Datasets:

kmfoda

/

gov_report

like 3

What Is a Post Office? Colloquially, the term "post office" often is employed to refer to any place where stamps are sold and postal services are provided by USPS employees. Post offices, branches, stations, community and contract post offices all offer to the public a range of postal services. They are where many individuals go to buy stamps and ship packages. The USPS, however, administratively differentiates the types of retail postal facilities that conduct these same activities: main post office—The basic organizational unit of the USPS. Generally, each post office has primary responsibility for collection, delivery, and retail operations in a specific geographic area. [Also called "post office."] post office branch—A unit of a main post office that is outside the corporate limits of the city or town of the main post office. [Also called "classified branch."] post office station—A unit of a main post office that is within the corporate limits of the city or town of the main post office. [Also called "classified station."] Each post office is managed by a postmaster; post office branches and stations are not. Branches and stations instead have managers who are under the direction of postmasters. The USPS also provides postal services to customers through privately operated facilities: contract postal unit—A postal unit that is a subordinate unit within the service area of a main post office. It is usually located in a store or place of business and is operated by a contractor who accepts mail from the public, sells postage and supplies, and provides selected special services (for example, postal money order or registered mail). community post office—A contract postal unit that provides service in a community where an independent post office has been discontinued. [It] bears its community's name and ZIP Code as part of a recognized address. Herein, the term "USPS retail postal facilities" will encompass all five of the aforementioned postal facilities—post offices, post office branches, post office stations, community post offices, and contract postal units. How Many Post Offices Are There? The USPS's annual reports contain tabulations of the number of USPS retail postal facilities in existence at the end of each fiscal year. Figure 1 presents data on the number of facilities from FY1971 through FY2012. Over time, the USPS has altered the terms used to refer to some of these facilities. Additionally, the USPS has disaggregated post office branches from post office stations only since FY2004. Hence, Figure 1 and Table 1 present the retail postal facilities data as compiled into three categories: post offices (POs), post office branches and stations (POBs and POSs), and community post offices and contract postal units (CPOs and CPUs). Figure 1 and Table 1 indicate that the total number of USPS retail postal facilities has declined steadily. In FY1971, the USPS had 42,287 retail facilities; in FY2012 it had 34,784—17.7% fewer. The number of POs has dropped 16.3%, and the number of CPUs and CPOs has declined 45.4%. Meanwhile, the number of POBs and POSs has increased 15.6%. How Many Post Offices Might the USPS Close? It is unclear how many retail postal facilities the USPS intends to close in the coming years. This uncertainty is the product of shifting USPS plans in recent years. The agency also has not stated how many post offices it needs to serve the public. (1) In May 2009, the USPS announced it planned to shutter up to 3,105 retail facilities. How many of these post office stations and branches ultimately were closed as part of this initiative is unknown. (2) In July 2011, the USPS declared that it might close 3,652 post offices, which would have amounted to approximately 10.2% of its then 35,633 retail facilities. The agency reported that that these included 2,825 post offices, each of which earned less than $27,500 in revenue annually; 384 post office stations and branches, each of which earned FY2010 revenue of less than $600,000; 178 "retail annexes," each of which earned FY2010 revenues of less than $1,000,000; and 265 post offices, stations, and branches that were undergoing discontinuance review already. The USPS claimed that closing all these facilities could save more than $200 million per year. At the time, the USPS said that some of these retail facilities could be closed or replaced by "village post offices." A village post office is a term coined by the USPS to refer to an arrangement substantially similar to a contract postal unit. Staffed by a non-USPS employee and located within a private retail outlet, a village post office would provide the following services: mail collection boxes, post offices boxes, stamp sales, and prepaid Priority Mail flat rate boxes and envelope sales and receipt. As proposed, a village post office would not provide other services, such as passport registration, money orders, and non-uniform parcel shipping. The provision of USPS products and services by private vendors is not unusual. Currently, the USPS has more than 64,000 third-party postal retail locations. The USPS views village post offices and other contractual arrangements as less expensive than operating a post office. However, in December 2011 the USPS announced that it had suspended its post office closures until May 15, 2012 "in response to a request made by multiple U.S. Senators." (3) On May 9, 2012, the USPS announced that it would attempt to preserve small rural post offices by reducing the hours they are kept open and shrinking their cohort of postmasters. Some 13,000 post offices' hours of service would be reviewed and possibly reduced under the agency's "Post Office Structure Plan" (POStPlan). The PRC issued an advisory opinion on this latest initiative, finding it not contrary to law and preferable to the agency's previous proposal for post office closures. The American Postal Workers Union, which represents some of the USPS employees who may be affected by the POStPlan, has criticized it as violating its collective bargaining agreement with the USPS. The APWU and USPS are reportedly arbitrating this matter. The USPS has stated that the POStPlan will be fully implemented by September 2014. The USPS's communications on the POStPlan did not clarify whether it had discontinued the 2009 and 2011 retail closure initiatives. Nor did the agency state which of the postal facilities on the 2009 and 2011 lists have been shuttered or might be shut down. According to the data used to create Figure 1 , the number of retail postal facilities has decreased by 1,281 between FY2008 and FY2012 (31.3%), from 36,065 to 34,784. What Authority Does the USPS Have to Close Post Offices? The USPS was established in 1971 by the Postal Reorganization Act (PRA; P.L. 91-375; 84 Stat. 725). Previously, postal services had been provided by the U.S. Post Office Department (USPOD), a government agency that received annual appropriations from Congress. Members were involved in many aspects of the USPOD's operations, including the selection of managers (e.g., postmasters) and the pricing of postal services. Under this configuration, the Post Office had operational difficulties and developed a reputation for incompetence and corruption. The PRA abolished USPOD and replaced it with the U.S. Postal Service, an "independent establishment of the executive branch" (39 U.S.C. 201). The USPS is a marketized government agency that has far greater freedom to run its operations than the former Post Office Department. It does not rely on appropriations for its operating revenue. Congress assigned the USPS the "general duty" to "maintain an efficient system of collection, sorting, and delivery of the mail nationwide" (39 U.S.C. 403(b)). In order to carry out this obligation, the law gives the USPS the "specific powers" to "provide for the collection, handling, transportation, delivery, forwarding, returning, and holding of mail, and for the disposition of undeliverable mail" (39 U.S.C. 404(a)(1)); and "determine the need for post offices, postal and training facilities and equipment, and ... provide such offices, facilities, and equipment as it determines are needed" (39 U.S.C. 404(a)(13)). While Congress designed the USPS to be a self-supporting entity, the nation's legislature also requires the USPS to serve the public as a whole. This "public service obligation," as it often is termed, is located in the PRA's chapters on "postal policy" (39 U.S.C. 101) and the USPS's "general authority" (39 U.S.C. 403): "The United States Postal Service shall be operated as a basic and fundamental service provided to the people by the Government of the United States, authorized by the Constitution, created by [an] Act of Congress, and supported by the people. The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people. It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities" (39 U.S.C. 101(a)); and "The Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining. No small post office shall be closed solely for operating at a deficit, it being the specific intent of the Congress that effective postal services be insured to residents of both urban and rural communities" (39 U.S.C. 101(b)). Congress also assigned the USPS the general duties to "receive, transmit, and deliver throughout the United States, its territories and possessions ... written and printed matter, parcels, and like materials and provide such other services incidental thereto as it finds appropriate to its functions and in the public interest... (39 U.S.C. 403(a))"; and "establish and maintain postal facilities of such character and in such locations, that postal patrons throughout the Nation will, consistent with reasonable economies of postal operations, have ready access to essential postal services" (39 U.S.C. 403(b)). Additionally, Congress has underscored the USPS's duty to serve less densely populated areas by including a provision in annual appropriation laws that reads, "none of the funds provided in this Act shall be used to consolidate or close small rural and other small post offices in [this] fiscal year." What Is the Post Office Closure Process? Federal postal law sets forth the basic rules by which the USPS may proceed to close a post office. The USPS must "provide adequate notice of its intention to close or consolidate such post office at least 60 days prior to the proposed date of such closing or consolidation to persons served by such post office to ensure that such persons will have an opportunity to present their views" (39 U.S.C. 404(d)(1)). In deciding whether to close a post office, the USPS must consider (i) the effect of such closing or consolidation on the community served by such post office; (ii) the effect of such closing or consolidation on employees of the Postal Service employed at such office; (iii) whether such closing or consolidation is consistent with the policy of the Government ... that the Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining; (iv) the economic savings to the Postal Service resulting from such closing or consolidation; and (v) such other factors as the Postal Service determines are necessary (39 U.S.C. 404(d)(2)(A)). If the USPS decides to move forward with the closure, it must notify the persons served by the post office of its decision and the findings used to arrive at this decision. The USPS must wait at least 60 more days before proceeding with the closure, and any person served by the post office slated for closure may appeal the closure to the PRC, which has up to 120 days to consider the appeal. The USPS is not required to wait for the PRC to issue its opinion. It may close a retail facility 60 days after it makes its closure announcement. The PRC may fault the USPS's decision to close a post office only if the PRC finds the decision to be "(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law; (B) without observance of procedure required by law; or (C) unsupported by substantial evidence on the record" (39 U.S.C. 404(d)(5)). The PRC may require the USPS to reconsider its decision, but the ultimate authority to close a post office rests with the USPS. The USPS long has had a separate "emergency suspension" process that it may employ to immediately cease service at a retail facility without following the aforementioned closure process. The USPS has been criticized for using it in situations that were foreseeable and perhaps not emergencies, and for failing to re-open these facilities. Under the most recently adopted post office closure rules, the USPS may close a post office immediately "due to cancellation of a lease or rental agreement when no suitable alternate quarters are available in the community, a fire or natural disaster, irreparable damage when no suitable alternate quarters are available in the community, challenge to the sanctity of the mail, or similar reasons." What Is the Role of the Postal Regulatory Commission in Post Office Closures? As noted in the previous section of this report, a member of the public may appeal a post office closure to the PRC. The current USPS's post office closure regulations continue the USPS's long-standing position that it will participate in appeals only if the facility closed is a post office (as opposed to a post office branch or station). The PRC may fault the USPS's decision to close a post office only if the PRC finds the decision to be "(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law; (B) without observance of procedure required by law; or (C) unsupported by substantial evidence on the record" (39 U.S.C. 404(d)(5)). The PRC may require the USPS to reconsider its decision, but the ultimate authority to close a post office rests with the USPS. Federal statute also provides another instance in which the PRC may play a role in the closure process. 39 U.S.C. 3661(b) requires the USPS to obtain an advisory opinion from the PRC when the USPS "determines that there should be a change in the nature of postal services which will generally affect service on a nationwide or substantially nationwide basis." Hence, the USPS submitted its 2009 and 2011 post office closure proposals and its 2012 POStPlan to the PRC for advisory opinions. Again, the USPS is not bound by a PRC advisory opinion, and 90 days after submitting a proposal the USPS may begin executing it. How Many USPS Employees May Lose Their Jobs? In making its various post office closure announcements, the USPS did not indicate whether any employees would lose their positions. One 2011 media report quoted the USPS as saying 4,500 employees would be affected by the closures, but did not clarify how many would lose their positions. Most postal clerks, those who work at post office counters, and letter carriers are protected from layoffs through collective bargaining agreements. However, postmasters and other managers are not covered by collective bargaining agreements. The USPS's May 2012 announcement concerning its rural post office preservation effort provided no estimate of the number of possible job eliminations. Approximately 21,000 postmasters may be offered retirement and early retirement incentives, although it is unclear how many will accept the USPS's offer. Recent Legislation 113th Congress At the time of the publication of this report, three bills with post office closure related provisions had been introduced into the 113 th Congress— H.R. 630 , H.R. 1016 , and S. 316 . H.R. 630 Representative Peter A. DeFazio introduced H.R. 630 , the Postal Service Protection Act of 2013, on February 13, 2013. The bill was referred to the Committee on Oversight and Government Reform. H.R. 630 would amend 39 U.S.C. 404(d) to reduce the USPS's authority to close retail postal facilities. The legislation would make the statutory closure rules applicable to all USPS-operated facilities that serve the public directly; require the USPS to notify by mail each customer served by a facility in the event that the USPS should wish to consider closing it; expand the current statutory public comment period from 60 to 90 days; require the USPS to explain publicly its analysis of the estimated effects of a closure; empower the PRC to forbid the closure of a post office after conducting a review by request of an affected member of the public; disallow the USPS to use an expedited emergency closure process in the instance of a lease termination or cancellation; and direct the USPSOIG to report on whether a retail postal facility closure produced the savings the USPS had estimated. H.R. 1016 Representative Scott H. Peters introduced H.R. 1016 , the Community Post Office Relocation Act, on March 6, 2013. The bill was referred to the Committee on Oversight and Government Reform. H.R. 1016 includes provisions to amend 39 U.S.C. 4 (which contains the USPS's general authorities) to include a new section that would alter the USPS's authority to sell post offices. In the event that the USPS wishes to relocate the operations out of a post office, H.R. 1016 would permit eligible not-for-profit (501(c)(3)) organizations to submit bids for the building "at fair market value"; require the USPS to "enter into negotiations for the sale of such building with the eligible buyer that submits the first offer, as determined by postmark date, during such 30-day period. If such negotiations fail, then the Postal Service shall enter into negotiations for sale with each subsequent eligible buyer, as determined by postmark date, that submits an offer during such 30-day period until a sale is made or until all such eligible buyers are exhausted"; and provide the USPS with the "right of first refusal" in the event the eligible buyer subsequently decides to sell the property. The property disposition changes proposed by H.R. 1016 would occur subsequent to the post office closure process set by 39 U.S.C. 404(d). Whether H.R. 1016 's proposed disposition provisions would affect the USPS's decision-making during the post office closure process is unclear. S. 316 Senator Bernard Sanders introduced S. 316 , the Postal Service Protection Act of 2013, on February 13, 2013. The bill was referred to the Senate Homeland Security and Governmental Affairs Committee. S. 316 and H.R. 630 are identical bills. As with H.R. 630 , S. 316 's post office closure provisions may be found in Sections 201 and 202. 112th Congress In the 112 th Congress, more than two dozen bills carried provisions related to the USPS's post offices and retail service to the public. The bills varied in their approaches to altering the post office closure, and H.R. 2309 , H.R. 2692 , S. 1668 , and S. 1789 illustrate this diversity. None of these bills became law. H.R. 2309 Representative Darrell Issa introduced H.R. 2309 , the Postal Reform Act of 2011, on June 23, 2011. H.R. 2309 was amended and reported by the Committee on Oversight and Government Reform (which Representative Issa chairs) and the Committee on Rules on and January 17, 2012, and March 29, 2012, respectively. H.R. 2309 included provisions to amend 39 U.S.C. to establish a Commission on Postal Reorganization (CPR), an entity similar to the base realignment commissions (BRAC) that have been used to reduce the number of military bases. With the assistance of the USPS and USPS Inspector General, the CPR would prepare recommendations to reduce both the USPS's networks of post offices and non-retail facilities so as to save $2 billion within two years of the adoption of said recommendations. Congress may pass a joint resolution of disapproval to prevent the closure recommendations from being executed. H.R. 2309 would cap the number of small rural post offices that may be closed at 10% of the total number of post offices closed; strike language from 39 U.S.C. 101(b) to increase the USPS's authority to close post offices: "The Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining"; and "No small post office shall be closed solely for operating at a deficit, it being the specific intent of the Congress that effective postal services be insured to residents of both urban and rural communities."; amend 39 U.S.C. 404(d), which sets forth the process for the USPS to follow when it closes post offices, to conform to the amendment of 39 U.S.C. 101(b); and amend 39 U.S.C. 404(d) to disallow the public to appeal a post office closure if a contract post office is located within two miles of the post office closed. H.R. 2692 Representative Albio Sires introduced H.R. 2692 , the Access to Postal Services Act, on July 28, 2011. H.R. 2692 was referred to the Committee on Oversight and Government Reform. H.R. 2692 included provisions to amend 39 U.S.C. 404 to define the term "post office" to include main post offices, post office branches, post office stations, and other USPS-operated retail outlets; amend 39 U.S.C. 404(d)(1) to require the USPS to notify affected members of the public of a proposed post office closure through mail and newspaper notices; strike language at 39 U.S.C. 404(d)(2)(a)(4)-(5) permitting the USPS to consider the cost savings in its consideration of the possible closure of a post office; amend 39 U.S.C. 404(d) to include a new provision that would forbid the USPS from avoiding the closure process prescribed by 39 U.S.C. 404(d) by declaring an emergency closure in the event of a "termination or cancellation of the lease by a party other than the Postal Service"; and amend 39 U.S.C. 404(d) to include a new provision that would require the USPS Inspector General not later than two years after a post office closure to assess the actual savings achieved as compared to those estimated by the USPS prior to the closure. S. 1668 Senator Jeff Merkley introduced S. 1668 , the Protecting Rural Post Offices Act of 2011, on October 6, 2011. S. 1668 was referred to the Committee on Homeland Security and Governmental Affairs. The bill would have amended 39 U.S.C. 404(d) to prohibit the USPS from closing a post office should it result "in more than 10 miles distance (as measured on roads with year-round access) between any 2 post offices." The bill did not define the term "post office." So it is unclear if it was intended to apply to post office branches, stations, and other retail facilities. S. 1789 Senator Joseph Lieberman introduced S. 1789 , the 21 st Century Postal Service Act of 2012, on November 2, 2011. The Committee on Homeland Security and Governmental Affairs amended and reported S. 1789 on January 31, 2012, and the Senate further amended and passed S. 1789 on April 25, 2012. S. 1789 would have amended 39 U.S.C. 404(d) to require the USPS to examine additional factors in the course of rendering a post office closure decision, including "the effect of such closing or consolidation on the community served by such post office"; consider additional options other than closure when considering closing a post office, including operating the post office for reduced hours; notify "the chief executive of each State whose residents are served by such post office," who shall appoint a "citizens service protection advocate" to "represent the interests of postal customers affected by the closing or consolidation"; and notify the state board of elections, and the local board of elections. S. 1789 also included provision to forbid the USPS from closing any post office should it produce a reduction of retail service beneath the retail service standards; and prohibit any post office closures until the USPS establishes "retail service standards"; prohibit any rural post office closures during the 12 months following enactment of S. 1789 ; prohibit any post office closures prior to November 13, 2012, in any state "that conducts all elections by mail or permits no-excuse absentee voting"; and forbid the USPS from closing a rural post office should the closure have negative effects on the community, such as "substantial financial losses" to any business in the community, or a reduction in access to "essential items, such as prescription medications and time-sensitive communications, that are sent through the mail."

In 2009 and 2011, the U.S. Postal Service (USPS) announced initiatives to close post offices. Approximately 4,380 retail facilities in rural, suburban, and urban areas could have been closed. In May 2012, the agency apparently changed course. The USPS issued a plan to "preserve" rural post offices; rather than closing these facilities, the USPS would reduce their operating hours. The agency did not, however, state whether it would continue to shutter post offices in non-rural areas, nor did it provide an estimate of how many post offices it needs to serve the public. Thus, how many post offices may be closed in the coming years remains unclear. At the end of FY2012, the USPS had 34,784 retail postal facilities—1,281 fewer than it had in FY2008. At the time of the publication of this report, three bills in the 113th Congress carry provisions that address post offices and the public's access to retail postal services, including H.R. 630, H.R. 1016, and S. 316. Colloquially, the term "post office" often is employed to refer to any place where stamps are sold and postal services are provided by USPS employees. However, the USPS differentiates among several categories of postal facilities, including post offices, post office branches and stations, community post offices, and contract postal units. Congress long has permitted the USPS considerable discretion to decide how many post offices to erect and where to place them. Congress also requires the USPS to provide the public with access to retail postal services (e.g., sales of postage, parcel acceptance, etc.). Both federal law and the USPS's rules prescribe a post office closure process, which takes at least 120 days. The USPS must notify the affected public and hold a 60-day comment period prior to closing a post office. Should the USPS decide to close a post office, the public has 30 days to appeal the decision to the Postal Regulatory Commission. Sixty days after it has made a closure decision, the USPS may shut down a post office. This report will be updated to reflect significant developments.

Overview Four major principles currently underlie U.S. policy on legal permanent immigration: the reunification of families, the admission of immigrants with needed skills, the protection of refugees, and the diversity of admissions by country of origin. These principles are embodied in federal law, the Immigration and Nationality Act (INA) first codified in 1952. The Immigration Amendments of 1965 replaced the national origins quota system (enacted after World War I) with per-country ceilings, and the statutory provisions regulating permanent immigration to the United States were last revised significantly by the Immigration Act of 1990. The two basic types of legal aliens are immigrants and nonimmigrants . As defined in the INA, immigrants are synonymous with legal permanent residents (LPRs) and refer to foreign nationals who come to live lawfully and permanently in the United States. The other major class of legal aliens are nonimmigrants—such as tourists, foreign students, diplomats, temporary agricultural workers, exchange visitors, or intracompany business personnel—who are admitted for a specific purpose and a temporary period of time. Nonimmigrants are required to leave the country when their visas expire, though certain classes of nonimmigrants may adjust to LPR status if they otherwise qualify. The conditions for the admission of immigrants are much more stringent than nonimmigrants, and many fewer immigrants than nonimmigrants are admitted. Once admitted, however, immigrants are subject to few restrictions; for example, they may accept and change employment, and may apply for U.S. citizenship through the naturalization process, generally after five years. Petitions for immigrant (i.e., LPR) status are first filed with U.S. Citizenship and Immigration Services (USCIS) in the Department of Homeland Security (DHS) by the sponsoring relative or employer in the United States. If the prospective immigrant is already residing in the United States, the USCIS handles the entire process, which is called "adjustment of status" because the alien is moving from a temporary category to LPR status. If the prospective LPR does not have legal residence in the United States, the petition is forwarded to the Department of State's (DOS) Bureau of Consular Affairs in their home country after USCIS has reviewed it. The Consular Affairs officer (when the alien is coming from abroad) and USCIS adjudicator (when the alien is adjusting status in the United States) must be satisfied that the alien is entitled to the immigrant status. These reviews are intended to ensure that they are not ineligible for visas or admission under the grounds for inadmissibility spelled out in INA. Many LPRs are adjusting status from within the United States rather than receiving visas issued abroad by Consular Affairs. As discussed more fully below, 54.3% of all LPRs adjusted to LPR status in the United States rather than abroad in FY2010. The INA specifies that each year countries are held to a numerical limit of 7% of the worldwide level of U.S. immigrant admissions, known as per-country limits. The actual number of immigrants that may be approved from a given country, however, is not a simple percentage calculation. Immigrant admissions and adjustments to 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, as discussed below. Current Law and Policy Worldwide Immigration Levels The INA provides for a permanent annual worldwide level of 675,000 legal permanent residents (LPRs), but this level is flexible and certain categories of LPRs are permitted to exceed the limits, as described below. The permanent worldwide immigrant level consists of the following components: family-sponsored immigrants, including immediate relatives of U.S. citizens and family-sponsored preference immigrants (480,000 plus certain unused employment-based preference numbers from the prior year); employment-based preference immigrants (140,000 plus certain unused family preference numbers from the prior year); and diversity immigrants (55,000). Immediate relatives of U.S. citizens as well as refugees and asylees who are adjusting status are exempt from direct numerical limits. Figure 1 summarizes these numerical limits governing the permanent worldwide immigrant level. The annual level of family-sponsored preference immigrants is determined by subtracting the number of immediate relative visas issued in the previous year and the number of aliens paroled into the United States for at least a year from 480,000 (the total family-sponsored level) and—when available—adding employment preference immigrant numbers unused during the previous year. By law, the family-sponsored preference level may not fall below 226,000. In recent years, the 480,000 level has been exceeded to maintain the 226,000 floor on family-sponsored preference visas after subtraction of the immediate relative visas. Within each family and employment preference, the INA further allocates the number of LPRs issued visas each year. As Table 1 summarizes the legal immigration preference system, the complexity of the allocations becomes apparent. Note that in most instances unused visa numbers are allowed to roll down to the next preference category. Employers who seek to hire prospective employment-based immigrants through the second and third preference categories also must petition the U.S. Department of Labor (DOL) on behalf of the alien. The prospective immigrant must demonstrate that he or she meets the qualifications for the particular job as well as the preference category. If DOL determines that a labor shortage exists in the occupation for which the petition is filed, labor certification will be issued. If there is not a labor shortage in the given occupation, the employer must submit evidence of extensive recruitment efforts in order to obtain certification. As part of the Immigration Act of 1990, Congress added a fifth preference category for foreign investors to become LPRs. The INA allocates up to10,000 admissions annually and generally requires a minimum $1 million investment and employment of at least 10 U.S. workers. Less capital is required for aliens who participate in the immigrant investor pilot program, in which they invest in targeted regions and existing enterprises that are financially troubled. Per-Country Ceilings As stated earlier, the INA establishes per-country levels at 7% of the worldwide level. For a dependent foreign state, the per-country ceiling is 2%. The per-country level is not a "quota" set aside for individual countries, as each country in the world, of course, could not receive 7% of the overall limit. As the State Department describes, the per-country level "is not an entitlement but a barrier against monopolization." Two important exceptions to the per-country ceilings have been enacted in the past decade. Foremost is an exception for certain family-sponsored immigrants. More specifically, the INA states that 75% of the visas allocated to spouses and children of LPRs (2 nd A family preference) are not subject to the per-country ceiling. Prior to FY2001, employment-based preference immigrants were also held to per-country ceilings. The American Competitiveness in the Twenty-First Century Act of 2000 ( P.L. 106-313 ) enabled the per-country ceilings for employment-based immigrants to be surpassed for individual countries that are oversubscribed as long as visas are available within the worldwide limit for employment-based preferences. The impact of these revisions to the per-country ceilings is discussed later in this report. The actual per-country ceiling varies from year to year according to the prior year's immediate relative and parolee admissions and unused visas that roll over. Other Permanent Immigration Categories There are several other major categories of legal permanent immigration in addition to the family-sponsored and employment-based preference categories. These classes of LPRs cover a variety of cases, ranging from aliens who win the Diversity Visa Lottery to aliens in removal (i.e., deportation) proceedings granted LPR status by an immigration judge because of exceptional and extremely unusual hardship. Table 2 summarizes these major classes and identifies whether they are numerically limited. Admissions Trends Immigration Patterns, 1900-2010 Immigration to the United States is not totally determined by shifts in flow that occur as a result of lawmakers revising the allocations. Immigration to the United States plummeted in the middle of the 20 th Century largely as a result of factors brought on by the Great Depression and World War II. There are a variety of "push-pull" factors that drive immigration. Push factors from the immigrant-sending countries include such circumstances as civil wars and political unrest, economic deprivation and limited job opportunities, and catastrophic natural disasters. Pull factors in the United States include such features as strong employment conditions, reunion with family, and quality of life considerations. A corollary factor is the extent that aliens may be able to migrate to other "desirable" countries that offer circumstances and opportunities comparable to the United States. The annual number of LPRs admitted or adjusted in the United States rose gradually after World War II, as Figure 2 illustrates. However, the annual admissions have not reached the peaks of the early 20 th century. The DHS Office of Immigration Statistics (OIS) data present those admitted as LPRs or those adjusting to LPR status. The growth in immigration after 1980 is partly attributable to the total number of admissions under the basic system, consisting of immigrants entering through a preference system as well as immediate relatives of U.S. citizens, that was augmented considerably by legalized aliens. The Immigration Act of 1990 increased the ceiling on employment-based preference immigration, with the provision that unused employment visas would be made available the following year for family preference immigration. In addition, the number of refugees admitted increased from 718,000 in the period 1966-1980 to 1.6 million during the period 1981-1995, after the enactment of the Refugee Act of 1980. Many LPRs are adjusting status from within the United States rather than receiving visas issued abroad by Consular Affairs before they arrive in the United States. In the past decade, the number of LPRs arriving from abroad has remained somewhat steady, hovering between a high of 421,405 in FY1996 and a low of 358,411 in FY2003. Adjustments to LPR status in the United States has fluctuated over the same period, from a low of 244,793 in FY1999 to a high of 819, 248 in FY2006. As Figure 3 shows, most of the variation in total number of aliens granted LPR status over the past decade is due to the number of adjustments processed in the United States rather than visas issued abroad. In FY2010, USCIS adjusted 566,576 aliens to LPR status, which was 54.3% of all LPRs. It was the lowest number of foreign nationals adjusted in the United States since FY2003, when USCIS was just standing up as an agency. Most (91.7%) of the employment-based immigrants adjusted to LPR status within the United States in FY2010. Many (53.1%) of the immediate relatives of U.S. citizens also did so that year. Only 12.2% of the other family-preference immigrants adjusted to LPR status within the United States in FY2010. In any given period of United States history, a handful of countries have dominated the flow of immigrants, but the dominant countries have varied over time. Figure 4 presents trends in the top immigrant-sending countries (together comprising at least 50% of the immigrants admitted) for selected decades and illustrates that immigration at the close of the 20 th century is not as dominated by a few countries as it was earlier in the century. These data suggest that the per-country ceilings established in 1965 had some effect. As Figure 4 illustrates, immigrants from only three or four countries made up more then half of all LPRs prior to 1960. By the last two decades of the 20 th century, immigrants from seven to nine countries comprised about half of all LPRs and this patterns has continued into the 21 st century. Although Europe was home to the countries sending the most immigrants during the early 20 th century (e.g., Germany, Italy, Austria-Hungary, and the United Kingdom), Mexico has been a top sending country for most of the 20 th century and into the 21 st Century. Other top sending countries from FY2001 through FY2010 are the Dominican Republic, El Salvador, Colombia and Cuba (Western Hemisphere) and the Philippines, India, China, South Korea and Vietnam (Asia). FY2010 Admissions During FY2010, a total of 1,042,625 foreign nationals became LPRs in the United States. The largest number of immigrants were admitted because of a family relationship with a U.S. citizen or legal resident, as Figure 5 illustrates. Of the total LPRs in FY2010, 66.3% entered on the basis of family ties. Immediate relatives of U.S. citizens made up the single largest group of immigrants—476,414 as Figure 5 indicates. Family preference immigrants—the spouses and children of LPRs, the adult children of U.S. citizens, and the siblings of adult U.S. citizens—were the second largest group. Additional major immigrant groups in FY2010 were employment-based preference immigrants (including spouses and children), who comprised 14.2%, and refugees and asylees adjusting to LPR status, who comprised 13.1%. As Figure 6 presents, Mexico led all countries with 139,120 foreign nationals who became LPRs in FY2010. The People Republic of China followed at a distant second with 70,863 LPRs. India came in third with 69,162 LPRs. These top countries exceeded the per-country ceiling for preference immigrants because they benefitted from special exceptions to the per-country ceilings. Mexico did so as a result of the provision in INA that allows 75% of family second preference (i.e., spouses and children of LPRs) to exceed the per-country ceiling, while India and China exceeded the ceiling through the exception to the employment-based per-country limits. The top 10 immigrant-sending countries depicted in Figure 6 accounted for over half of all LPRs in FY2009. The top 50 immigrant-sending countries contributed 86% of all LPRs in FY2009. Appendix A provides detailed data on the top 50 immigrant-sending countries by major category of legal immigration. Backlogs and Waiting Times Visa Processing Dates According to the INA, family-sponsored and employment-based preference visas are issued to eligible immigrants in the order in which a petition has been filed. Spouses and children of prospective LPRs are entitled to the same status, and the same order of consideration as the person qualifying as principal LPR, if accompanying or following to join (referred to as derivative status). When visa demand exceeds the per-country limit, visas are prorated according to the preference system allocations (detailed in Table 1 ) for the oversubscribed foreign state or dependent area. These provisions apply at present to the following countries oversubscribed in the family-sponsored categories: Mexico and the Philippines. Family-Based Visa Priority Dates As Table 4 evidences, relatives of U.S. citizens and LPRs are waiting in backlogs for a visa to become available, with the brothers and sisters of U.S. citizens now waiting over 11 years, with even longer waits for siblings from Mexico and the Philippines. "Priority date" means that unmarried adult sons and daughters of U.S. citizens who filed petitions on December 22, 2004, are now being processed for visas (with older priority dates for certain countries as noted in Table 4 ). Married adult sons and daughters of U.S. citizens who filed petitions over 10 years ago (December 1, 2001) are now being processed for visas. Prospective family-sponsored immigrants from the Philippines have the most substantial waiting times before a visa is scheduled to become available to them; consular officers are now considering the petitions of the brothers and sisters of U.S. citizens from the Philippines who filed almost 24 years ago. Employment-Based Visa Retrogression After P.L. 106-313 's easing of the employment-based per-country limits, few countries and categories were oversubscribed in the employment-based preferences. For the past several years, however, "accounting problems" have arisen between USCIS's processing of LPR adjustments of status with the United States and Consular Affairs' processing of LPR visas abroad. As most (89.8% in 2008) of employment-based LPRs are adjusting from within the United States, Consular Affairs is dependent on USCIS for current processing data on which to base the employment-based visa priority dates. The Visa Bulletin for September 2005 offered this explanation: "The backlog reduction efforts of both Citizenship and Immigration Services, and the Department of Labor continue to result in very heavy demand for Employment-based numbers. It is anticipated that the amount of such cases will be sufficient to use all available numbers in many categories ... demand in the Employment categories is expected to be far in excess of the annual limits, and once established, cut-off date movements are likely to be slow." The visa waiting times eased somewhat in FY2006 and in early FY2007. "Visa retrogression" occurred most dramatically in July 2007. The Visa Bulletin for July 2007 listed the visa priority dates as current for the employment-based preferences (except for the unskilled other worker category). On July 2, 2007, however, the State Department issued an Update to July Visa Availability that retrogressed the dates to the point of being "unavailable." The State Department offered the following explanation: "The sudden backlog reduction efforts by Citizenship and Immigration Services Offices during the past month have resulted in the use of almost 60,000 Employment numbers.... Effective Monday July 2, 2007 there will be no further authorizations in response to requests for Employment-based preference cases." The employment-based categories were unavailable until the FY2008 visas became available. As of February 2012, the priority workers (i.e., extraordinary ability) visa category is current, as Table 5 presents. The advanced degree visa category is current worldwide, but those seeking advanced degree visas from China and from India have a January 1, 2010, priority. Visas for professional and skilled workers have a worldwide priority date of February 22, 2006, except for those workers from India, Mexico, and the Philippines, who have longer waits. Unskilled workers with approved petitions as of February 22, 2006, are now being issued visas. Petition Processing Backlogs Distinct from the visa priority dates that result from the various numerical limits in the law, there have been significant backlogs due to the sheer volume of aliens eligible to immigrate to the United States. Over 3 million immigration and naturalization petitions were filed with the USCIS during the three-month period of June, July, and August 2007. The USCIS acknowledged the agency was overwhelmed by the volume of petitions and were unable to record the receipt of all of these petitions upon arrival. In October 2007, the agency secured many of the I-130 petitions for alien relatives in a "lockbox" and indicated that it would record all of those "lockbox" petitions by the end of February 2008. The spike in immigrant petitions has occurred amidst controversies over processing backlogs dating back to the establishment of USCIS in March 2003. Processing backlogs also inadvertently reduced the number of LPRs in FY2003. Only 705,827 people became LPRs in FY2003. USCIS was only able to process 161,579 of the potential 226,000 family-sponsored LPRs in FY2003, and thus 64,421 LPR visas rolled over to the FY2004 employment-based categories. In December 2003, USCIS reported 5.3 million immigrant petitions pending. USCIS decreased the number of immigrant petitions pending by 24% by the end of FY2004, but still had 4.1 million petitions pending. As FY2005 drew to a close there were over 3.1 million immigration petitions pending. USCIS has altered its definition of what constitutes a backlog, and as a result, comparable data on the current backlogs are not available. The processing dates for immediate relative, family preference, and employment-based LPR petitions are presented in Appendix B for each of the four USCIS Regional Service Centers. Even though there are no numerical limits on the admission of aliens who are immediate relatives of U.S. citizens, such citizens petitioning for their relatives are waiting at least a year and in some parts of the country, more than two years for the paperwork to be processed. Citizens and LPRs petitioning for relatives under the family preferences are often waiting several years for the petitions to be processed. Appendix B is illustrative, but not comprehensive because some immigration petitions may be filed at USCIS District offices and at the National Benefits Center. Aliens with LPR petitions pending cannot visit the United States. Since the INA presumes that all aliens seeking admission to the United States are coming to live permanently, nonimmigrants must demonstrate that they are coming for a temporary period or they will be denied a visa. Aliens with LPR petitions pending are clearly intending to live in the United States permanently and thus are denied nonimmigrant visas to come temporarily. Issues and Options in the 112th Congress30 As has often been said, there is a broad-based consensus that the U.S. immigration system is broken. This consensus erodes, however, as soon as the options to reform the U.S. immigration system are debated. Substantial efforts to reform legal immigration have failed in the recent past, prompting some to characterize the issue as a "zero-sum game" or a "third rail." The challenge inherent in reforming legal immigration is balancing employers' hopes to increase the supply of legally present foreign workers, families' longing to re-unite and live together, and a widely shared wish among the various stakeholders to improve the policies governing legal immigration into the country. Whether the Congress will act to alter immigration policies—either in the form of comprehensive immigration reform or in the form of incremental revisions aimed at strategic changes—is at the crux of the debate. Addressing these contentious policy reforms against the backdrop of economic crisis sharpens the social and business cleavages and may narrow the range of options. Family-Based Preferences Proponents of family-based migration point to the significant backlogs in family based immigration due to the sheer volume of aliens eligible to immigrate to the United States and maintain that any proposal to reform immigration levels should also include the option of family-based backlog reduction. Citizens and LPRs often wait years for their relatives' petitions to be processed and visa numbers to become available. Some proponents of immigration reform argue that the immediate relatives of LPRs should be treated as immediate relatives of U.S. citizens are treated under the INA. In other words, the spouses and minor children of LPRs—currently entering as second preference – would no longer be numerically limited to 114,200 of the worldwide level, nor would they count toward the 7% per country ceiling. Those supporting this revision of the INA cite the five-year wait that the spouses and minor children of LPRs currently face before they can join their family in the United States and argue that it undermines family values and erodes the institution of the family. Against these competing priorities for increased immigration are those who would shift the family-based allocations toward the first and second preferences by eliminating categories for the brothers and sisters of U.S. citizens and the adult children of U.S. citizens. Other options would scale back family-based immigration levels, including the option of limiting family-based LPRs to the immediate relatives of U.S. citizens. Effects of Current Economic Conditions on Legal Immigration Economic indicators confirm that the economy went into a recession at the close of 2007. Although the economic recession has ended, unemployment remains high and is projected to remain so for some time. The effects of the current economic conditions further complicate efforts to reform immigration law. 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 suggest a slowing of migration pressures, it remains unclear how the continuing high levels of unemployment will effect migration to the United States. Even as U.S. unemployment levels remain high, employers assert that they continue to need the "best and the brightest" workers, regardless of their country of birth, to remain competitive in a worldwide market and to keep their firms in the United States. While support for the option of increasing employment based immigration may be dampened by the economic recession, proponents argue it is an essential ingredient for economic growth. Those opposing increases in employment-based LPRs in particular assert that there is no compelling evidence of labor shortages and cite the rate of unemployment. They argue that recruiting foreign workers during an economic recession would have a deleterious effect on salaries, compensation, and working conditions of U.S. workers. Some would limit employment-based LPRs to the top two preference categories of priority workers and those who are deemed exceptional, extraordinary, or outstanding individuals. With this economic and political backdrop, the option of lifting the per-country caps on employment-based LPRs has become increasingly popular. Some theorize that the elimination of the per-country caps would increase the flow of high-skilled immigrants without increasing the total annual admission of employment-based LPRs. The presumption is that many high-skilled people (proponents cite those from India and China, in particular) would then move closer to the head of the line to become LPRs. Lifting Per-Country Ceilings Some propose not applying per-country ceilings to employment-based preference categories, and they also point out that the employment-based LPRs from India, China, Mexico, or the Philippines face backlogs due to the 7% per-country ceiling. They maintain that employability has nothing to do with country of birth and that U.S. employers are not allowed to discriminate based on nationality or country of origin. They argue that it is discriminatory to have laws that limit the number of employment-based LPRs according to country of origin. Many advocates for immigration reform state that family reunification should be placed as a higher priority over per-country ceilings, and cite the multiyear backlogs faced by prospective family-based LPRs from India, China, Mexico, or the Philippines. They assert that the per-country ceilings are arbitrary and must be raised to a level that enables families from all countries to reunite. Proponents of per-country ceilings maintain that the statutory ceilings restrain the dominance of high-demand countries and preserve the diversity of the immigrant flows. Since the Immigration Amendments of 1965 ended the country-of-origin quota system that overwhelmingly favored European immigrants and subsequent amendments placed immigrants from Western Hemisphere countries under the worldwide and per-country limits, U.S. immigration policy has arguably been more equitable and less discriminatory in terms of country of origin. Supporters of current law also note that the INA does provide exceptions to the per-country ceilings from which Mexico, India, and China are benefiting. Permanent Partners The issue of whether gay and lesbian citizens should be able to sponsor the foreign national who is their permanent partner for LPR status is garnering attention. While the INA does not define the terms "spouse," "wife," or "husband," the 1996 Defense of Marriage Act (DOMA) declares that the terms "marriage" and "spouse," as used in federal enactments, exclude same-sex marriage. Specifically, DOMA states that In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word 'marriage' means only a legal union between one man and one woman as husband and wife, and the word 'spouse' refers only to a person of the opposite sex who is a husband or a wife. In addition to DOMA's definitional limits, the INA law states that spouse, wife, or husband does not include a spouse, wife, or husband by reason of any marriage ceremony where the contracting parties thereto are not physically in the presence of each other, unless the marriage is consummated. This definitional subsection of the INA was added to address concerns over marriage fraud and mail order brides. In 1982, the Ninth Circuit addressed the issue of a same-sex marriage petition for immediate relative status in the case of Adams v. Howerton . The Ninth Circuit held that to determine if a marriage is valid for immigration purposes two steps are required: to determine if the marriage is valid under state law and to determine if the marriage qualifies under the INA. The court held that words should take their ordinary meaning, and the term marriage ordinarily contemplated a relationship between a man and a woman: Congress has not indicated an intent to enlarge the ordinary meaning of those words. In the absence of such a congressional directive, it would be inappropriate for us to expand the meaning of the term "spouse" for immigration purposes. The regulations provide further guidance on the determination of a bona fide marriage. Among other criteria, the regulations state that the LPR must establish by clear and convincing evidence that the marriage was not entered into for the purposes of evading the immigration laws. Documentation of the marriage is made by evidence such as joint ownership of property, a lease showing joint tenancy of a common residence, and commingling of financial resources. In advocating for the revision of the INA to include same-sex permanent partners, the American Bar Association concluded, "The current failure to recognize same-sex permanent partnerships for immigration purposes is cruel and unnecessary, and such critical protections should be available to help same-sex partners maintain their commitment to one another on an equal basis with different-sex spouses." Supporters of current law, however, have expressed concern that if immigration law were to recognize same-sex partnerships for purposes of immigration benefits, opportunities for fraud would increase because such relationships are not legally recognized in many jurisdictions. Others supporting current law oppose same-sex partnerships generally and argue that there is no reason to provide an exception for purposes under immigration law. Point System47 Replacing or supplementing the current preference system (discussed earlier in this report) with a point system is garnering considerable interest for the first time in over a decade. Briefly, point systems such as those of Australia, Canada, Great Britain, and New Zealand assign prospective immigrants with credits if they have specified attributes, most often based upon educational attainment, shortage occupations, extent of work experience, language proficiency, and desirable age range. Proponents of point systems maintain that such merit-based approaches are clearly defined and based upon the nation's economic needs and labor market objectives. A point system, supporters argue, would be more acceptable to the public because the government (rather than employers or families) would be selecting new immigrants and this selection would be based upon national economic priorities. Opponents of point systems state that the judgment of individual employers are the best indicator of labor market needs and an immigrant's success. Opponents warn that the number of people who wish to immigrate to the United States would overwhelm a point system comparable to Australia, Canada, Great Britain, and New Zealand. In turn, this predicted high volume of prospective immigrants, some say, would likely lead to selection criteria so rigorous that it would be indistinguishable from what is now the first preference category of employment-based admissions (persons of extraordinary ability in the arts, science, education, business, or athletics; outstanding professors and researchers; and certain multi-national executives and managers) and ultimately would not result in meaningful reform. Immigration Commission In 2006, the Independent Task Force convened by the Migration Policy Institute proposed a Standing Commission on Immigration and Labor Markets that would make regular recommendations for adjusting levels of labor market immigration to the President and Congress. As part of this process, this commission would be tasked with providing timely, evidence-based and impartial analysis. More recently, former Labor Secretary Ray Marshall lead an effort sponsored by the Economic Policy Institute that recommends the creation of an independent commission to measure labor shortages and to recommend the future numbers and characteristics of employment-based temporary and permanent immigrants to fill those shortages. This independent commission, as envisioned by its advocates, would develop measures of labor market shortages, assess methodologies, and devise processes to adjust foreign labor flows to employers' needs while protecting domestic and foreign labor standards. Skeptics of an independent immigration commission point out that the current preference system for selecting employment-based LPRs to the United States is largely based upon the rigors of the local job markets and the hiring decisions of employers. The commission option might take the selection process away from the judgments of individual employers and needs of particular labor markets and base it on standardized sets of criteria based on national priorities. They warn that the commission option, as well as the point system option, may lead to a pool over very talented and qualified LPRs who do not have jobs if the individual employers are not part of the selection process. Interaction with Legalization Options Whether the LPR adjustments of guest workers and other temporary foreign workers are channeled through the numerically limited, employment-based preferences or are exempt from numerical limits will affect the future flow of LPRs. Whether the legislation also contains the controversial provisions that would permit aliens currently residing in the United States without legal status to adjust to LPR status, to acquire "earned legalization," or to obtain a guest worker visa also has affects on future legal permanent admissions. Although guest workers and other temporary foreign workers options, as well as legalization proposals, are not topics of this report, the issues have become inextricably linked to the debate on legal permanent admissions. Two concerns at the crux of this issue are: (1) whether a large-scale legalization program would disadvantage persons currently waiting in the backlogs for LPR visas and (2) whether such a legalization would prompt an increase in LPR petitions from family members of the legalized population. For an analysis of this interaction in the comprehensive immigration reform efforts during the 108 th through the 111 th Congresses, see Appendix D . Appendix A. Top 50 Sending Countries in FY2010, by Category of LPR Appendix B. Processing Dates for Immigrant Petitions Appendix C. FY2001-FY2010 Immigrants, by Preference Category Appendix D. Recent Legislative History Issues in the 108 th Congress Legislation reforming permanent immigration came from a variety of divergent perspectives in the 108 th Congress. The sheer complexity of the current set of provisions makes revising the law on permanent immigration a daunting task. This discussion focuses only on those bills that would have revised the permanent immigration categories and the numerical limits as defined in §201-§203 of the INA. On January 21, 2004, Senators Chuck Hagel and Thomas Daschle introduced legislation ( S. 2010 ) that would, if enacted, potentially yield significant increases in legal permanent admissions. The Immigration Reform Act of 2004 ( S. 2010 ), would have among other provisions: no longer deduct immediate relatives from the overall family-sponsored numerical limits; treat spouses and minor children of LPRs the same as immediate relatives of U.S. citizens (exempt from numerical limits); and reallocate the 226,000 family preference numbers to the remaining family preference categories. In addition, many aliens who would have benefited from S. 2010 's proposed temporary worker provisions would be able to adjust to LPR status outside the numerical limits of the per country ceiling and the worldwide levels. Several bills that would offer more targeted revisions to permanent immigration were offered in the House. Representative Robert Andrews introduced H.R. 539 , which would have exempted spouses of LPRs from the family preference limits and thus treated them similar to immediate relatives of U.S. citizens. Representative Richard Gephardt likewise included a provision that would have treated spouses of LPRs outside of the numerical limits in his "Earned Legalization and Family Unity Act" ( H.R. 3271 ). Representative Jerrold Nadler introduced legislation ( H.R. 832 ) that would have amended the INA to add "permanent partners" after "spouses" and thus would have enabled aliens defined as permanent partners to become LPRs through the family-based immigration categories as well as to become derivative relatives of qualifying immigrants. Legislation that would have reduced legal permanent immigration was introduced early in the 108 th Congress by Representative Thomas Tancredo. The "Mass Immigration Reduction Act" ( H.R. 946 ) would have zeroed out family sponsored immigrants (except children and spouses of U.S. citizens), employment-based immigrants (except certain priority workers) and diversity lottery immigrants through FY2008. It also would have set a numerical limit of 25,000 on refugee admissions and asylum adjustments. Representative J. Gresham Barrett introduced an extensive revision of immigration law ( H.R. 3522 ) that also included a significant scaling back of permanent immigration. Legislation Passed in the 109 th Congress Recaptured Visa Numbers for Nurses Section 502 of Division B, Title V of P.L. 109-13 ( H.R. 1268 , the emergency FY2005 supplemental appropriation) amended the American Competitiveness in the Twenty-first Century Act of 2000 ( P.L. 106-313 ) to modify the formula for recapturing unused employment-based immigrant visas for employment-based immigrants "whose immigrant worker petitions were approved based on schedule A." In other words, it makes up to 50,000 permanent employment-based visas available for foreign nationals coming to work as nurses. This provision was added to H.R. 1268 as an amendment in the Senate and was accepted by the conferees. Recaptured Employment-Based Visa Numbers On October 20, 2005, the Senate Committee on the Judiciary approved compromise language that, among other things, would have recaptured up to 90,000 employment-based visas that had not been issued in prior years (when the statutory ceiling of 140,000 visas was not met). An additional fee of $500 would have been charged to obtain these recaptured visas. This language was forwarded to the Senate Budget Committee for inclusion in the budget reconciliation legislation. On November 18, 2005, the Senate passed S. 1932 , the Deficit Reduction Omnibus Reconciliation Act of 2005, with these provisions as Title VIII. These provisions, however, were not included in the House-passed Deficit Reduction Act of 2005 ( H.R. 4241 ). The conference report ( H.Rept. 109-362 ) on the Deficit Reduction Act of 2005 ( S. 1932 ) was reported during the legislative day of December 18, 2005. It did not include the Senate provisions that would have recaptured employment-based visas unused in prior years. On December 19, the House agreed to the conference report by a vote of 212-206. On December 21, the Senate removed extraneous matter from the legislation pursuant to a point of order raised under the "Byrd rule" and then, by a vote of 51-50 (with Vice President Cheney breaking a tie vote), returned the amended measure to the House for further action. Major Issues in the 109 th Congress President Bush's Immigration Reform Proposal When President George W. Bush announced his principles for immigration reform in January 2004, he included an increase in permanent legal immigration as a key component. The fact sheet that accompanied his remarks referred to a "reasonable increase in the annual limit of legal immigrants." When President Bush spoke, he characterized his policy recommendation as follows: The citizenship line, however, is too long, and our current limits on legal immigration are too low. My administration will work with the Congress to increase the annual number of green cards that can lead to citizenship. Those willing to take the difficult path of citizenship—the path of work, and patience, and assimilation—should be welcome in America, like generations of immigrants before them. Some commentators speculated that the President was promoting increases in the employment-based categories of permanent immigration, but the Bush Administration did not provide specific information on what categories of legal permanent admissions it advocated should be increased. The President featured his immigration reform proposal in the 2004 State of the Union address, and a lively debate has ensued. Most of the attention has focused on the new temporary worker component of his proposal and whether the overall proposal constitutes an "amnesty" for aliens living in the United States without legal authorization. President Bush continued to state that immigration reform was a top priority. In an interview with the Washington Times, the President responded to a question about where immigration reform ranks in his second term agenda by saying, "I think it's high. I think it's a big issue." The President posited that the situation was a "bureaucratic nightmare" that must be solved. Securing America's Borders Act ( S. 2454 )/Chairman's Mark Title IV of S. 2454 , the Securing America's Borders Act, which Senate Majority Leader Bill Frist introduced on March 16, 2006, as well as Title V in the draft of Senate Judiciary Chairman Arlen Specter's mark circulated March 6, 2006 (Chairman's mark) would have substantially increased legal immigration and would have restructured the allocation of these visas. The particular provisions in S. 2454 and the Chairman's mark were essentially equivalent. Foremost, Title IV of S. 2454 and Title V of the Chairman's mark would have no longer deducted immediate relatives of U.S. citizens from the overall family-sponsored numerical limit of 480,000. This change would have likely added at least 226,000 more family-based admissions annually (based upon the current floor of 226,000 family-sponsored visas). The bills would have increased the annual number of employment-based LPRs from 140,000 to 290,000. They also would have no longer counted the derivative family members of employment-based LPRs as part of the numerical ceiling. If each employment-based LPR would be accompanied by 1.2 family members (as is currently the ratio), then an estimated 348,000 additional LPRs might have been admitted. The bills would have "recaptured" visa numbers from FY2001 through FY2005 in those cases when the family-based and employment-based ceilings were not reached. Title IV of S. 2454 and Title V of the Chairman's mark would have raised the current per-country limit on LPR visas from an allocation of 7% of the total preference allocation to 10% of the total preference allocation (which would have been 480,000 for family-based and 290,000 for employment-based under this bill). Coupled with the proposed increases in the worldwide ceilings, these provisions would have eased the visa wait times that oversubscribed countries (i.e., China, India, Mexico, and the Philippines) currently have by substantially increasing their share of the overall ceiling. Title IV of S. 2454 and Title V of the Chairman's mark would have further reallocated family-sponsored immigrants and employment-based visas. The numerical limits on immediate relatives of LPRs would have increased from 114,200 (plus visas not used by first preference) to 240,000 annually. They would have shifted the allocation of visas from persons of "extraordinary" and "exceptional" abilities and persons having advanced professional degrees (i.e., first and second preferences), and increased the number of visas to unskilled workers 10,000 to 87,000—plus any unused visas that would roll down from the other employment-based preference categories. Employment-based visas for certain special immigrants would have no longer been numerically limited. Comprehensive Immigration Reform ( S. 2611 ) As the Senate was locked in debate on S. 2454 and the Judiciary Chairman's mark during the two-week period of March 28-April 7, 2006, an alternative was offered by Senators Chuck Hagel and Mel Martinez. Chairman Specter, along with Senators Hagel, Martinez, Graham, Brownback, Kennedy, and McCain introduced this compromise as S. 2611 on April 7, 2006, just prior to the recess. The identical language was introduced by Senator Hagel ( S. 2612 ). Much like S. 2454 and S.Amdt. 3192 , S. 2611 would have substantially increased legal permanent immigration and would have restructured the allocation of the family-sponsored and employment-based visas. After several days of debate and a series of amendments, the Senate passed S. 2611 as amended by a vote of 62-36 on May 25, 2006. In its handling of family-based legal immigration, Title V of S. 2611 mirrored Title IV of S. 2454 and Title V of the Chairman's mark. It would have no longer deducted immediate relatives of U.S. citizens from the overall family-sponsored numerical limit of 480,000. This change would have likely added at least 226,000 more family-based admissions annually (based upon the current floor of 226,000 family-sponsored visas). The numerical limits on immediate relatives of LPRs would have increased from 114,200 (plus visas not used by first preference) to 240,000 annually. Assuming that the trend in the number of immediate relatives of U.S. citizens continued at the same upward rate, the projected number of immediate relatives would have been approximately 470,000 in 2008. Assuming that the demand for the numerically limited family preferences continued at the same level, the full 480,000 would have been allocated. If these assumptions held, the United States would have likely admitted or adjusted an estimated 950,000 family-sponsored LPRs by 2009, as Figure D -1 projects. In terms of employment-based immigration, S. 2611 would have increased the annual number of employment-based LPRs from 140,000 to 450,000 from FY2007 through FY2016, and set the limit at 290,000 thereafter. S. 2611 / S. 2612 also would have no longer counted the derivative family members of employment-based LPRs as part of the numerical ceiling. As in S. 2454 , S. 2611 would have reallocated employment-based visas as follows: up to 15% to "priority workers"; up to 15% to professionals holding advanced degrees and certain persons of exceptional ability; up to 35% to skilled shortage workers with two years training or experience and certain professionals; up to 5% to employment creation investors; and up to 30% (135,000) to unskilled shortage workers. Employment-based visas for certain special immigrants would have no longer been numerically limited. S. 2611 also would have no longer counted the derivative family members of employment-based LPRs as part of the numerical ceiling. If each employment-based LPR would be accompanied by 1.2 family members (as is currently the ratio), then an estimated 540,000 additional LPRs might have been admitted. However, the Senate passed an amendment on the floor that placed an overall limit of 650,000 on employment-based LPRs and their accompanying family annually FY2007-FY2016, as Figure D -1 projects. In addition, special exemptions from numerical limits would have also been made for aliens who have worked in the United States for three years and who have earned an advanced degree in science, technology, engineering, or math. Certain widows and orphan who meet specified risk factors would have also been exempted from numerical limits. The bills would have further increased overall levels of immigration by reclaiming family and employment-based LPR visas when the annual ceilings were not met, FY2001-FY2005. As noted earlier, unused visas from one preference category in one fiscal year roll over to the other preference category the following year. S. 2611 would have significantly expanded the number of guest worker and other temporary foreign worker visas available each year and would have coupled these increases with eased opportunities for these temporary workers to ultimately adjust to LPR status. Whether the LPR adjustments of guest workers and other temporary foreign workers were channeled through the numerically limited, employment-based preferences or were exempt from numerical limits (as were the proposed F-4 foreign student fourth preference adjustments) obviously would have affected the projections and the future flows. S. 2611 included a provision that would have exempted from direct numerical limits those LPRs who are being admitted for employment in occupations that the Secretary of Labor has deemed there are insufficient U.S. workers "able, willing and qualified" to work. Such occupations are commonly referred to as Schedule A because of the subsection of the code where the Secretary's authority derives. Currently, nurses and physical therapists are listed on Schedule A, as are certain aliens deemed of exceptional ability in the sciences or arts (excluding those in the performing arts). Title V of S. 2611 would have raised the current per-country limit on LPR visas from an allocation of 7% of the total preference allocation to 10% of the total preference allocation (which would be 480,000 for family-based and 450,000/290,000 for employment-based under this bill). Coupled with the proposed increases in the worldwide ceilings, these provisions would have eased the visa wait times that oversubscribed countries (i.e., China, India, Mexico, and the Philippines) currently have by substantially increasing their share of the overall ceiling. The bill would have also eliminated the exceptions to the per-country ceilings for certain family-based and employment-based LPRs, which are discussed above. Secure America and Orderly Immigration Act ( S. 1033 / H.R. 2330 ) On May 12, 2005, a bipartisan group of Senators and Congressmen introduced an expansive immigration bill known as the Secure America and Orderly Immigration Act ( S. 1033 / H.R. 2330 ). Among other things, these bills would have made significant revisions to the permanent legal admissions sections of INA. Specifically Title VI of the legislation would have removed immediate relatives of U.S. citizens from the calculation of the 480,000 annual cap on family-based visas for LPR status, thereby providing additional visas to the family preference categories; lowered the income requirements for sponsoring a family member for LPR status from 125% of the federal poverty guidelines to 100%; recaptured for future allocations those LPR visas that were unused due to processing delays from FY2001 through FY2005; increased the annual limit on employment-based LPR visa categories from 140,000 to 290,000 visas; and raised the current per-country limit on LPR visas from an allocation of 7% of the total preference allocation to 10% of the total preference allocation (which would be 480,000 for family-based and 290,000 for employment-based under this bill). Comprehensive Enforcement and Immigration Reform Act of 2005 The Comprehensive Enforcement and Immigration Reform Act of 2005 ( S. 1438 ), introduced by Senators John Cornyn and Jon Kyl on July 20, 2005, had provisions that would have restructured the allocation of employment-based visas for LPRs. Among the various proposals, Title X of this legislation would have made the following specific changes to the INA provisions on permanent admissions: reduced the allocation of visas to persons of "extraordinary" and "exceptional" abilities and persons having advanced professional degrees (i.e., first and second preferences); increased the number of visas to unskilled workers from a statutory cap of 10,000 annually to a level of 36% of the 140,000 ceiling for employment-based admissions (plus any other unused employment-based visas); eliminated the category of diversity visas; and recaptured for future allocations those employment-based visa numbers that were unused from FY2001 through FY2005. Immigration Accountability Act of 2005 As part of a package of four immigration reform bills, Senator Chuck Hagel introduced the Immigration Accountability Act of 2005 ( S. 1919 ), which would have provided for "earned adjustment of status" for certain unauthorized aliens who met specified conditions and would have expanded legal immigration. In terms of permanent legal admissions, S. 1919 would have among other provisions: no longer deducted immediate relatives from the overall family-sponsored numerical limits of 480,000; treated spouses and minor children of LPRs the same as immediate relatives of U.S. citizens (i.e., exempt from numerical limits); and reallocated the 226,000 family preference numbers to the remaining family preference categories. The Hagel immigration reform proposal also included legislation that would have revised the temporary worker programs, border security efforts, and employment verification. Enforcement First Immigration Reform Act of 2005 Title VI of the Enforcement First Immigration Reform Act of 2005 ( H.R. 3938 ), introduced by Representative J.D. Hayworth, focused on revising permanent admissions. H.R. 3938 would have increased employment-based admissions and decreased family-based admissions. More specifically, it would have increased the worldwide ceiling for employment-based admissions by 120,000 to 260,000 annually; within the employment-based third preference category, doubled unskilled admission from 10,000 to 20,000; eliminated the family-based fourth preference category (i.e., adult sibling of U.S. citizens); and eliminated the diversity visa category. H.R. 3938 also had two provisions aimed at legal immigration from Mexico: §604 would have placed a three-year moratorium on permanent family-preference (not counting immediate relatives of U.S. citizens) and employment-based admissions from Mexico; and §605 would have amended the INA to limit family-based immigration from Mexico to 50,000 annually. Reducing Immigration to a Genuinely Healthy Total (RIGHT) Act of 2005 On September 8, 2005, Representative Thomas Tancredo introduced the "Reducing Immigration to a Genuinely Healthy Total (RIGHT) Act of 2005" ( H.R. 3700 ), which would have substantially overhauled permanent admissions to the United States. Among other provisions, H.R. 3700 would have reduced the worldwide level of employment-based immigrants from 140,000 to 5,200 annually; limited the 5,200 employment-based visas to persons of "extraordinary" and "exceptional" abilities and persons having advanced professional degrees (i.e., first and second preferences); eliminated the family preference visa categories; and eliminated the category of diversity visas. Additional Immigration Reduction Legislation Representative J. Gresham Barrett introduced an extensive revision of immigration law ( H.R. 1912 ) that also included a significant scaling back of permanent immigration. This legislation was comparable to legislation he introduced in the 108 th Congress. Permanent Partners Representative Jerrold Nadler introduced legislation ( H.R. 3006 ) that would have amended the INA to add "permanent partners" after "spouses" and thus would have enabled aliens defined as permanent partners to become LPRs through the family-based immigration categories as well as to become derivative relatives of qualifying immigrants. This bill was comparable to legislation he introduced previously. Major Legislation in the 110 th Congress Senate Majority Leader Harry Reid introduced S. 1348 , the Comprehensive Immigration Reform Act of 2007, and floor debate on S. 1348 began the week of May 21, 2007. As introduced, S. 1348 was virtually identical to S. 2611 , which the Senate passed in the 109 th Congress. The Senate bipartisan compromise proposal for comprehensive immigration reform, which was backed by the Bush Administration, was announced on May 17, 2007, and formally introduced on May 21, as S.Amdt. 1150 . This substitute language differed from S. 1348 (and it predecessor S. 2611 ) in several key areas of legal immigration. The Senate Majority Leader and Minority Leader Mitch McConnell publicly affirmed their commitment to debate comprehensive immigration reform in June 2007. The Senate continued debate on the legislation as promised, but it did not pass cloture. S. 1639 , Comprehensive Immigration Reform Act of 2007 Senators Ted Kennedy and Arlen Specter introduced the bipartisan compromise proposal for comprehensive immigration reform on May 21, 2007, as S.Amdt. 1150 . Among those publically associated with negotiating the compromise legislation were Homeland Security Secretary Michael Chertoff and USCIS Director Guteirrez. On June 18, 2007, Senators Kennedy and Specter introduced S. 1639 , which was similar but not identical to S.Amdt. 1150 . Title V of S. 1639 would have substantially revised legal permanent admissions. S. 1639 stalled in the Senate on June 28, 2007, when the key cloture vote failed. In terms of family-based immigration, S. 1639 would have narrowed the types of family relationships that would make an alien eligible for a visa. Foremost, it would have eliminated the existing family-sponsored preference categories for the adult children and siblings of U.S. citizens (i.e., first, third, and fourth preferences). It would have also eliminated the existing category for the adult children of LPRs. The elimination of these categories would have been effective for cases filed after January 1, 2007. When visas became available for cases pending in the family-sponsored preference categories as of May 1, 2005, the worldwide level for family preferences would have been reduced to 127,000. The worldwide ceiling would have been set at 440,000 annually until these pending cases cleared. Immediate relatives exempt from numerical limits would have been redefined to include only spouses and minor children of U.S. citizens. The parents of adult U.S. citizens would have no longer been treated as immediate relatives; instead, parents of citizens would have been capped at 40,000 annually. The spouses and minor children of LPRs would have remained capped at a level comparable to current levels—87,000 annually. In terms of employment-based immigration, the first three preference categories would have been eliminated and replaced with a point system. This proposed point system would have established a tier for "merit-based" immigrants. The point system for merit-based immigrants would have been based on a total of 100 points divided between four factors: employment, education, English and civics, and family relationships. The fourth and fifth employment-based preference categories would have remained. (See Table 1 .) S. 1639 would also have enabled certain eligible aliens who were unauthorized to adjust to LPR status by means of a point system after they have worked in the United States on a newly proposed Z visa. These Z-to-LPR adjustments would have been scored on the merit-based point system, plus four additional factors: recent agricultural work experience, U.S. employment experience, home ownership, and medical insurance. S. 1639 would have established three different worldwide ceiling levels for the "merit-based" point system. For the first five fiscal years post-enactment, the worldwide ceiling would have been set at the level made available during FY2005—a total of 246,878. Of this number, 10,000 would have been set aside for exceptional Y visa holders to become LPRs, and 90,000 would have been allocated for reduction of the employment-based backlog existing on the date of enactment. In the sixth year after enactment, the worldwide level for the merit point system LPRs would have dropped to 140,000, provided that priority dates on cases pending reached May 1, 2005. Of this number, 10,000 would have again been set aside for exceptional Y visa holders, and up to 90,000 would have been set aside for reduction of employment-based backlog existing on the date of enactment. When the visa processing of the pending family-based and employment-based petitions would have reached those with May 1, 2005, priority dates, it would have triggered the provisions in S. 1639 that would have enabled the Z-to-LPR adjustments to go into effect (discussed below). At this time, the merit point system worldwide level would have become 380,000. The Z-to-LPR adjustments, however, would have occurred outside of this worldwide level. The proposal nonetheless would have continued to set aside 10,000 for exceptional Y visa holders to become LPRs. SKIL ( S. 1038 / H.R. 1930 ) S. 1038 / H.R. 1930 , the SKIL Act of 2007, would have expanded employment-based LPRs by exempting the following aliens from worldwide numerical limits: (1) those who have a master's or higher degree from an accredited U.S. university; (2) those who have been awarded medical specialty certification based on postdoctoral training and experience in the United States; (3) those who will work in shortage occupations; (4) those who have a master's degree or higher in science, technology, engineering, or math and have been working in a related field in the United States during the preceding three-year period; (5) those who have an extraordinary ability or who have received a national interest waiver. Moreover, S. 1038 / H.R. 1930 would have no longer counted the derivative family members of employment-based LPRs as part of the numerical ceiling. STRIVE ( H.R. 1645 ) Congressmen Luis Gutierrez and Jeff Flake introduced a bipartisan immigration reform bill, H.R. 1645 , know as the Security Through Regularized Immigration and a Vibrant Economy Act of 2007 or STRIVE. This legislation was similar, but not identical, to S. 2611 of the 109 th Congress. Specifically, H.R. 1645 would have no longer deducted immediate relatives of U.S. citizens from the overall family-sponsored numerical limit of 480,000. This change would have likely added at least 226,000 more family-based admissions annually (based upon the current floor of 226,000 family-sponsored visas). Family-sponsored immigrants would have been reallocated as follows: up to 10% to unmarried sons and daughters of U.S. citizens; up to 50% to spouses and unmarried sons and daughters of LPRs, (of which 77% would be allocated to spouses and minor children of LPRs); up to 10% to the married sons and daughters of U.S. citizens; and, up to 30% to the brothers and sisters of U.S. citizens. STRIVE would have increased the annual number of employment-based LPRs from 140,000 to 290,000 and would have no longer counted the derivative family members of employment-based LPRs as part of the numerical ceiling. It would, however, have capped the total employment-based LPRs and their derivatives at 800,000 annually. It would have reallocated employment-based visas as follows: up to 15% to "priority workers"; up to 15% to professionals holding advanced degrees and certain persons of exceptional ability; up to 35% to skilled shortage workers with two years training or experience and certain professionals; up to 5% to employment creation investors; and up to 30% (135,000) to unskilled shortage workers. Save America Comprehensive Immigration Act Congresswoman Sheila Jackson-Lee introduced H.R. 750 , the Save America Comprehensive Immigration Act of 2007. Among its array of immigration provisions were those that would have doubled the number of family-sponsored LPRs from 480,000 to 960,000 annually and would have doubled the number of diversity visas from 55,000 to 110,000 annually. Nuclear Family Priority Act H.R. 938 , the Nuclear Family Priority Act would have amended the INA to limit family sponsored LPRs the immediate relatives of U.S. citizens and LPRs. More specifically, it would have eliminated the existing family-sponsored preference categories for the adult children and siblings of U.S. citizens and replaced them with a single preference allocation for spouses and children of LPRs.

Four major principles underlie current U.S. policy on permanent immigration: the reunification of families, the admission of immigrants with needed skills, the protection of refugees, and the diversity of admissions by country of origin. These principles are embodied in the Immigration and Nationality Act (INA). The INA specifies a complex set of numerical limits and preference categories that give priorities for permanent immigration reflecting these principles. Legal permanent residents (LPRs) refer to foreign nationals who live permanently in the United States. During FY2010, a total of 1.0 million aliens became LPRs in the United States. Of this total, 66.3% entered on the basis of family ties. Immediate relatives of U.S. citizens made up the single largest group of immigrants—476,414—in FY2010. Other major categories in FY2010 were employment-based LPRs (including spouses and children) and refugees/asylees adjusting to LPR status—14.2% and 13.1%, respectively. About 13.3% all LPRs come from Mexico, which sent 139,120 LPRs in FY2010. Substantial efforts to reform legal immigration have failed in the recent past, prompting some to characterize the issue as a "zero-sum game" or a "third rail." The challenge inherent in reforming legal immigration is balancing employers' hopes to increase the supply of legally present foreign workers, families' longing to re-unite and live together, and a widely shared wish among the various stakeholders to improve the policies governing legal immigration into the country. Whether the Congress will act to alter immigration policies—either in the form of comprehensive immigration reform or in the form of incremental revisions aimed at strategic changes—is at the crux of the debate. Addressing these contentious policy reforms against the backdrop of high unemployment sharpens the social and business cleavages and may narrow the range of options. Even as U.S. unemployment levels remain high, employers assert that they continue to need the "best and the brightest" workers, regardless of their country of birth, to remain competitive in a worldwide market and to keep their firms in the United States. While support for the option of increasing employment-based immigration may be dampened by the level of unemployment, proponents argue it is an essential ingredient for economic growth. Other possible options are to admit LPRs on the basis of a point system comprised of education and needed skills or to establish a independent agency or commission that would set the levels and types of employment-based immigrants. Proponents of family-based migration alternatively point to the significant backlogs in family based immigration due to the sheer volume of aliens eligible to immigrate to the United States and maintain that any proposal to increase immigration levels should also include the option of family-based backlog reduction. Citizens and LPRs often wait years for their relatives' petitions to be processed and visa numbers to become available. Possible options include treating the immediate relatives of LPRs as immediate relatives of U.S. citizens are treated under the INA, (i.e., not held to numerical limits or per-country ceilings). Against these competing priorities for increased immigration are those who offer options to scale back immigration levels, with options ranging from limiting family-based LPRs to the immediate relatives of U.S. citizens to confining employment-based LPRs exceptional, extraordinary, or outstanding individuals.

Introduction The Moving to Work (MTW) demonstration program was created by Congress in 1996 to give the U.S. Department of Housing and Urban Development (HUD) and local Public Housing Authorities (PHAs) the flexibility to test alternative policies for providing housing assistance through the nation's two largest housing assistance programs: the Section 8 Housing Choice Voucher program and the public housing program. The alternative policies are meant to increase the cost-effectiveness of assisted housing programs, promote the self-sufficiency of assisted families, and increase housing choices for low-income families. Today, more than 30 PHAs are participating in MTW, and as of 2010, they managed approximately $2.7 billion in Section 8 Housing Choice Voucher funding and $1.1 billion in public housing funding, supporting 13% of all vouchers and 11% of all public housing units. More than a decade and a half since the inception of the demonstration, the future of MTW is uncertain. The current set of HUD-PHA agreements is set to expire in 2018, but calls for earlier changes to the program have emerged. Critics of the demonstration have argued that MTW agencies have been given unprecedented flexibilities, yet there is little understanding of the impacts those flexibilities have had on the lives of the low-income families PHAs are responsible for serving, and some concern that those impacts have been negative. Supporters of the demonstration have argued that the flexibility of the MTW demonstration program has allowed participating PHAs to serve more families in unique, improved, and cost-effective ways. These competing perceptions of the MTW demonstration program have translated to conflicting calls to end the program, change the program, or expand the program. Given the way the demonstration was designed and implemented, it is difficult to evaluate the effectiveness or efficiency of MTW agencies' specific policies, as measured against the program's statutory goals, and thus to assess the claims of critics or supporters. These conflicting views of the MTW demonstration program's success highlight a key point for understanding discussions around the program's future. The MTW demonstration was initially intended to serve as a testing ground for innovations in the provision of assisted housing; some have contended that it should be restructured to better serve that purpose. Others believe that MTW agencies have demonstrated that PHAs can successfully operate outside of the traditional regulatory structure, and thus some version of the program should be considered as the future of assisted housing. Despite the controversy around the future of the MTW demonstration program itself, the policies developed by MTW agencies have informed discussions about reforms to the mainstream assisted housing programs. For example, several of the program reforms being considered for the public housing and Section 8 Housing Choice Voucher programs have been implemented by MTW agencies. As Congress considers future reforms of federal housing assistance programs, policymakers may look to lessons from the MTW demonstration program for insight. This report provides an overview of the history and purpose of the MTW demonstration program, followed by a description of some of the policies adopted by participating PHAs. It concludes by providing some observations about the outcomes of the program and discussing policy options for the future. History and Purpose of the MTW Demonstration Program Authorizing Legislation Congress authorized the Moving to Work Demonstration Program in the FY1996 omnibus appropriations law ( P.L. 104-134 ). The authorizing language directs the Secretary of HUD to conduct a demonstration program providing PHAs with the flexibility to design and test approaches for providing housing assistance to low-income families outside of the rules that govern HUD's primary assisted housing programs: the Section 8 Housing Choice Voucher program and the low-rent public housing program. The intent is to test ways to achieve three policy objectives: 1. reducing costs and increasing cost-effectiveness in the provision of assisted housing, 2. encouraging the self-sufficiency of assisted families, and 3. increasing the housing choices for low-income families. The law directs the Secretary to select up to 30 PHAs for participation through a competitive process, and to conduct detailed evaluations for up to 15 participating agencies in order to identify replicable program models. Legislative guidelines for the MTW demonstration program are broad. The law does not specify the approaches to assisted housing that MTW agencies are to develop and test. Instead, the law allows MTW agencies to develop their own policies to achieve the aforementioned objectives. Examples of the flexibilities provided under the law include allowing PHAs to combine their Section 8 voucher funding with public housing operating and capital funding, creating one funding stream for housing assistance and development, and allowing HUD to waive many of the statutory requirements for assisted housing programs as established by the U.S. Housing Act of 1937, as amended. The law explicitly permits PHAs to design a "reasonable" rent policy, designed to encourage employment and self-sufficiency by participating families. Further, the law directs that participating PHAs be held harmless in terms of funding. However, the legislation also places limits on the flexibility allowed to MTW agencies. MTW agencies are required to serve substantially the same number and size-mix of families, guarantee that at least 75% of assisted families are low-income, and ensure that their assisted housing stock meets HUD-established housing quality standards. Further, the law prohibits HUD from issuing waivers of certain provisions of the U.S. Housing Act, including requirements related to public housing demolition and disposition, labor standards, and public housing community service requirements. The legislation also requires that PHAs seek public input in the development of their MTW policies. The law requires a PHA to hold a public hearing on its proposed policies prior to submitting an application to become an MTW agency. The PHA must then take into account the public comments within its MTW application plan. That plan must spell out how the PHA intends to use its flexibilities under the MTW program. It must be approved by HUD in order for a PHA to participate in the MTW demonstration program and HUD must monitor MTW agencies' compliance with their plans. The law goes on to require that MTW agencies submit annual reports to HUD that describe their use of funds, activities during the prior year, and any data required by the Secretary of HUD to assess the demonstration program. Thus, the statutory authorization for the MTW demonstration program allows MTW agencies to implement a diverse set of policies and activities. Policy Context To understand the structure of the MTW demonstration program, it is useful to understand the policy context that shaped its development. The administration of public housing was a controversial issue during the 1980s and 1990s, due to concerns about rising costs, a decaying public housing stock, and a perception that public housing developments were pervaded with social ills. Federal policymakers at the time, therefore, took interest in strategies that could reduce the cost of public housing while also improving its management. Major public and assisted housing reforms were debated throughout this period. Several policy debates influenced the consideration of public housing reform and the resulting development of the MTW demonstration program. First, at the time, the concept of "block granting" was being explored in many social programs. Housing practitioners and some federal policymakers wanted to explore the possibility of block granting or otherwise devolving assisted housing programs to the local level so that local officials would have greater autonomy to design programs and target funding to meet local community needs. This strategy was not universally supported, as some federal policymakers and tenant advocates believed that federal regulation of assisted housing programs was necessary to ensure the achievement of federal housing goals, such as desegregation. Second, the welfare reform debates of the 1990s focused the attention of federal policymakers on increasing family self-sufficiency across social welfare programs, including housing assistance programs. Third, federal policymakers and housing practitioners had increasingly come to believe that providing assisted housing through market-based approaches practiced by private industry would reduce assisted housing costs. The MTW demonstration program was a compromise that allowed for the pursuit of all of these varying policy goals while largely maintaining the existing models of assisted housing. Program Implementation and Growth HUD announced the demonstration program in December 1996 and received 43 applications for participation from PHAs. From that pool of applicants, HUD selected 30 PHAs for participation. The selected PHAs each entered into an individual negotiation process with various HUD offices to set the terms of their MTW agreements. That initial MTW negotiation process proved to be both complicated and lengthy as each statutory or regulatory waiver was individually approved. The first agreement was reached in February 1998 and the majority of MTW agreements were signed in 1998 or 1999. Perhaps due to the delays in implementation, or perhaps due to the passage of a public and assisted housing reform law in 1998 that provided all PHAs increased flexibility in the administration of assisted housing programs (such as in selecting tenants), six of the selected MTW agencies opted not to participate in the program. In 2000, HUD competitively allocated the remaining six open spaces to housing authorities with more than 2,500 units (see Table 1 ). Additional PHAs have become MTW agencies through acts of Congress and the program has grown beyond the original statutory cap of 30 PHAs (see Table 1 ). Congress specifically directed HUD to add the following PHAs to the MTW demonstration: Charlotte and Pittsburgh through P.L. 105-276 ; and Alaska, San Bernardino, CA, San Jose, CA, and Santa Clara, CA, through P.L. 110-161 . Congress directed HUD to competitively select another three PHAs for participation in MTW through P.L. 111-8 and another three each through P.L. 111-117 and P.L. 112-10 ; all nine of these competitive slots were only available to high-performing PHAs with fewer than 5,000 assisted housing units, and three of the six competitive slots were open only to HOPE VI sites. Several MTW agencies completed their participation in the demonstration program and chose not to renew their agreements. As a result, 35 PHAs are currently participating in the MTW demonstration program (see Table 1 ). HUD recently selected another four agencies to participate in MTW, although they had not yet finalized agreements with HUD at the time this report was last updated. The MTW authorizing language granted HUD broad discretion in administering the demonstration program and there have been criticisms of HUD's implementation. First, some PHAs were selected for participation despite prior poor performance. Second, the design of the program's structure was not uniform, so MTW agencies implemented a variety of policies under a variety of agreements, making it difficult to compare across agencies. Third, HUD's data systems did not allow for variations in PHA income and rent policies and thus could not accommodate data collection from MTW PHAs. As a result, HUD was unable to collect information on tenant characteristics in the early years of the demonstration, which would be necessary to fully evaluate the effects of MTW policies on tenant outcomes and assisted housing program costs. As a result of both data collection issues and the program's design, HUD has not been able to measure and compare the results of different MTW policies. While HUD has issued or contracted for several reports about MTW, these evaluations are largely process-oriented and limited to descriptions of policies adopted by PHAs. HUD was criticized by its Inspector General for insufficient monitoring of the demonstration's implementation, and in April 2012 the Government Accountability Office (GAO) issued a report recommending HUD undertake additional steps to improve its monitoring and oversight of the program. Partly in response to these critiques, HUD executed a standard MTW agreement with each participating agency in 2008. The standard agreement introduced uniform language for the MTW agreements and normalized reporting requirements, but still allowed MTW agencies flexibility to develop their own local policies. The standard MTW agreements extended MTW agencies' participation in the demonstration program until 2018. HUD has stated it believes that the introduction of the standard agreement and the extension of the MTW demonstration program will allow for more systematic evaluation of MTW agencies' policies in the future. However, the standard agreement does not require the standardization of performance data, which limits HUD's ability to evaluate specific policies implemented by MTW agencies. In 2008, HUD also began to collect data on tenant characteristics, which might allow for some evaluation of MTW policies in terms of tenant outcomes and the cost of assisted housing. According to the 2012 GAO review, HUD has recently increased its efforts to monitor MTW agencies' compliance with the program's statutory purposes and requirements. For example, many of the terms in the MTW statute are undefined, including "self-sufficiency," "housing choice," and "comparable mix of families." HUD has announced plans to require MTW agencies to create their own, or to adopt HUD's, definitions of "self-sufficiency" and "housing choice," and plans to provide MTW agencies with a template to collect data on what constitutes a "comparable mix of families." In addition, in 2011 HUD undertook an assessment of whether MTW agencies met two of the statutory requirements of the program: (1) that 75% of individuals served are low-income; and (2) that substantially the same number of families are served. In that review, HUD found that 91% of individuals served by MTW agencies were low-income and that all but one MTW agency served substantially the same number of families (defined by HUD as at least 95% of the number of families served by the PHA before it entered the MTW demonstration program). The GAO report concluded that HUD's recent initiatives were moving in the right direction in terms of ensuring MTW agencies' compliance with statutory requirements, but it also concluded that without standard definitions and a systematic process, HUD cannot effectively evaluate whether MTW agencies are in full compliance with the statute. A HUD IG report issued in September 2013 also noted that while HUD has taken some steps to improve its oversight of the MTW program, the department was still unable to ensure agencies' compliance with statutory requirements, among other issues. The IG report thus recommended HUD add no additional MTW agencies, or delay adding additional MTW agencies, until its administration of the program improved. Policies Implemented by MTW Agencies As stated previously, MTW agencies have adopted a wide range of program activities. Some agencies have used the MTW demonstration program to fully transform their assisted housing programs, while others have made more modest policy changes. Some agencies have applied their MTW policies to all of their assisted households while others have applied their MTW policies to subsets of their assisted housing populations or to select properties. The following section describes three policy areas in which MTW agencies have discretion and provides some examples of the policies that MTW agencies have developed in these areas. The three areas discussed are (1) the merging of assisted housing program funding streams and development activities; (2) the level of assistance provided to program participants and conditions of assistance; and (3) other administrative flexibilities. Given the differences in scope and scale of MTW programs at participating agencies, the policies described in this section may also vary. When possible, this section will note how MTW agencies have altered their policies over time. Given the limitations described earlier, this report does not attempt to evaluate the effectiveness or efficiency of the policies adopted by MTW agencies in relation to the goals of the program. Merged Funding Streams: Development Activities and Project-Basing MTW agencies may elect to receive their federal Section 8 Housing Choice Voucher funding, public housing capital funding, and operating funding in one merged form, rather than through the standard set of several assisted housing funding streams. This form of "block grant" assistance departs from traditional program operations, in which each assisted housing program has a dedicated funding stream and there are few allowances for the use of funds across programs. For instance, under the non-merged funding structure, Section 8 voucher funding can only be used for landlord payments; voucher funding cannot be used to fund the PHA's administration of the program (they receive separate administrative fees for this purpose), the PHA's public housing program, or its other low-income housing development plans. In another departure from the traditional funding structure, the amount of MTW block grant assistance a PHA receives is not determined through traditional programmatic formulas but rather through the negotiation of the MTW agreement. At the outset of the demonstration program, only six MTW agencies elected to receive merged assistance funding, but currently the majority of MTW PHAs receive merged funding. A 2004 report showed that MTW agencies used this area of discretion in a limited fashion during the early years of the program. In general, MTW agencies used the merged funding flexibility to smooth financial shortfalls in particular programs and for cross-programmatic purposes that may have been approved by HUD in the absence of the MTW discretion. Although MTW agencies appeared to use the funding flexibility for uses that were available absent merged funding, in interviews officials at MTW agencies stated that they believed that the funding flexibility provided by MTW created a level of autonomy from regulatory processes that encouraged alternative uses of funds. For instance, some MTW agencies developed additional support services for tenants to increase self-sufficiency—these programs might have been possible under the traditional funding structure, but MTW agencies felt that they would not have undertaken them without funding flexibility. Other MTW agencies used the funding flexibility for development uses that would not have been feasible without merged funding. These MTW agencies used their block grant assistance to leverage financing for the development of additional low-income housing units. Public Housing Redevelopment As noted earlier, more MTW agencies have now chosen to receive block grant funding, and they are using their funding flexibility broadly. Some MTW agencies have undertaken ambitious development activities, including the conversion of their public housing stocks to new forms of assistance. For example, two of the largest MTW agencies, the Chicago Housing Authority and the Atlanta Housing Authority, have used their MTW flexibility to undertake significant redevelopment of their public housing stock. The Chicago Housing Authority used its merged funding stream to attract private investment to its "Plan for Transformation," in which the PHA has replaced large parts of its deteriorating public housing stock with new developments—many of which are in mixed-income communities. When testifying before Congress, an official from the Chicago Housing Authority stated that the fixed 10-year merged MTW funding stream was key in obtaining financing for its transformation plan from private investors. For instance, the committed funding stream allowed the Chicago Housing Authority to use revenue bond financing. Similarly, Atlanta used its merged funding stream to finance the replacement of its distressed public housing stock. Other MTW agencies, such as the Keene Housing Authority and the Housing Authorities of the County of Santa Clara and the City of San Jose, have used the flexibility in their funding to convert public housing to project-based voucher developments, which is generally not possible under standard program rules (see discussion in next section and " Sample Policy: Keene Housing Authority (NH) and Project-Based Assistance " text box). The interest in converting public housing developments into new forms of assistance is generally driven by an interest in leveraging additional outside financing, which is limited in traditional public housing. Project-Basing "Project-basing" of vouchers is permitted in the traditional Section 8 Housing Choice Voucher program, but it appears to be a tool used more widely by MTW PHAs than non-MTW PHAs. In the traditional, HUD-regulated voucher program, a PHA may "project-base" some of its vouchers by signing a contract with a private property owner that reserves a portion of the building for low-income tenants; the voucher is then attached to the reserved units. The law that authorizes the voucher program limits project-basing such that PHAs may project-base only up to 20% of their tenant-based vouchers and cannot project-base more than 25% of the units in any private building, or project-base any units in a building receiving federal assisted housing funds (e.g., public housing units). MTW agencies, however, may receive waivers of these restrictions and can, for instance, use their funding flexibility to: convert the whole of their public housing stock to project-based vouchers or other similar assistance, project-base former public housing properties that have been sold to nonprofit organizations, including PHA-affiliated nonprofits, and project-base an entire building in order to serve special populations. In addition, MTW agencies may adopt their own processes for awarding project-based assistance rather than follow the competitive process required under the standard voucher program regulations. As shown in Table 2 , the majority of MTW agencies (all but three) either currently have housing portfolios that include some form of project-based voucher assistance or they have plans to begin project-basing vouchers. This is a much higher rate of project-basing than undertaken by non-MTW PHAs. According to a 2010 HUD report, only about 15% of all PHAs were engaged in project-basing vouchers. Level of Assistance: Income, Rent, and Conditions of Assistance Several MTW activities can affect the level of assistance provided to tenants. Under the standard public housing and the Housing Choice Voucher programs, statutory requirements determine a tenant's eligibility for assistance based on their income and the amount of subsidy they receive (which is related to the amount of rent they pay). Until 2011, MTW agencies had full discretion to experiment with alternative income calculations and alternative rent structures. In 2011, HUD issued guidance stating that, under the terms of the authorizing statute, MTW agencies must determine if families are income eligible for housing assistance based on the statutory income calculation; it is unclear when and how MTW agencies with approved alternative income calculations will become compliant with the new guidance. Although MTW agencies will no longer be granted the discretion to use an alternative income calculation, they continue to have the discretion to implement alternative rent structures. In addition, MTW agencies have the discretion to set additional conditions of assistance for tenants, such as time limits, work requirements, and mandatory participation in self-sufficiency programs. Income and Rent Policies The industry groups that represent PHAs have argued that the statutory income calculations and rent structures for the public housing and Section 8 Housing Choice Voucher programs are overly complicated to administer, deter the reporting of income, and discourage tenants from increasing their income through work (since rent increases as income increases). Thus, some MTW agencies have experimented with alternative income calculations and rent structures. Income Policies Under the law governing the public housing and Section 8 Housing Choice Voucher programs, "income" is defined as income from all sources and "adjusted income," which is used for the purposes of calculating tenant rent, is defined as income less statutory exclusions. The law requires that income be examined every year. Some MTW agencies have used the flexibility provided by the demonstration to simplify their income calculations by limiting income exclusions and deductions and by not including the income derived from assets below a certain threshold value (e.g., $50,000). As shown in Table 3 , more than half of participating MTW agencies in 2011 were using some form of modified income or asset disregard and over one-quarter were using a modified set of deductions. (As noted earlier, given recent HUD guidance it is not clear whether MTW agencies will be able to continue all of these policies in the future.) Most MTW agencies have experimented with reducing the frequency with which they verify tenants' income, particularly for populations likely to have fixed incomes, such as persons who are elderly or have disabilities. As noted earlier, federal housing law generally requires that tenant income be reexamined every year for rent determination purposes and on an interim basis for changes in tenant income. Some MTW agencies have elected to only reexamine tenants' income every two or three years and/or to eliminate interim reexaminations of income. As shown in Table 3 , 88% of MTW agencies are using an alternate schedule for recertifying tenant income. By adopting simpler income calculations, it is possible that MTW agencies are forgoing additional revenue or increasing their subsidy costs, but they may have concluded that those costs are worth the administrative savings or changes in tenant incentives. However, there are no data available to evaluate the cost-effectiveness of this approach. Rent Policies Under the traditional housing assistance programs, assisted tenants are required to pay no more than 30% of their incomes towards their rent, although PHAs are permitted to adopt low ($50) minimum rent policies, which are subject to hardship exemptions. Given this structure, generally, as tenants' incomes increase (and subsidies decrease), their rents increase; and as their incomes decrease, their rents decrease (and subsidies increase). MTW agencies have used the flexibility provided by the demonstration to experiment with a variety of alternative rent structures. MTW agencies have adopted maximum (or ceiling) and (higher) minimum rents, flat rents (which do not vary with changes in tenant income), delayed and phased-in rent increases, stepped rents (which increase over time and not in relation to income), and alternative subsidies (see the " Sample Policy: MDHCD (MA) Self-Sufficiency Program " text box). As shown in Table 3 , most MTW agencies have adopted their own minimum rent policies, just under a quarter have adopted tiered rent policies, and more than a quarter have adopted flat rent policies. In addition, slightly less than a third of MTW agencies have simplified the utility calculation component of determining a tenant's subsidy. In interviews during the MTW program's initial evaluation in 2004, some MTW agency officials stated that they believed that alternative rent structures encourage work by not penalizing tenants for increases in income and that the alternative rent structures gave tenants exposure to a system more closely mimicking the private market. These MTW agency officials also indicated that they thought the alternative rent structures were easier for tenants to understand and easier for staff to administer. At this time, there are no systematic data to evaluate the assertions that the alternative rent structures adopted by MTW agencies have led to increased tenant earnings. Further, while it is reasonable to assume that the rent changes have decreased administrative work and changed (either increased or decreased) tenants' out-of-pocket payments, due to the lack of available data it is unclear what the magnitude of these outcomes might be. Conditions of Assistance MTW PHAs have also used their flexibility to implement new requirements for tenants receiving assistance. Some MTW PHAs have implemented time limit and work requirement policies; as shown in Table 4 , approximately one-third of MTW agencies have implemented work requirements while half as many MTW agencies have implemented time limit policies. These policies may be designed to encourage self-sufficiency and/or to allow the PHA to serve additional families from their waiting lists. Generally, MTW agencies implementing work requirement and time limit policies also provide families subject to the requirement with supportive services (see " Sample Policy: MDHCD (MA) Self-Sufficiency Program " text box). The specifications of the work requirements and time limits vary across MTW agencies. For instance, time limits adopted by MTW agencies for program participation range from three to seven years. New Administrative Flexibilities Many of the policies already discussed may result in decreased administrative burdens for MTW agencies (e.g., alternative recertification schedules, streamlined project-basing), but there are additional policies that MTW agencies have adopted that streamline operations without altering the level or type of assistance that families receive. Examples include alternative housing quality inspection schedules and alternative reporting requirements. Inspections In the Section 8 Housing Choice Voucher program, each rental unit under contract must be inspected to ensure it meets HUD's physical quality standards annually, based on the date of a family's initial occupancy. These policies are designed to ensure that assisted housing units are of a decent quality. PHA industry groups have contended that the inspection requirements, as currently structured, require a high level of staff resources. They have also argued that in some cases it is not necessary to inspect units every year to ensure housing quality. Reflecting these concerns, some MTW agencies have clustered their inspections based on location and some have alternative inspection schedules, such as risk-based inspections (see " Sample Policy: The Oakland Housing Authority (CA) and Biennial Inspections " text box). The risk-based model of inspection can include, for landlords with good records: less frequent inspections, the self-certification of units, and the inspection of a sample of a landlord's rental units. As shown in Table 5 , only a couple of MTW agencies are clustering inspections, but 38% are conducting inspections less frequently than annually and 19% are allowing owners to self-certify under certain conditions. The authorizing language for the MTW program states that MTW agencies must ensure that assisted housing meets federal housing quality standards (HQS). HUD's 2010 Report to Congress suggests that the alternative HQS inspection procedures adopted by MTW agencies have ensured the quality of the assisted housing stock in a less burdensome and costly way. However, at this time, a full evaluation has not been conducted as to whether the alternative HQS inspection procedures are either more or less effective than the regulated program procedures in ensuring the quality of Section 8 voucher-assisted rental units. Additional research would be necessary to evaluate the effectiveness and efficiency of the traditional inspection procedures compared to alternative inspection procedures. Reporting Another area where MTW agencies differ involves how they report program information to HUD (due to the different accountability structure afforded the MTW demonstration program, as discussed previously in the report). MTW agencies are required to submit an Annual MTW Plan, which outlines their activities for the year, and an Annual MTW Report, which describes and evaluates the outcomes of those activities. Non-MTW agencies must also submit plans, but they are more prescriptive than MTW plans and are focused on how PHAs are meeting federal rules and regulations and which among a more limited set of options they are choosing and why. MTW officials interviewed by the Urban Institute in 2004 believed that MTW reporting requirements encouraged program creativity and strategic planning and that, while some of their MTW activities would have been possible outside of the demonstration program, they would not have attempted these activities but for the MTW planning process. These same officials viewed other assisted housing program reporting requirements as merely the fulfilling of an obligation. MTW agencies formerly had additional flexibility to implement activities that were not included in their Annual MTW Plans if those activities were allowable under their specific MTW waivers. However, since the implementation of the standard MTW agreement in 2008, MTW agencies must now include any new MTW activities in their Annual MTW Plans for HUD's approval before implementation; with this change, HUD has more knowledge of MTW agencies' activities and the way in which the agencies plan to measure their outcomes. However, GAO has noted that the current reporting process, which relies heavily on the Annual MTW Plan and Annual MTW Report, allows MTW agencies to self-report on the achievement of their target program outcomes without verification. HUD has also reported that some MTW agencies have struggled with the new reporting requirements after not reporting on activities for up to 11 years. In addition, several of HUD's reporting systems continue to lack the capacity to accept data on MTW-specific activities. Observations about Outcomes As previously stated, there has been no systematic evaluation of the outcomes of the policies adopted by MTW agencies in achieving the goals of the program (reduce costs and increase cost-effectiveness in the provision of assisted housing, encourage the self-sufficiency of assisted families, and increase the housing choices for low-income families). A more systematic evaluation may be possible in the future, as HUD standardizes the program and increases the program's data collection. Despite the lack of verified evidence regarding the effectiveness and efficiency of MTW activities, tenant advocates, PHAs, and HUD have made observations about the way in which the program has affected tenants and the way it has affected PHAs' operations. These observations are neither tested nor quantified, but they do inform policy debates about the future of the MTW demonstration program and about overall reform of assisted housing programs. Tenant Outcomes Since the beginning of the demonstration program, low-income housing advocates have expressed concern that assisted housing tenants will be and have been negatively affected by the policies adopted by MTW agencies. (For example, see " Public Opposition to MTW Participation: The New York City Housing Authority (NYCHA) " text box.) Whether the implementation of the MTW demonstration program has positively or negatively affected assisted housing tenants has not been thoroughly studied and is thus unclear. HUD has suggested that MTW has permitted participating PHAs to provide a greater number of assisted housing units than they would have been able to provide under the traditional assistance programs. This would mean that the MTW program has provided a benefit to low-income individuals more broadly. However, the ability of MTW agencies to assist a greater number of families may be a result of agencies reducing the amount of assistance provided to current recipients, rather than a result of savings from administrative streamlining. For example, some PHAs have implemented policies that reduce the amount of rental assistance that an individual tenant receives (e.g., requiring tenants to pay rent above the affordability standard of 30% of tenant income). Similarly, while the self-sufficiency policies and programs implemented by MTW agencies could potentially benefit some low-income individuals over the long term by facilitating increases in family income, it is unclear if time limit and work requirement policies have resulted in needy families losing access to assistance. Finally, there have been reports that MTW agencies have reduced tenants' access to portability (the ability to move from one PHA's jurisdiction to another's using the same voucher), which would limit tenants' housing choices. Further research would be required to know the net benefit of MTW discretion to low-income individuals receiving or waiting to receive assistance. In addition, the MTW demonstration program has facilitated the large-scale demolition of public housing in some communities, significantly affecting the lives of the tenants in those developments. Although MTW agencies are subject to the same rules and procedures for the demolition and disposition of public housing as non-MTW PHAs, the flexibility of being an MTW agency may make the demolition and disposition of an agency's public housing stock more feasible. As noted earlier, the Atlanta and Chicago PHAs are two MTW agencies that have demolished the majority of their public housing stock, replacing some of the lost stock with vouchers and mixed-income developments. PHAs pursuing this strategy contend that the replacement housing is of better quality than the demolished public housing and provides more opportunities for residents. Tenant advocates have objected to this type of large-scale displacement of public housing residents; they argue that the relocations destroy communities and employment networks and make social services less accessible. The primary research on the effects on tenants of the demolition and disposition of public housing has looked at the results of the HOPE VI public housing revitalization program. HOPE VI has funded the demolition or redevelopment of severely distressed public housing, including public housing owned by MTW agencies. Research conducted by the Urban Institute on the outcomes of HOPE VI has shown mostly positive results for tenants. Tenants who were displaced from severely distressed public housing appear to now live in lower-poverty neighborhoods with improved health outcomes. However, research has also found that some tenants who are considered to be particularly vulnerable (such as very large families, families with disabled members, and families with multiple barriers to self-sufficiency) have not seen the same levels of benefit from public housing revitalization and may require additional services. Outcomes for PHA Operations While the data available are insufficient to know if the discretion afforded to MTW agencies allows for a more cost-effective administration of assisted housing programs, the belief that the program has been a success on this front is generally held by supporters of the program, including PHA industry groups, some assisted housing practitioners, and some Members of Congress. The fact that most participating PHAs have chosen to renew their participation and more PHAs wish to participate than there are advertised slots is evidence of the popularity of the program among assisted housing practitioners. Congress has exhibited some support for the program by taking action to expand the number of agencies participating. Further, HUD officials have suggested that they believe MTW agencies are more cost-effective in their administration of assisted housing. However, this belief that MTW has been successful at improving cost effectiveness and efficiency is not universally held. Some low-income housing advocates have argued that MTW agencies administer assisted housing at a higher cost than non-MTW agencies. Some advocates have also suggested that, in a limited funding environment, the negotiated funding MTW agencies receive negatively affects the funding of other PHAs. While MTW agencies' funding levels are subject to the same across-the-board decreases in funding that apply to non-MTW agencies, it is unclear how MTW agencies' funding levels would have fared if they were subject to the standard funding formulas instead of their negotiated agreements. Supporters of MTW have claimed that the increased discretion afforded to MTW agencies decreases administrative burdens without increasing oversight risk. In the traditional structure of assisted housing programs, PHAs are held accountable through a regulatory structure that monitors if PHAs have delivered assisted housing according to the rules of the specific programs. As a result, PHAs are evaluated based on their ability to follow processes rather than the outcomes of their activities. A traditional regulatory oversight model may be perceived as a necessary tool to guard against waste, fraud, and abuse. MTW agencies are not subject to this form of regulatory accountability, and instead define their own outcome goals and then self-report their effectiveness in meeting these goals to HUD through their annual MTW reports. Supporters of the MTW program argue that this structure allows MTW agencies to pursue innovative strategies and focus on program outcomes and long-term planning. PHA industry groups point to the experiences of MTW agencies as support for deregulation and a move away from traditional, regulatory oversight. However, it is unclear whether the use of program funds by MTW agencies has been monitored closely enough to fully evaluate their outcomes. Future of the MTW Demonstration Program The current MTW agreements are all scheduled to expire in 2018. If no other actions are taken, the program is slated to continue as-is until that time, and it will be at HUD's discretion whether to renew the agreements again. However, the future of the MTW demonstration remains uncertain. Some supporters have proposed expanding MTW, converting it from a demonstration into a permanent program, and allowing more PHAs to participate in it. Other proposals have called for continuation of the program, with perhaps a limited expansion, but with changes designed to address concerns raised by tenant-advocates and to allow for a stronger evaluation component. Critics of MTW have called for it to be phased out and, in some cases, replaced with targeted demonstrations that would allow for more meaningful evaluations to inform future policy changes. These differences of opinion highlight the outstanding question of whether the MTW demonstration program should be considered a lab for testing new ideas for reforming the primary rental assistance programs or whether some version of the MTW program is the future of assisted housing. Depending on their perspective about the purpose of the program, policymakers may consider changing the MTW program to make it a more effective demonstration, changing the MTW demonstration into a permanent and expanded program, or maintaining the status quo. Policy Option: Restructure MTW as More Effective Demonstration The purpose of the MTW demonstration program, as articulated in its authorizing statute, is to "design and test various approaches for providing and administering housing assistance" that meet the goals of the program. As noted earlier, those goals involve reducing cost and increasing cost-effectiveness, promoting work and self-sufficiency, and increasing family choice. The statute charged the Secretary of HUD with evaluating participating agencies "in an effort to identify replicable program models promoting the purpose of the demonstration." As discussed throughout this report, the way that the MTW demonstration program was designed and implemented has limited the effectiveness of the program as a true demonstration. While PHAs have used the MTW flexibilities to "test various approaches for providing and administering housing assistance," those models have not been fully assessed in terms of whether they effectively or efficiently meet the purposes of the demonstration. Recognizing the limitations of the MTW program as a demonstration, some have called for changes to MTW to allow it to more clearly serve research-oriented purposes. For example, the Center on Budget and Policy Priorities has argued that a set of targeted, temporary demonstrations would be a more effective mechanism to test specific policy changes. Recently, HUD has proposed expanding the MTW demonstration program to 60 agencies as part of an effort to structure a systematic evaluation. HUD's proposals include a more targeted selection of MTW agencies, which would allow for the study of particular policies (e.g., admitting a subset of agencies that plan to implement a particular rent policy). HUD has also stressed the importance of selecting high-performing agencies that have the capacity to take part in a rigorous evaluation. HUD's intended goal would be to evaluate the policies implemented by MTW agencies for national adoption. Similar proposals have been included in assisted housing reform legislative proposals, such as the Section 8 Voucher Reform Act and the draft Affordable Housing and Self Sufficiency Improvement Act (AHSSIA). Policy Option: MTW as an Expanded Permanent Program As noted earlier in this report, the legislative history of the MTW demonstration program indicates that its creation was a compromise between policymakers who thought that the existing set of rental assistance programs should be transformed into a flexible block grant program and those who thought the existing programs should be retained. The MTW compromise allowed for the creation of a new, block grant-like housing program for a small number of PHAs, and the maintenance of the existing programs for most PHAs. Over time, more PHAs have been added to MTW than originally envisioned and many additional PHAs wish to receive MTW status. The desirability of MTW for PHAs has led to calls to expand and make MTW a permanent program. For example, the Moving to Work Charter Program Act, which has been introduced in each of the past several Congresses, would expand to at least 250 the number of PHAs eligible to participate in MTW and make it a permanent program. Others have called for block granting and deregulating federal housing assistance for all PHAs, along the lines of MTW. For example, in 2004 the Bush Administration proposed the Housing Assistance for Needy Families program, which was modeled on MTW and would have converted housing assistance into a block grant, allowing PHAs many of the same flexibilities provided under MTW. That proposal did not receive wide support. PHA industry groups raised concerns that a block grant funding model could lead to funding reductions down the road, as has been seen with other HUD block grant programs. Tenant advocates raised concerns that deregulation would mean that they would lose protection in the law against policies that would raise tenants' rents and subject them to conditions of assistance they felt would be unreasonable. A differently structured block grant proposal could garner wider support, although some of the same concerns raised in 2004 could be raised again. In addition, HUD has expressed concern about the capacity of some agencies entering the MTW demonstration program. As previously mentioned, some of the PHAs admitted to the current program were considered poor performers prior to entering. HUD argues that high performers are more likely to succeed because they have proven their ability to meet reporting requirements and thus will be able to report on their activities and outcomes as required in the MTW demonstration program. HUD has also recommended that PHAs be selected for the program based on evaluation capacity, previously demonstrated innovation, and the level of local support. Finally, it is unclear if the MTW program as currently designed, or if a fully deregulated block grant program, would be a good program model for small PHAs, particularly those that administer only the public housing program or only the Housing Choice Voucher program. Policy Option: The Status Quo Another option for policymakers is to make no changes and allow the MTW demonstration program to continue as it is currently structured. The existing MTW agencies have agreements through 2018 (with the possibility for extensions beyond that date, at HUD's discretion). Congress may also consider adding small numbers of additional agencies, as it has done the past several years. Further, as noted earlier, HUD has taken some steps to address concerns raised by critics of the existing program, such as increasing MTW reporting requirements, standardizing agreements, and including evaluation requirements for new agencies entering the program. If the program continues as is, participating PHAs will continue to experiment with new policies that may influence the primary assisted housing programs. Even without a full evaluation of the policies adopted by MTW PHAs, it appears that both HUD and policymakers are considering incorporating some of the reforms adopted by MTW agencies into the mainstream programs. Both the Obama Administration and some Members of Congress from both parties have proposed or supported changes to HUD rental assistance programs that would either require or allow PHAs to adopt policies that MTW PHAs have experimented with, including changes to inspection rules, including allowing biennial inspections; changes to income calculation rules, including allowing alternate sources of documentation or definitions of income and a streamlined calculation process; changes to rent policies, including higher minimum rents and/or a limited rent policy demonstration; expanded authority to PHAs to "voucher-out" their public housing and replace it with project-based assistance; and allowance for PHAs to blend their public housing operating and capital funding. While bipartisan consensus seems to be forming in favor of adopting some reforms based on the MTW demonstration, other policies remain controversial, particularly those involving changing the amount of assistance provided to residents and placing conditions (such as time limits and work requirements) on the receipt of such assistance. Tenant advocates and researchers continue to have questions and concerns about the effects of these and other policies on tenant outcomes, as well as the other stated purposes of the demonstration.

The Moving to Work (MTW) demonstration program was created by Congress in 1996 to give the U.S. Department of Housing and Urban Development (HUD) and local Public Housing Authorities (PHAs) the flexibility to test alternative policies for providing housing assistance through the nation's two largest housing assistance programs: the Section 8 Housing Choice Voucher program and the public housing program. The alternative policies are meant to increase the cost-effectiveness of assisted housing programs, promote the self-sufficiency of assisted families, and increase housing choices for low-income families. The more than 30 PHAs currently participating in the demonstration have adopted a wide range of new policies that would not have been possible under the traditional rules governing assisted housing programs. Participating PHAs have merged their various federal funding streams and used their merged, "block grant" funding to undertake new activities, including supportive services for residents, development of new affordable housing, and the restructuring of traditional public housing. MTW PHAs have also changed their rent policies in ways that may raise rents for some tenants, but may also improve incentives for families to increase earnings. Some PHAs have adopted policies that place new conditions on assistance, such as time limits and work requirements. And PHAs have undertaken changes to streamline administration of the program, such as modifying their quality inspection procedures. The way the demonstration program was designed—allowing for a wide variety of activities—and issues with data collection have meant that no systematic evaluation of the outcome of the policies adopted by MTW agencies has been undertaken. However, HUD has made efforts to increase and standardize data collection within the MTW demonstration program, which may make such an evaluation more feasible in the future. Both supporters and critics of the program have made observations about how the flexibility provided under MTW has been used, and those observations have influenced the policy debate about the future of the demonstration. Critics of the demonstration have argued that MTW agencies have been given unprecedented flexibilities, yet there is little understanding of the impacts those flexibilities have had on the lives of low-income families. Supporters of the demonstration have argued that the flexibility of MTW has allowed participating PHAs to serve more families in unique, improved, and cost-effective ways. These competing perceptions of MTW have translated to conflicting calls to end the program, change the program, or expand the program. To some extent, these conflicting visions of the future of the program reflect different ideas about the program's purpose. Should MTW be used as a testing ground for evaluating innovative policies for the delivery of assisted housing? Or, should something like MTW replace the major housing assistance programs? Regardless of whether Congress chooses to make changes to the MTW program, the policies adopted by participating PHAs appear to be influencing debates about assisted housing programs. Several of the policies adopted by MTW agencies are under consideration as permanent reforms for the public housing and Section 8 Housing Choice Voucher programs. As Congress considers the reform of federal housing assistance programs, policymakers may continue to look to lessons from the MTW demonstration program for insight.

Administration and Congressional Action President Trump submitted his FY2018 budget request on May 23, 2017. The request included a total of $45.2 billion for agencies funded through the FSGG appropriations bill, including $250 million for the CFTC. On July 17, 2017, the House Committee on Appropriations reported a Financial Services and General Government Appropriations Act, 2018 ( H.R. 3280 , H.Rept. 115-234 ). Total FY2018 funding in the reported bill would have been $42.5 billion, with another $248 million for the CFTC included in the Agriculture appropriations bill ( H.R. 3268 , H.Rept. 115-232 ). The combined total of $42.7 billion would have been about $2.5 billion below the President's FY2018 request, with most of this difference in the funding for the General Services Administration (GSA). Nearly all of H.R. 3280 's text was included as Division D of H.R. 3354 when it was considered by the House of Representatives beginning on September 6, 2017. The bill was amended numerous times, shifting funding among FSGG agencies but not changing the FSGG totals. H.R. 3354 passed on September 14, 2017. The Senate Committee on Appropriations released an FY2018 chairmen's recommended FSGG draft bill along with an explanatory statement on November 20, 2017. Funding in the recommended bill totaled $43.3 billion, about $1.9 billion below the President's FY2018 request with most of this difference in funding for the GSA. With the end of FY2017 approaching and no permanent FY2018 appropriations bills enacted, Congress passed, and the President signed, H.R. 601 / P.L. 115-56 . Division D of this act provided for continuing appropriations through December 8, 2017, generally termed a continuing resolution (CR). P.L. 115-556 provided funding for most FSGG agencies based on the FY2017 funding rate. In addition, the CR contained a number of deviations or "anomalies" from the general formula. The FSGG anomalies focused on decreasing funding related to the presidential transition, which had been increased in FY2017. Four additional CRs were enacted—on December 8, 2017 ( P.L. 115-90 ), December 22, 2017 ( P.L. 115-96 ), January 22, 2018 ( P.L. 115-120 ), and February 8, 2018 ( P.L. 115-123 ). P.L. 115-123 also included an additional $127 million for the GSA and $1.66 billion for the Small Business Administration (SBA), largely to address disaster costs from hurricanes in 2017. The Consolidated Appropriations Act, 2018 ( H.R. 1625 , P.L. 115-141 ) was enacted on March 23, 2018. The bill, originally focused on eradication of human trafficking, was amended with the appropriations measure, passed in the House on March 22, 2018, and passed in the Senate on March 23, 2018. The C ongressional Record for March 22, 2018, includes an Explanatory Statement which is to have the same effect as a joint explanatory statement of a conference committee. FSGG appropriations are included in Division E, with the CFTC funded in the Agriculture appropriations in Division A. Additional legislative language affecting financial regulation is in Division S, Titles VIII and IX. FY2018 enacted appropriations in both P.L. 115-141 and P.L. 115-123 totaled $47.7 billion for the FSGG agencies, $2.5 billion above the original request with much of this difference resulting from the emergency funding for the SBA. The GSA, the Federal Communications Commission (FCC), and the Election Assistance Commission (EAC) also had substantial funding differences between requested and enacted amounts. Most of the EAC funding was for grants to states for the election reform program. Table 1 reflects the status of FSGG appropriations measures at key points in the appropriations process. Table 2 lists the broad amounts requested by the President and included in the various FSGG bills, largely by title, and Table 3 details the amounts for the independent agencies. Specific columns in Table 2 and Table 3 are FSGG agencies' enacted amounts for FY2017, the President's FY2018 request, the FY2018 amounts from H.R. 3554 as passed by the House, from the Senate Appropriations chairmen's draft bill, and the enacted amounts combined from P.L. 115-141 and P.L. 115-123 . Financial Regulatory Agencies and FSGG Appropriations Although financial services are a focus of the FSGG bill, the bill does not actually include funding for the regulation of much of the financial services industry. Financial services as an industry is often subdivided into banking, insurance, and securities. Federal regulation of the banking industry is divided among the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Comptroller of the Currency (OCC), and the Bureau of Consumer Financial Protection (generally known as the Consumer Financial Protection Bureau, or CFPB). In addition, credit unions, which operate similarly to many banks, are regulated by the National Credit Union Administration (NCUA). None of these agencies receives its primary funding through the appropriations process, with only the FDIC inspector general and a small program operated by the NCUA currently funded in the FSGG bill. Insurance generally is regulated at the state level, with some oversight at the holding company level by the Federal Reserve. There is a relatively small Federal Insurance Office (FIO) inside the Treasury, which is funded through the Departmental Offices account, but FIO has no regulatory authority. Federal securities regulation is divided between the SEC and the CFTC, both of which are funded through appropriations. The CFTC funding is a relatively straightforward appropriation from the general fund, whereas the SEC funding is provided by the FSGG bill, but then offset through fees collected by the SEC. Although funding for many financial regulatory agencies may not be provided by the FSGG bill, legislative provisions affecting financial regulation in general and some of these agencies specifically have often been included in FSGG bills. H.R. 3280 and H.R. 3354 as passed by the House include many provisions, particularly in Title IX and Title X, that would amend the 2010 Dodd-Frank Act and other statutes relating to the regulation of financial institutions and the authority and funding of financial regulators. Many of these provisions were included in other legislation, notably H.R. 10 , which passed the House on June 8, 2017. Of particular interest from the appropriations perspective, H.R. 3280 and H.R. 3354 as passed by the House would bring several financial regulators under the FSGG bill instead of receiving funding from outside of the appropriations process, as is currently the case. P.L. 115-141 included the texts of H.R. 4267 and H.R. 4792 , both of which address small business access to capital. H.R. 4267 was also included in H.R. 10 , but had not been originally included in H.R. 3280 or H.R. 3354 . The texts of H.R. 4267 and H.R. 4792 , however, were not included in the FSGG portion of the bill. Instead they were in Titles VIII and IX in a separate Division S. None of the language bringing financial regulators under the appropriations process was included in the law as enacted. Committee Structure and Scope The House and Senate Committees on Appropriations reorganized their subcommittee structures in early 2007. Each chamber created a new Financial Services and General Government Subcommittee. In the House, the jurisdiction of the FSGG Subcommittee is composed primarily of agencies that had been under the jurisdiction of the Subcommittee on Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies, commonly referred to as TTHUD. In addition, the House FSGG Subcommittee was assigned four independent agencies that had been under the jurisdiction of the Science, State, Justice, Commerce, and Related Agencies Subcommittee: the Federal Communications Commission (FCC), the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), and the Small Business Administration (SBA). In the Senate, the jurisdiction of the new FSGG Subcommittee is a combination of agencies from the jurisdiction of three previously existing subcommittees. Most of the agencies that had been under the jurisdiction of the Transportation, Treasury, the Judiciary, and Housing and Urban Development, and Related Agencies Subcommittee were assigned to the FSGG subcommittee. In addition, the District of Columbia, which had its own subcommittee in the 109 th Congress, was placed under the purview of the FSGG Subcommittee, as were four independent agencies that had been under the jurisdiction of the Commerce, Justice, Science, and Related Agencies Subcommittee: the FCC, FTC, SEC, and SBA. As a result of this reorganization, the House and Senate FSGG Subcommittees have nearly identical jurisdictions, except that the CFTC is under the jurisdiction of the FSGG Subcommittee in the Senate and the Agriculture Subcommittee in the House. CRS FSGG Appropriations Experts Table 4 below lists various departments and agencies funded through FSGG appropriations and the names and contact information of the CRS expert(s) on these departments and agencies.

The Financial Services and General Government (FSGG) appropriations bill includes funding for the Department of the Treasury, the Executive Office of the President (EOP), the judiciary, the District of Columbia, and more than two dozen independent agencies. The House and Senate FSGG bills fund the same agencies, with one exception. The Commodity Futures Trading Commission (CFTC) is funded through the Agriculture appropriations bill in the House and the FSGG bill in the Senate. President Trump submitted his FY2018 budget request on May 23, 2017. The request included a total of $45.2 billion for agencies funded through the FSGG appropriations bill, including $250 million for the CFTC. The House Committee on Appropriations reported a Financial Services and General Government Appropriations Act, 2018 (H.R. 3280, H.Rept. 115-234) on July 17, 2017. Total FY2018 funding in the reported bill would have been $42.5 billion, with another $248 million for the CFTC included in the Agriculture appropriations bill (H.R. 3268, H.Rept. 115-232). The combined total of $42.7 billion would have been about $2.5 billion below the President's FY2018 request, with the largest difference in the funding for the General Services Administration (GSA). Nearly all of H.R. 3280's text was included as Division D of H.R. 3354, an omnibus appropriations bill, when it was considered by the House of Representatives beginning on September 6, 2017. The bill was amended numerous times, shifting funding among FSGG agencies but not changing the FSGG totals. H.R. 3354 passed on September 14, 2017. The full Senate Committee on Appropriations did not act on an FY2018 FSGG appropriations bill. A draft FY2018 chairmen's recommended FSGG bill along with an explanatory statement was released on November 20, 2017. Funding in the draft bill would have totaled $43.3 billion, about $1.9 billion below the President's FY2018 request, with most of this difference in funding for the GSA. No appropriations bills were passed prior to the start of FY2018. Five separate continuing resolutions (CR) were enacted—on September 8, 2017 (P.L. 115-56), December 8, 2017 (P.L. 115-90), December 22, 2017 (P.L. 115-96), January 22, 2018 (P.L. 115-120), and February 8, 2018 (P.L. 115-123). The CRs generally maintained FSGG funding based on FY2017 levels, with P.L. 115-123 also adding supplemental emergency funding for the GSA ($127 million) and the Small Business Administration (SBA; $1.66 billion) largely to address natural disasters. The Consolidated Appropriations Act, 2018 (H.R. 1625, P.L. 115-141) was enacted on March 23, 2018. FSGG appropriations were included as Division E, with the CFTC funded in the Agriculture appropriations in Division A. FY2018 enacted appropriations in P.L. 115-141 and P.L. 115-123 combined totaled $47.7 billion for the FSGG agencies, $2.5 billion above the original request with much of this difference resulting from the emergency funding for the SBA. Although financial services are a major focus of the FSGG appropriations bills, these bills do not include funding for many financial regulatory agencies, which are funded outside of the appropriations process. The FSGG bills do, however, often contain additional legislative provisions relating to such agencies, as was the case with H.R. 3280 and H.R. 3354, which contained several provisions in Title IX and Title X that also appear in H.R. 10, a broad financial regulatory bill passed by the House on June 8, 2017. Although most of these provisions were not ultimately attached, P.L. 115-141 included the texts of H.R. 4267 and H.R. 4792, both of which addressed small business access to capital.

Introduction Between 1989 and 2008, Congress passed several laws placing political and economic sanctions on Burma's military junta as part of a policy to identify individuals responsible for repression in Burma and hold them accountable for their actions, foster the reestablishment of a democratically elected civilian government, and promote the protection of human rights. Various developments in Burma between 2010 and 2016 led the Obama Administration and others to perceive positive developments toward the restoration of a democratically elected civilian government in that nation after nearly five decades of military rule. Based on that perception, the Obama Administration waived most of the sanctions on Burma, particularly after Aung San Suu Kyi and the National League for Democracy won the 2015 parliamentary elections and a new NLD-controlled Union Parliament took office in April 2016. Certain events since 2016, however, have led some Members of Congress and others to call for the reinstatement of some of the waived sanctions and/or the imposition of new restrictions on relations with Burma. One of the more prominent events was the "clearance operation" in northern Rakhine State in late 2017, during which Burma's security forces allegedly committed serious human rights abuses against the Rohingya including murder, torture, and rape. A U.N. fact-finding mission (and other investigations) have determined that these human rights abuses may constitute genocide, crimes against humanity, and/or war crimes. Burma's security forces have also been accused of committing crimes against humanity and war crimes against civilians in Kachin and Shan State between 2011 and 2018 as part of its ongoing conflict with various ethnic armed organizations (EAOs). Other events that have contributed to congressional reconsideration of U.S. policy in Burma are the lack of progress in peace talks between Aung San Suu Kyi's government, the Burmese military, and the EAOs; and the continuing arrest, detention, and conviction of "political prisoners," including the conviction of two Burmese reporters for their coverage of the alleged atrocities in Rakhine State. The Trump Administration has utilized the Global Magnitsky Act to impose "limited targeted sanctions" on five military officers and two military units it has determined were responsible for serious human rights abuses in Kachin, Rakhine, and Shan State. To some Members of Congress, this response is insufficient given the severity of the alleged human rights violations, as well as the Burmese military's apparent intransigence in the ongoing cease-fire negotiations. Two bills have been introduced during the 115 th Congress, the Burma Unified through Rigorous Military Accountability (BURMA) Act of 2018 ( H.R. 5819 ) and the Burma Human Rights and Freedom Act of 2018 ( S. 2060 ), that would redefine U.S. policy in Burma and impose greater restrictions on bilateral relations. In addition, both the House and Senate committee versions of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2019, ( H.R. 6385 and S. 3108 ) would continue the practice of placing restrictions on the use of appropriations in Burma. Brief History of Burma and U.S. Sanctions From 1948 to 1966, the Union of Burma was ruled by a democratically elected civilian government representing the goals and interests of the nation's Bamar majority and its various ethnic minorities. The fragile federated state was based on the provisions of the Panglong Agreement signed by Burma's revolutionary leader, General Aung San (father of Aung San Suu Kyi), and representatives of some of the nation's larger ethnic minorities—the Chin, the Kachin, and the Shan. The ethnic-based coalition proved to be unstable, and on March, 2, 1962, Burma's military, known as the Tatmadaw, staged a coup d'état, led by General Ne Win. Following the coup, several of Burma's ethnic minorities organized militias to protect themselves from Tatmadaw and Bamar domination. From 1962 to 2011, Burma was ruled by a military junta that denied the people of Burma the right to select the government of their choice and many of their internationally recognized human rights, such as freedom of speech and freedom of association. Throughout this period, a low-grade civil war raged off and on between the Tatmadaw and over 20 different ethnic armed organizations (EAOs). Despite the military coup, the political repression, and the ongoing civil war, the United States established and maintained normal diplomatic relations with the military junta, including relatively close military-to-military relations. Between 1989 and 2008, Congress passed a series of laws imposing diplomatic and economic sanctions on Burma's military junta, in response to its violent suppression of democratic protests in 1988, 1990, 2003, and 2007. Two of the sanctions laws were the Burmese Freedom and Democracy Act of 2003 (BFDA, P.L. 108-61 ) and the JADE Act, which imposed various political and economic restrictions on U.S. relations with Burma. In 2008, Burma's military junta, then known as the State Peace and Development Council (SPDC), began a process to transform the nation's government into what it called a "disciplined democracy." On May 8, 2008, the SPDC held a national referendum on a new constitution that would establish a mixed civilian/military government. Many observers viewed the results of the referendum—in which over 90% of the voters supported the new constitution—as fraudulent. On November 7, 2010, the SPDC held parliamentary elections that were boycotted by many political parties, including Aung San Suu Kyi's National League for Democracy (NLD). The promilitary Union Solidarity and Development Party (USDP) won nearly 80% of the contested seats (25% of the seats in Burma's Union Parliament are not contested, but rather under the 2008 constitution are appointed by the Commander in Chief of Defence Services). The new Union Parliament appointed SPDC Prime Minister Lieutenant General Thein Sein as President. He was sworn in on March 30, 2011, after the SPDC officially transferred power to the new government. Following the establishment of a new government in Burma under the provisions of the 2008 constitution, the Obama Administration adopted a new policy of greater engagement while maintaining existing sanctions. President Obama utilized the waiver provisions in sanctions laws to waive the enforcement of some of the sanctions, in part in response to President Thein Sein's undertaking some political reforms and releasing many political prisoners. On November 8, 2015, Burma held nationwide parliamentary elections, in which the NLD won nearly 80% of the contested seats. The Union Parliament chose Htin Kyaw, a long-standing NLD member and close friend of Aung San Suu Kyi, as President. Aung San Suu Kyi was subsequently appointed to the newly created position of State Counselor, as well as Foreign Minister. During Aung San Suu Kyi's September 2016 visit to Washington, DC, President Obama announced Burma's reinstatement in the U.S. Generalized System of Preferences (GSP) program and his intention to revoke several executive orders that enforced many of the sanctions on Burma. President Obama's pledge to revoke the executive orders was fulfilled by the release of E.O. 13472 on October 7, 2016. On December 2, 2016, he issued Presidential Determination 2017-04, ending restrictions on U.S. assistance to Burma as provided by Section 570(a) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1997. Several noneconomic restrictions as detailed in the sections that follow, however, remain in effect, including a prohibition on issuing visas to enter the United States to certain categories of Burmese officials; restrictions limiting the types of U.S. assistance to Burma; and an embargo on arms sales to Burma. In addition, Congress has set limits on bilateral relations in appropriations legislation. Section 7043(a) of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), for example, places a number of restrictions on bilateral, international security, and multilateral assistance to Burma. Similar restrictions were included in the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ); the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ); the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ); the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ); and the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). The pending appropriations legislation for the State Department in FY2019— H.R. 6385 and S. 3108 —also contains possible restrictions on relations with Burma. U.S. Policy Goals in Burma Sanctions Legislation At the time it passed legislation imposing sanctions on Burma, Congress articulated goals of U.S. policy toward Burma and, by extension, how the sanctions might facilitate the achievement of those goals. Among the goals stated in those laws were the establishment of a constitutional democratic civilian government; the protection and/or the improvement of internationally recognized human rights; the release of political prisoners; greater cooperation with U.S. counternarcotics efforts; the alleviation of the suffering of Burmese refugees and the provision of humanitarian assistance to the Burmese people; and the identification of individuals responsible for repression in Burma and holding them accountable for their actions. Progress has been made on some of these goals, but arguably none have been fully achieved. Circumstances in Burma have raised a number of questions for Congress regarding U.S. policy and the restrictions on relations, such as the following: Should waived restrictions be reinstated—or new restrictions be imposed—in light of the alleged serious human rights violations against the Rohingya and other ethnic minorities in Burma? To what extent did the formation of the NLD-led government advance the goals of U.S. policy? Did the sanctions on Burma contribute to the political changes that occurred between 2008 and 2015? Are the previously stipulated goals of U.S. policy toward Burma still suitable given the current situation in Burma and in the region? If not, what are the appropriate new or revised goals? Are the existing restrictions on relations with Burma consistent with U.S. goals in Burma? If not, how should they be changed or altered to make them consistent? Will the continuation or renewal of restrictions on relations with Burma lead to the achievement of U.S. goals in Burma? Restrictions in Place Following President Obama's release of E.O. 13472 on October 7, 2016, and Presidential Determination 2017-04 on December 2, 2016, the restrictions on relations with Burma that remain in place consist of restrictions on the issuance of visas to certain Burmese nationals, limits on U.S. assistance to Burma contained in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), and various restrictions on U.S. relations with Burma's military. In addition, the Trump Administration has utilized the Global Magnitsky Act (22 U.S.C. 2656) to apply visa and economic sanctions to five Burmese military officers and two military units. Visa Restrictions Section 570(a)(3) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act of 1997 ( P.L. 104-208 ) states, "Except as required by treaty obligations or to staff the Burmese mission to the United States, the United States should not grant entry visas to any Burmese government official." Section 6 of the Burmese Freedom and Democracy Act (BFDA; P.L. 108-61 ) expanded the discretionary authority to deny entry visas to "the former and present leadership" of the SPDC and USDA. Neither the President nor the State Department has used the authority granted by these two laws. Section 5(a)(1) of the Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 2008 (JADE Act; P.L. 110-286 ) states the following: The following persons shall be ineligible for a visa to travel to the United States: (A) Former and present leaders of the SPDC, the Burmese military, or the USDA. (B) Officials of the SPDC, the Burmese military, or the USDA involved in the repression of peaceful political activity or in other gross violations of human rights in Burma or in the commission of other human rights abuses, including any current or former officials of the security services and judicial institutions of the SPDC. (C) Any other Burmese persons who provide substantial economic and political support for the SPDC, the Burmese military, or the USDA. (D) The immediate family members of any person described in subparagraphs (A) through (C). The JADE Act authorizes the President to waive the visa ban if "the President determines and certifies in writing to Congress that travel by the person seeking such a waiver is in the national interest of the United States." The Obama Administration and the Trump Administration on many occasions have issued such presidential waivers. Restrictions on U.S. Assistance The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) contains several restrictions on U.S. programs and activities in Burma. Section 7034(b)(2) prohibits the appropriation of funds, to Burma and other countries, "to support any military training or operations that include child soldiers," or for "tear gas, small arms, light weapons, ammunition, or other items for crowd control purposes for foreign security forces that use excessive force to repress peaceful expression, association, or assembly in countries undergoing democratic transition." Section 7043(a) places restrictions on assistance to Burma, including the following: Bilateral economic assistance (Title III): "may not be made available to any individual or organization if the Secretary of State has credible information that such individual or organization has committed a gross violation of human rights, including against Rohingya and other minority groups, or that advocates violence against ethnic or religious groups or individuals in Burma"; "may not be made available to any organization or entity controlled by the armed forces of Burma"; and "may only be made available for programs to support the return of Rohingya, Karen, and other refugees and internally displaced persons to their locations of origin or preference in Burma if such returns are voluntary and consistent with international law." International Security Assistance (Title IV): prohibits funding for International Military Education and Training (IMET) and Foreign Military Financing Program (FMF Program) in Burma; and restricts Department of State consultations with the armed forces of Burma "only on human rights and disaster response in a manner consistent with the prior fiscal year, and following consultation with the appropriate congressional committees." Multilateral Assistance (Title VI) is restricted to projects "carried out in accordance with the requirements of section 7029(b)(2) of this Act." Section 7029(b) requires the Secretary of the Treasury to instruct the U.S. executive director of each international financial institution to vote against any loan or financing for any project unless the project provides for accountability and transparency; is developed and carried out in accordance with best practices regarding environmental conservation, cultural protection, and empowerment of local populations (including indigenous communities); does not "provide incentives for, or facilitate, forced displacement"; and does not "involve enterprises owned or controlled by the armed forces." Restrictions on Relations with Burma's Military In addition to the restrictions in P.L. 115-141 , the United States has other restrictions on relations with Burma's military. These include the following: Prohibition on the Sale of U.S. Military Equipment —On June 9, 1993, the State Department's Bureau of Political-Military Affairs issued Public Notice 1820 suspending "all export licenses and other approvals to export or otherwise transfer defense articles or defense services to Burma." Ban on the Provision of Visas to Military Leaders —Section 5(a)(1)(A) of the Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 2008 (JADE Act; P.L. 110-286 ) states that former and present leaders of the Burmese military "shall be ineligible for a visa to travel to the United States." Section 5(a)(1)(B) of the same act also makes officials of the Burmese military "involved in the repression of peaceful political activity or in other gross violations of human rights in Burma or in the commission of other human rights abuses" ineligible for a visa. Prohibition on Military Training or Operations that Include Child Soldiers —From 2010 to 2016, and again in 2018, Burma was designated by the State Department as a country whose government has armed forces or government-supported armed groups that recruit and use child soldiers. Pursuant to the Child Soldiers Prevention Act of 2008 (CSPA, P.L. 110-457 ), certain security assistance and commercial licensing of military equipment with Burma (including IMET, FMF, Excess Defense Articles, and Peacekeeping Operations, as well as the issuance of licenses for direct commercial sales of military equipment) were prohibited, unless the President issues a waiver. However, Section 7034(b)(1) of P.L. 115-141 states, "Funds appropriated by this Act should not be used to support any military training or operations that include child soldiers." Given that the State Department has identified Burma as a nation that recruits and uses child soldiers, this section would apparently preclude military training or operations with either the entire Burmese military, or those units within it that include child soldiers. Global Magnitsky Sanctions In late 2017, the Tatmadaw conducted a "clearance operation" in northern Rakhine State in response to attacks on security outposts along the border with Bangladesh, during which Burma's security forces may have committed genocide, crimes against humanity, and war crimes. The "clearance operation" resulted in the exodus of over 700,000 Rohingya from Burma into Bangladesh. Satellite imagery confirms that over 300 Rohingya villages were partially or totally destroyed during the Tatmadaw's operation. The United Nations and other organizations have interviewed Rohingya survivors, who recount stories of mass killings, torture, and rape perpetrated by Tatmadaw soldiers and other Burmese security officers. The Trump Administration has condemned the initial attacks on the Burmese security outposts, as well as the Tatmadaw's response to attacks, characterizing the "clearance operations" as "ethnic cleansing." On December 21, 2017, the Department of the Treasury placed Major General Maung Maung Soe, Burma's Western Commander during the "clearance operations," on its Specially Designated Nationals and Blocked Persons (SDN) List under the Global Magnitsky Act "for his command of forces involved in serious human rights abuses in northern Rakhine State." As a result, General Maung Maung Soe will not be granted a visa to enter the United States, any assets he may have in U.S. financial institutions have been frozen, and he is to be denied financial services by any U.S. entity or person. On August 17, 2018, the Department of the Treasury added four more Burmese senior military officers—Lieutenant General Aung Kyaw Zaw, Major General Khin Hlaing, Major General Khin Maung Soe, and Brigadier General Thura San Lwin—plus two military units—the 33 rd Light Infantry Division and the 99 th Light Infantry Division—to its SDN list under the Global Magnitsky Act. The five officers and two units are subject to the same sanctions as General Maung Maung Soe. Waived or Lapsed Restrictions As noted above, some of the laws imposing sanctions on Burma also include provisions whereby the President could waive, temporarily or permanently, the sanctions under certain conditions. In addition, some of the laws also contain provisions by which the President can terminate the sanctions. President Obama waived several restrictions, but also stated that waivers could be reversed, and the restrictions reimposed, if conditions in Burma so warrant. On December 2, he issued Presidential Determination 2017-04, terminating the restrictions on bilateral assistance to Burma contained in Section 570(a) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1997 ( P.L. 104-208 ). In addition, Congress has permitted certain trade restrictions contained in Sections 3 and 3A of the BFDA (as amended) to lapse by not passing the necessary annual renewal resolution. Economic Restrictions In the past, Congress and the executive branch placed several economic restrictions on relations with Burma that have been subsequently terminated, waived, or suspended, including a general ban on the import of goods from Burma; a ban on the import of Burmese jadeite and rubies, and products containing Burmese jadeite and rubies; a ban on the import of goods from certain Burmese companies; the "freezing" of the assets of certain Burmese nationals; a prohibition on providing financial services to certain Burmese nationals; restrictions on U.S. investments in Burma; restrictions on bilateral assistance to Burma; and restrictions on U.S. support for multilateral assistance to Burma. Ban on Import of Products of Burma Section 3 and 3A of the BFDA (as amended) banned the importation of "any article that is a product of Burma," goods and services from certain Burmese companies, jadeite and rubies from Burma, and articles of jewelry containing jadeite or rubies from Burma. This ban, however, was subject to annual renewal by Congress passing a resolution as stipulated in Section 9(b) of the same act. From 2004 to 2012, Congress passed the annual renewal resolution, but has not done so since. As a consequence, these restrictions contained in Section 3 and 3A of the BFDA have lapsed, but could be reinstated by the passage of the required resolution. On August 7, 2013, President Obama issued Executive Order 13651, reinstating the ban on the import of jadeite and rubies from Burma, and articles of jewelry containing jadeite or rubies from Burma. Executive Order 13651, however, was revoked on October 7, 2016, when President Obama issued Executive Order 13742, thereby terminating the ban on the import of jadeite and rubies from Burma. "Freezing" the Assets of Certain Burmese Nationals Section 5(b)(1) of the JADE Act blocked the transferal, payment, export, withdrawal, or other handling of property or interest in property belonging to a person described in Section 5(a)(1) of the act that is "located in the United States or within the possession or control of a U.S. person" (including the overseas branch of a U.S. person); or "comes into the possession or control of a U.S. person after the date of the enactment of this Act" (July 29, 2008). In Executive Order 13742 on October 7, 2016, President Obama "determined and certified" to Congress that "it is in the national interest of the United States" to waive the sanctions in Section 5(b) of the JADE Act, pursuant to Section 5(i) of that act. Restrictions on the Provision of Financial Services As described above, Section 5(b) of the JADE Act freezes the assets of persons described by Section 5(a)(1) of the act, and bars the payment or transfer of any property, or "any transactions involving the transfer of anything of economic value," as well as the "export or reexport directly or indirectly, of any goods, technology, or services" to persons described by Section 5(a)(1) of the act, or to "any entity, owned, controlled, or operated by the SPDC or by an individual described in such subsection." Pursuant to Section 5(i) of the same law, President Obama determined and certified to Congress on October 7, 2016, in Executive Order 13742 that it was in the national interest of the United States to waive these sanctions. Ban on Investment in Burma Section 570(b) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act of 1997 ( P.L. 104-208 ) states the following: The President is hereby authorized to prohibit, and shall prohibit United States persons from new investment in Burma, if the President determines and certifies to Congress that, after the date of enactment of this Act, the Government of Burma has physically harmed, rearrested for political acts, or exiled Daw Aung San Suu Kyi or has committed large-scale repression of or violence against the Democratic opposition. Pursuant to Section 570(e) of the same act, the Department of State (having been delegated authority by President Obama) waived the investment restrictions on Section 570(b) effective July 11, 2012, having determined that it would be contrary to the national security interests of the United States to continue the restrictions. Restrictions on Bilateral Assistance Section 570(a) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act of 1997 ( P.L. 104-208 ) restricted bilateral assistance to Burma to the following: (A) humanitarian assistance, (B) subject to the regular notification procedures of the Committees on Appropriations, counter-narcotics assistance under chapter 8 of part I of the Foreign Assistance Act of 1961, or crop substitution assistance, if the Secretary of State certifies to the appropriate congressional committees that— (i) the Government of Burma is fully cooperating with United States counter-narcotics efforts, and (ii) the programs are fully consistent with United States human rights concerns in Burma and serve the United States national interest, and (C) assistance promoting human rights and democratic values. The act also provided that these restrictions were to remain in effect "[u]ntil such time as the President determines and certifies to Congress that Burma has made measurable and substantial progress in improving human rights practices and implementing democratic government." On December 2, 2016, President Obama issued Presidential Determination 2017-04, providing such a determination and certification to Congress, and thereby terminating the restrictions on bilateral assistance contained in Section 570(a). Restrictions on Multilateral Assistance Section 307(a) of the Foreign Assistance Act of 1961 (P.L. 87-195, as amended) withholds the "United States proportionate share" of the funding for certain international organizations' programs in Burma (as well as several other nations). Section 307(c) exempts the Atomic Energy Agency and the United Nations Children's Fund (UNICEF). Organizations subject to the restriction include the United Nations Development Program, the United Nations Environmental Program, the World Meteorological Organization, and a number of other U.N. programs. Section 7017 of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), however, included the statement that "the requirement to withhold funds for programs in Burma under section 307(a) of the Foreign Assistance Act of 1961 shall not apply to funds appropriated by this Act." This exemption was extended into FY2017 by P.L. 115-31 and FY2018 by P.L. 115-141 . Section 5 of the 2003 BFDA required the U.S. executive director of each international financial institution (IFI) in which the United States participates to vote against the extension of any loan, financial, or technical assistance to Burma. In September 2012, Congress passed P.L. 112-192 , granting the President the authority to waive U.S. opposition to IFI assistance to Burma required under Section 5 of the 2003 BFDA if the President determines that doing so is in the national interest of the United States. President Obama issued a memorandum on October 10, 2012, delegating the authority granted by P.L. 112-192 to Secretary of State Clinton, who then issued a determination stating that "it is in the national interest of the United States to support assistance for Burma." Perspective of the NLD-Led Government The NLD-led government and Aung San Suu Kyi have given mixed and sometimes contradictory statements on U.S. restrictions on relations with Burma. In November 2015, when asked if she would like to see U.S. sanctions lifted, Aung San Suu Kyi reportedly said, "Well, with a genuinely democratic government in power, I do not see why they would need to keep sanctions on." In March 2016, however, Han Thar Myint, an NLD central executive committee member, reportedly said that the NLD will not push for a lifting of U.S. restrictions given that the military retains considerable power in the government, as well as in Burma's economy. In a joint press availability after her meeting with Secretary of State Kerry on May 22, 2016, Aung San Suu Kyi stated the following: [W]e're not afraid of sanctions. We're not afraid of scrutiny. We believe that if we are going along the right path, all sanctions should be lifted in good time.… I understand and I accept and I believe that United States is a friend, and are not keeping the sanctions to hurt us.… I'm sure that the time will come soon where the United States will rule that this is not the time for sanctions. Ambiguity over the NLD-led government's position on U.S. restrictions on relations with Burma arose during Aung San Suu Kyi's visit to Washington, DC, in September 2016. In a press statement following her meeting in the Oval Office with President Obama on September 14, 2016, Aung San Suu Kyi stated, "We think that the time has now come to remove all the sanctions that hurt us economically, because our country is in a position to open up to those who are interested in taking part in our economic enterprises." In subsequent meetings with Members of Congress, however, Aung San Suu Kyi reportedly said that she had hoped that some restrictions on relations with high-level Burmese military officers and businesses owned or controlled by the Burmese military could remain in effect, but also reportedly said that she had been told by U.S. officials that such a selective retention of restrictions was not possible. In general, Aung San Suu Kyi and Senior General Min Aung Hlaing have denied claims that Burma's security forces committed serious human rights abuses in Rakhine State, or elsewhere in Burma as part of its conflict with the EAOs. As a result, they have opposed the imposition of sanctions on Burma in response to the events in Rakhine State, including the Treasury's placement of five senior military officers and two military units on its SDN list. Congressional Considerations Congress may examine a number of different factors as it considers whether to alter U.S. restrictions on relations with Burma. One question is whether to reassess the goals of U.S. policy toward Burma, the prospects for achieving them, and whether there are contradictions among them. Another factor is how to evaluate the current political situation in Burma, and whether further political and economic reforms are likely. Congress may also examine to what extent restrictions on relations enhance or harm developments in Burma that are consistent with U.S. policy objectives in order to determine which restrictions to maintain, impose, or remove. Goals of U.S. Policy For many years, Congress and the executive branch have, in general, shared a common view on the broader goals of U.S. policy in Burma—the establishment of a democratically elected civilian government that respects the human rights of its people and promotes the peace and prosperity of the nation. The current U.S. ambassador to Burma, Scot Marciel, reiterated this policy in a press interview on May 10, 2016, stating, "But our goal, the United States' goal, remains the same: We want to see a peaceful, prosperous, democratic Myanmar. One whose people live in harmony and enjoy full rights." What Congress chooses to do with respect to U.S. restrictions on relations with Burma will depend on what it determines the objectives of U.S. policy toward Burma should be, and in what order of priority. Among the specific objectives for U.S. policy in Burma that have been proposed by various human rights organizations and that Congress may choose to consider are supporting the peace process and national reconciliation to end the nation's civil war; addressing the plight of the Rohingya in Rakhine State, including investigating alleged genocide, crimes against humanity, and/or war crimes perpetrated by the Tatmadaw and other security forces, providing adequate and reliable humanitarian assistance to the internally displaced persons (IDPs) in Rakhine State, and addressing the citizenship status of the currently stateless Rohingya; responding to the allegations that Burmese security forces committed crimes against humanity and/or war crimes in Kachin and Shan States; promoting amendments to the 2008 constitution to establish a more democratic, civilian government; amending or repealing Burmese laws that are inconsistent with internationally recognized human rights, and promoting the protection of human rights in Burma; supporting the development of governmental institutions that are resilient enough to function during times of political change and natural disasters; and promoting economic growth and development to provide greater prosperity to the people of Burma. Moving beyond these general goals, however, may reveal underlying contradictions between the different goals. Efforts to promote economic prosperity in Burma, for example, may run counter to establishing a democratically elected civilian government. The Burmese military, via such entities as the Myanmar Economic Corporation (MEC) and the Union of Myanmar Economic Holdings Limited (UMEHL), controls many sectors of the Burmese economy, including most of the nation's natural resources. Efforts to promote economic prosperity by permitting U.S. trade and investment in portions of the economy controlled by the Burmese military may bolster their economic and political power, and as such, lead Burma's military leaders to resist further political and economic reforms. Further political and economic reform could depend on the Burmese military's willingness to relinquish some or all of its seats in the Union Parliament, as well as its control over the appointment of the Ministers of Border Affairs, Defence, and Home Affairs. At the same time, however, it is also possible that permitting U.S. economic relations with MEC, UMEHL, and other companies owned by the Burmese military, its leaders, and/or relatives and close friends of the military leaders, could prompt Burma's military leaders to be more willing to relinquish some of their political power. Congress may explore these questions further. Burma's Current Political Situation Aung San Suu Kyi has emerged as the dominant political figure in the NLD-led government, and is using her authority as State Counselor and Foreign Minister to set priorities and oversee implementation of government policy. Depending on how the dynamics between Aung San Suu Kyi and other influential figures and forces (such as Commander in Chief Min Aung Hlaing and the ethnic armed organizations) proceed, Congress may choose to assess if her views on specific issues are consistent with U.S. policy, and how best to work with her to advance those efforts. Understanding the views of Burma's military leaders has always been crucial in forming a framework to understand Burmese political conditions. It was Burma's military leaders that effectively wrote the 2008 constitution, held the parliamentary elections in 2010, and formed the core of the Thein Sein government that ran the country from 2011 to 2015. The political and economic reforms that have occurred in Burma since 2008 are either the direct results of the actions of Burma's military leaders or were undertaken with the support of the military leaders. Those reforms have been generally consistent with the "seven step roadmap to a disciplined democracy" announced by General Khin Nyunt, the military junta's Prime Minister, on August 30, 2003. In the various meetings and conferences held to discuss a path to ending Burma's civil war, Commander-in-Chief Min Aung Hlaing and other Tatmadaw representatives have demonstrated little willingness to negotiate. As a result, it appears unlikely that Burma's military leaders will be supportive of or willing to allow the political and economic reforms proposed by the NLD-led government, and they will resist efforts to fundamentally alter the current governance system. Similarly, the opinions of the various EAOs may play a vital role in achieving U.S. goals in Burma. Ending the civil war will require the EAOs to either agree to a cease-fire and the terms for a new governance system, and/or be defeated militarily. Achieving the former may require major changes in the 2008 constitution (including its possible replacement with a new constitution) and Burma's economy, particularly control over the nation's natural resources. Such changes may be unacceptable to Burma's military or the NLD-led government. Defeating the EAOs in the battlefield, however, may be beyond the capabilities of the Burmese military without substantial international assistance, as well as the support of the NLD-led government. At this time, neither Aung San Suu Kyi nor the NLD-led government appear to support a military solution to Burma's civil war, but prospects for Aung San Suu Kyi's proposed peace process also are unclear. Another potentially important force in Burma's current political dynamic is the community of emerging civil society organizations (CSOs). During the decades of military rule, Burma's military leaders actively suppressed the establishment of CSOs in order to maintain control over the Burmese people. The Thein Sein government allowed the emergence of issue-driven CSOs in Burma, and some of them have undertaken causes generally consistent with U.S. policy. Relations between some CSOs and the NLD-led government, however, are reportedly strained; 40 CSOs wrote an open letter to Aung San Suu Kyi in July 2016 asking that they be allowed to play a more active role in the peace process. Besides their potential support for U.S. goals in Burma, CSOs may play a vital role in the discussion of political reform and the peace process, according to some observers. One such observer expressed concern that national reconciliation, if left to the NLD-led government, the Burmese military, and the EAOs, could result in the establishment of a federation of "crony states," in which the current military leaders and their supporters in each region of Burma control both the political and economic systems, and prevent the establishment of a democratic civilian government based on the rule of law and the will of the Burmese people. Escalation of the Civil War The NLD-led government has been in office for more than two years, and questions are being raised in Burma about its commitment and ability to secure an end to the nation's civil war, promote political reform, and protect the human rights of the Burmese people. Aung San Suu Kyi has identified the end of the civil war as a top priority for the new government, but the three "21 st Century Panglong Conferences" have demonstrated that the various groups in attendance have different visions for a democratic federated state of Burma and the path to achieving that goal. Fighting between the Tatmadaw and at least four of the EAOs (the Kachin Independence Army, the Myanmar National Democratic Alliance Army, the Ta'ang National Liberation Army, and the Arakan Army) has escalated, raising doubts about the prospects for peace and the Tatmadaw's support for a nationwide cease-fire agreement. Crises in Rakhine State More than a year has passed since the Tatmadaw launched their "clearance operations" in northern Rakhine State, and virtually all of the more than 700,000 Rohingya who fled to Bangladesh remain in refugee camps, with a trickle of new arrivals every week. The estimated 600,000 Rohingya who remain in Burma face harsh conditions, including a 10:00 p.m. to 5:00 a.m. curfew, restrictions on movement, lack of employment, limited access to their farms, and harassment from local police and others. Provision of humanitarian assistance in Bangladesh appears adequate, but funding is a growing concern. Access to northern Rakhine State remains strictly controlled by the Tatmadaw, despite an agreement with the United Nations, resulting in a shortage of food, water, and medical care for the Rohingya community. Prospects for the dignified, safe, voluntary, and sustainable return of Rohingya displaced into Bangladesh are presently poor. While the governments in Dhaka and Naypyitaw have signed a memorandum of understanding (MOU) regarding the return of the Rohingya, none have returned in accordance with the procedures prescribed by the MOU. The United Nations has stated conditions in northern Rakhine State are neither sufficiently safe nor sustainable for the return of the Rohingya. Two other issues pose major barriers to the voluntary return of the Rohingya. Many of the Rohingya insist that their Burmese citizenship must be reinstated before they will return to Rakhine State. In 1982, Burma's military junta promulgated a new citizenship law, the implementation of which effectively stripped most of the Rohingya of their citizenship. Aung San Suu Kyi and the NLD have chosen to leave that law in place despite a supermajority in Burma's Union Parliament, but have offered to consider applications for citizenship from the Rohingya according to the provisions of the 1982 law. This appears to be unacceptable to many of the Rohingya. The other issue that could preclude the return of the Rohingya is their desire for some form of accountability for the crimes committed against them during the "clearance operations." A United Nations fact-finding mission has recommended that the U.N. Security Council refer the case to the International Criminal Court (ICC) or an "ad hoc international criminal tribunal." The ICC determined in September 2018 that it has jurisdiction over the displacement of Rohingya into Bangladesh. Various organizations have called for the passage of U.N. sanctions against Burma and the Tatmadaw, as well as the imposition of bilateral restrictions on relations with Burma. To date, the international response to calls for accountability in Burma has been limited, and unlikely to be considered sufficient by the displaced Rohingya. Human Rights Progress on other human rights issues has also been relatively slow, according to some observers. In her first official act as State Counsellor, Aung San Suu Kyi ordered the release of 113 political detainees on April 7, 2016, and indicated that freeing all political prisoners would be a priority for the new government. President Htin Kyaw granted amnesty to 70 political prisoners on April 17, 2016. By mid-August, the NLD-led government reportedly had released 457 people facing trial for political activities. According to the Assistance Association for Political Prisoners (Burma), a nonprofit human rights organization formed in 2000 by former political prisoners, there were 276 political prisoners as of the end of September 2018, including 26 serving sentences, 51 detained while awaiting trial, and 199 released while awaiting trial. Burma's ongoing problem with political prisoners is in part facilitated by the existence of a number of laws, some dating back to British colonial rule, that restrict freedom of speech, freedom of association, and other internationally recognized human rights. In June 2016, Human Rights Watch released a report, They Can Arrest You at Any Time , detailing how various repressive laws criminalize peaceful expression in Burma. Addressing U.S. Restrictions Depending on what goals it sets for U.S. policy in Burma and its perspective on the current political situation in the country, Congress may decide to address the existing restrictions on U.S. relations. In the past, this has been done by passing specific legislation to impose or recommend restrictions on bilateral or multilateral relations, or by including provisions in appropriations legislation setting limits on bilateral or multilateral assistance to Burma. Congress has also passed legislation that places conditions on certain forms of bilateral relations contingent on acceptable behavior with regard to specific issues, such as the recruitment and induction of children into the military. In addition, Congress may actively or passively permit the President and the executive branch to determine what restrictions, if any, should be placed on relations with Burma, and provide the necessary authority and appropriations to implement U.S. policy toward Burma. Congress may have the opportunity to take action with respect to U.S. policy in Burma on certain dates or at particular junctures. For example, congressional consideration of appropriations legislation—or continuing resolutions—provides a legislative juncture when restrictions on relations with Burma may be considered and altered, if Congress so chooses. In addition, Congress may consider revisiting the body of legislation imposing restrictions on relations with Burma to determine if the time has come to repeal or amend those laws in light of the changes that have occurred in the country, and the extent to which the restrictions imposed in those laws are no longer in effect due to presidential waivers. To lift the economic restrictions on Burma, President Obama had to terminate and revoke five separate Executive Orders, and invoke authority in the JADE Act. Some observers suggest Congress should pass new legislation stating the goals of U.S. policy, accounting for the current situation in Burma, indicating the restrictions in relations with Burma that are to remain in place, and providing clear and concise conditions or guidelines for the removal of those restrictions. During the 115 th Congress, two bills of this type—the Burma Unified through Rigorous Military Accountability Act of 2018 ( H.R. 5819 ) and the Burma Human Rights and Freedom Act of 2018 ( S. 2060 )—were introduced. Appendix. Chronology of Burmese Sanction Legislation and Related Executive Orders Starting in 1989 and continuing through 2008, Congress and the executive branch imposed a series of political and economic sanctions on Burma's ruling military junta. Since 2008, most of the congressional or executive actions have been to waive or eliminate some of those sanctions. The following table provides a list of such congressional or presidential actions in chronological order.

Major changes in Burma's political situation since 2016 have raised questions among some Members of Congress concerning the appropriateness of U.S. policy in Burma in general, and the current restrictions on relations with Burma (Myanmar) in particular. During the 115th Congress, two bills were introduced—the Burma Unified through Rigorous Military Accountability Act of 2018 (H.R. 5819; the BURMA Act of 2018) and the Burma Human Rights and Freedom Act of 2018 (S. 2060)—that would reformulate U.S. policy and the restrictions on bilateral relations. In November 2015, Burma held nationwide parliamentary elections from which Aung San Suu Kyi's National League for Democracy (NLD) emerged as the party with an absolute majority in both chambers of Burma's Union Parliament. The new government subsequently appointed Aung San Suu Kyi to the newly created position of State Counselor, as well as Foreign Minister. While the NLD controls the Union Parliament and the executive branch, the Burmese military, also known as the Tatmadaw, continues to exercise significant power under provisions of Burma's 2008 constitution. For example, 25% of the seats in both chambers of the Union Parliament are military officers appointed by the Tatmadaw's Commander in Chief Senior General Min Aung Hlaing, creating a voting bloc that can prevent any changes in the constitution. On October 7, 2016, former President Obama revoked several executive orders pertaining to sanctions on Burma, and waived restrictions required by Section 5(b) of the Tom Lantos Block Burmese JADE (Junta Anti-Democratic Efforts) Act of 2008 (P.L. 110-286), removing most of the economic restrictions on relations with Burma. On December 2, 2016, he issued Presidential Determination 2017-04, ending restrictions on U.S. assistance to Burma as provided by Section 570(a) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1997. Various noneconomic restrictions, however, remain in effect, including bans on providing visas to certain Burmese nationals and other restrictions on U.S. assistance to Burma. Certain events since 2016, however, have led some Members of Congress to call for the reinstatement of some of the waived sanctions and/or the imposition of new restrictions on relations with Burma. One of the more prominent events was the "clearance operation" in northern Rakhine State in late 2017, during which Burma's security forces allegedly committed serious human rights abuses against the Rohingya. A U.N. fact-finding mission (and other investigations) say the security force's actions may constitute genocide, crimes against humanity, and/or war crimes. Burma's security forces have also been accused of committing crimes against humanity and war crimes against civilians in Kachin and Shan State between 2011 and 2018 as part of its ongoing conflict with various ethnic armed organizations (EAOs). Congress will have various opportunities to weigh in on U.S. policy toward Burma, including what restrictions, if any, to include in such a policy. In recent years, Congress has restricted foreign assistance to Burma in annual appropriations acts, such as the Consolidated Appropriations Act, 2018 (P.L. 115-141). In addition, Congress may consider whether to reexamine existing sanctions laws on Burma in light of recent developments, to determine if it is time to amend, modify, replace, and/or repeal provisions in those laws.

Introduction Senate Rule XXVI spells out specific requirements for Senate committee procedures. In addition, each Senate committee is required to adopt rules that govern its organization and operation. Those committee rules then elaborate, within Senate rules, how the committee will handle questions of order and procedure. A committee's rules may "not be inconsistent with the Rules of the Senate." Committees may add to the basic rules, but they may not add anything that is in conflict with Senate rules. Examining the rules for each committee can show how each approaches issues of comity and fairness in the conduct of its business. The rules also serve to illustrate how each committee handles the division of power and the allocation of responsibility within its membership. Several committees, for example, require that if the committee is conducting business with a quorum that is less than a majority of its members, a member from the minority party must be present. When issuing subpoenas or starting investigations, committees may take different approaches on how to give authority to the chair of the committee while still allowing the ranking minority member a role in the process. Some committees require the agreement of the ranking minority member, others require that he or she be notified before the subpoena is issued. The requirement that each committee must adopt its own set of rules dates back to the 1970 Legislative Reorganization Act (P.L. 91-510). That law built on the 1946 Legislative Reorganization Act (P.L. 79-601), which created a framework for most Senate committees by setting out some basic requirements that most committees must adhere to. Under the provisions of the 1970 law, Senate committees must adopt their rules and have them printed in the Congressional Record not later than March 1 of the first year of a Congress. Typically, the Senate also publishes a compilation of the rules of all the committees each Congress, and some individual committees also publish their rules as a committee print. Although committee rules govern the actions of Senators in committee proceedings, there is no means for the Senate to enforce rules on committee conduct if the requirement that a physical majority be present for reporting a measure or matter is met. There also is no means for the Senate to enforce committee rules that go beyond those set out in the Senate's standing rules. For example, if a committee's rules contain a provision requiring that a member of the minority party be present for a quorum, but the committee acts without regard to that provision, the minority could register their disapproval with the committee's actions, but there is no point of order that could be raised on the Senate floor. Other factors may come into play when studying a committee's procedural profile. Along with the formal rules of the Senate and the individual rules for each committee, many committees have traditions or precedents they follow in practice that can affect their procedures. One committee, for example, does not allow Senators to offer second degree amendments during committee markups. This restriction is not contained in either the Senate or the committee's rules, it is a tradition. It is a tradition, however, the committee follows closely. This report analyzes the different approaches Senate committees have taken with their rules, focusing on additions to the overall Senate committee rules structure or unique provisions. A committee's rules can be extensive and detailed or general and short. The tables that conclude this report compare key features of the rules by committee. The tables, however, represent only a portion of each committee's rules. Provisions of the rules that are substantially similar to or that are essentially restatements of the Senate's standing rules are not included. This report reviews the requirements contained in Senate rules for committees, then explores how each Senate committee handles 11 specific procedural issues: meeting day, hearing and meeting notice requirements, scheduling of witnesses, hearing quorum, business quorum, amendment requirements, proxy voting, polling, nominations, investigations, and subpoenas. Also, the report looks at unique provisions some committees have included in their rules in a "miscellaneous" category. Standing Rules and Standing Orders of the Senate and Committees Although there is some latitude for committees to set their own rules, the standing rules of the Senate set out the specific requirements that each committee must follow. The following provisions are taken from Rule XXVI of the Standing Rules of the Senate. Some committees reiterate these rules in their own rules, but even for those committees that do not, these restrictions apply. This is not an exhaustive explanation of Senate Rules and their impact on committees, rather this summary is intended to provide a background against which to understand each committee's individual rules. Rules. Each committee must adopt rules; those rules must be published in the Congressional Record not later than March 1 of the first year of each Congress. If a committee adopts an amendment to its rules, that change only becomes effective when it is published in the Record . (Rule XXVI, paragraph 2). Meetings. Committees and subcommittees are authorized to meet and to hold hearings when the Senate is in session and when it has recessed or adjourned. A committee may not meet on any day (1) after the Senate has been in session for two hours, or (2) after 2:00 p.m. when the Senate is in session. Each committee must designate a regular day on which to meet weekly, biweekly or monthly (this requirement does not apply to the Appropriations Committee). A committee is to announce the date, place, and subject of each hearing at least one week in advance, though any committee may waive this requirement for "good cause." (Rule XXVI, paragraph 5(a); Rule XXVI, paragraph 3). Special meeting. Three members of a committee may make a written request to the chair to call a special meeting. The chair then has three calendar days in which to schedule the meeting, which is to take place within the next seven calendar days. If the chair fails to do so, a majority of the committee members can file a written motion to hold the meeting at a certain date and hour. (Rule XXVI, paragraph 3). Open meetings. Unless closed for reasons specified in Senate rules, such as a need to protect national security information, committee and subcommittee meetings, including hearings, are open to the public. When a committee or subcommittee schedules or cancels a meeting, it is required to provide that information, including the time, place, and purpose of the meeting, for inclusion in the Senate's computerized schedule information system. Any hearing that is open to the public also may be open to radio and television broadcasting, at the committee's discretion. Committees and subcommittees may adopt rules to govern how the media may broadcast the event. A vote by the committee in open session is required to close a meeting. (Rule XXVI, paragraph 5(b)). Quorums. Committees may set a quorum for doing business that is not less than one-third of the membership. A majority of a committee must be physically present when the committee votes to order the reporting of any measure, matter, or recommendation. The motion to order the reporting of a measure or matter requires the support of a majority of the members who are present and, in turn, the members who are physically present must constitute a majority of the committee. Proxies cannot be used to constitute a quorum. (Rule XXVI paragraph 7(a)(1)). Meeting Record . All committees must make public a video, transcript or audio recording of each open hearing of the committee within 21 days of the hearing. These shall be made available to the public via the Internet (Rule XXVI, paragraph 5(2)(A)). Proxy voting. A committee may adopt rules permitting proxy voting. A committee may not permit a proxy vote to be cast unless the absent Senator has been notified about the question to be decided and has requested that his or her vote be cast by proxy. A committee may prohibit the use of proxy votes on votes to report. (Rule XXVI, paragraph 7(a)(3)). Investigations and subpoenas. Each standing committee and its subcommittees is empowered to investigate matters within its jurisdiction and to issue subpoenas for persons and papers. (Rule XXVI, paragraph 1). Witnesses selected by the minority. During hearings on any measure or matter, the minority shall be allowed to select witnesses to testify on at least one day, when the chair receives such a request from a majority of the minority party members. This provision does not apply to the Appropriations Committee. (Rule XXVI, paragraph 4(d)). Reporting. Senate committees may report original bills and resolutions, in addition to those that have been referred to the panel. As stated in the quorum requirement, a majority of the committee must be physically present for a measure or matter to be reported. Also, a majority of those present are required to order a measure or matter reported. A Senate Committee is not required to issue a written report to accompany a measure or matter it reports; if the committee does write such a report, Senate rules specify a series of required elements that must be included in the report. (Rule XXVI, paragraph 7(a)(3); Rule XXVI, paragraph 10(c) . A Comparison of Select Committee Rules Regular Meeting Day In their rules for the 112 th Congress, no Senate Committee uses either Monday or Friday for its regular meeting day, and the committees are relatively evenly spread over the remaining three days: six committees chose Tuesdays, seven committees selected Wednesdays, and six committees picked Thursdays as their regular meeting days (see Table 1 ). The Armed Services Committee chose both Tuesday and Thursday. Two committees, Appropriations and Select Aging, meet at the call of the chair. Within those categories, some committees, including the Armed Services; Foreign Relations; Indian Affairs; and Judiciary provide for meeting at least once a week. The other committees set the meetings at once or twice a month. Hearing Notice Requirements Committees must, according to Senate Rules, provide one week's notice of their hearings. The rule, however, allows shorter notice, if "the committee determines there is good cause" to schedule a hearing with less notice. When it comes to the determination of what "good cause" is, Senate committees allocate the task of making that decision differently (see Table 1 ). The rules of the Armed Services Committee, for example, say it is the decision of the committee as a whole. Three committees, Agriculture, Nutrition, and Forestry; Banking, Housing, and Urban Affairs; and Finance give the chair of the panel the authority to schedule a hearing with less than a week's notice. Six committees require some type of cooperation between the chair and ranking member of the committee to meet with less than a week's notice. Four of those committees, Budget; Environment and Public Works; Judiciary; and Special Aging, require the chair to obtain the agreement of the ranking member to make the decision to hold a hearing with less than usual notice. The Energy and Natural Resources Committee gives the responsibility to the chair and the committee together, while the Foreign Relations Committee chair must consult with the ranking minority member on the committee. Scheduling of Witnesses Several committees go beyond Senate requirements in their rules regarding scheduling of witnesses, giving greater opportunity to the minority to include witnesses of their choosing during a hearing (see Table 1 ). The Finance Committee calls on its staff to ensure there is a "balance of views" early on in a hearing, and allows each member of the committee to designate individuals to testify. The Foreign Relations Committee minority may request an equal number of witnesses as the majority, and the Small Business and Entrepreneurship Committee allows for an equal number of witnesses for the majority and minority unless there is to be just one administration witness. Similarly, if the Senate is evenly divided, the Budget Committee provides for equal numbers of witnesses for the majority and minority, with the same exception for a single administration witness. The Ethics and Select Intelligence committees' rules have provisions according an opportunity for an individual to testify before the committee if that person believes his or her reputation is at issue or if his or her name came up in previous testimony. Hearing Quorum For receiving testimony at hearings, most Senate committees reduce their quorum requirement to one or sometimes two Senators. One panel, the Armed Services Committee, requires that a member of the minority be present, unless the full committee stipulates otherwise. Business Quorum The "conduct of business" at a committee meeting typically refers to actions such as debating and voting on amendments, that allow the committee to proceed on measures up to the point of reporting the measure to the full Senate. For the conduct of business, the requirement that a member of the minority be present is a common feature of committee quorum rules. In order to report out a measure, Senate rules require that a majority of the committee be physically present. A dozen committees feature some kind of minority attendance requirement for the conduct of business during a committee business meeting (see Table 2 ). The Environment and Public Works Committee's business quorum requires two members of the minority and one-third of the committee in total. The Homeland Security and Governmental Affairs, and Small Business and Entrepreneurship committees require the presence of one member of the minority, as do the Veterans' Affairs and Special Aging committees. The Veterans' Affairs Committee rules also contain a provision designed to make sure that the lack of a minority member cannot indefinitely delay action on a measure or matter. The Finance Committee requires one member from the majority and one member of the minority for its business quorum as do the Agriculture, Nutrition, and Forestry; Foreign Relations and Ethics committees. The Health, Education, Labor, and Pensions Committee requires that any business quorum that is less than a majority of the committee include a member of the minority. The Armed Services Committee sets a business quorum at nine members, which must include a member of the minority party, but the committee may bypass the minority representation requirement if a simple majority of the committee is present. The Judiciary Committee also specifies a quorum of eight, with two members of the minority present. The Indian Affairs Committee has a rule stating that a quorum is presumed to be present unless the absence of a quorum is noted by a Senator. Amendment Filing Requirements Several committees require that Senators file any first degree amendments they may offer during a committee markup before the committee meets (see Table 2 ). This provision allows the chair and ranking member of the committee to see what kind of issues may come up at the markup, and also may allow them the opportunity to try to negotiate agreements with amendment sponsors before the formal markup session begins. It also provides an opportunity to Senators to draft second degree amendments to possible first degree amendments before the markup begins. The Banking, Housing, and Urban Affairs and Small Business and Entrepreneurship committees call for submitting such amendments two business days before the markup, if sufficient notice of the markup has been given. The Appropriations; Environment and Public Works; Health, Education, Labor, and Pensions; Homeland Security and Governmental Affairs; and Veterans' Affairs committees require 24 hours notice of first degree amendments. The Judiciary Committee requires that first degree amendments be filed with the committee by 5 p.m. of the day before the markup. All of these committees allow the full committee to waive this filing requirement and, in some cases, it is waived automatically if Senators were not given sufficient notice of the markup. Proxy Voting All Senate committees except Special Aging permit some form of proxy voting, where a Senator does not have to be physically present to record his or her position on a measure or matter before the committee (see Table 3 ). The Armed Services; Foreign Relations; Homeland Security and Governmental Affairs; Select Intelligence; Veterans' Affairs and Ethics committees require that proxies be executed in writing. The Small Business and Entrepreneurship Committee requires that the responsibility for voting the proxy be assigned to a Senator or staffer who is present at the markup. The Commerce, Science and Transportation; Environment and Public Works; Judiciary and Small Business and Entrepreneurship committees allow several other methods of transmitting a Senator's proxy intentions, including telephone or personal instructions to another Member of the committee. Proxies cannot be used in any committee to count toward a quorum for reporting a measure or matter. The Budget Committee prohibits proxy voting during its annual markup of the budget resolution, and the Ethics Committee does not permit a Senator to vote by proxy on a motion to initiate an investigation. Polling of Committee Polling is a method of taking a "vote" of the committee on a matter without the committee physically coming together. As such, it cannot be used to report out measure or matters (that would violate Senate rules that require a physical majority to be present to report a measure or matter). Polling can be used, however, for internal housekeeping matters before the committee, such as questions concerning staffing or perhaps how the committee ought to proceed on a measure or matter (see Table 3 ). Five committees have general provisions for polling in their rules: Agriculture, Nutrition, and Forestry; Budget; Health, Education, Labor, and Pensions; Homeland Security and Government Affairs; and Aging. Of those, all the committees except the Health, Education, Labor, and Pensions Committee, allow a member to request that the matter being polled be formally voted on by the committee at the next business meeting. The Health, Education, Labor, and Pensions Committee only permits polling if there is unanimous consent from the committee to do so. Nominations Many committees set out timetables in their rules for action on presidential nominations, and most committees also contain provisions allowing the timetables to be waived (see Table 3 ). The Banking, Housing, and Urban Affairs; Health, Education, Labor, and Pensions; and Veterans' Affairs committees require a five-day layover between receipt of the nomination and committee action on it. The Foreign Relations Committee requires a six-day delay, the Armed Services Committee a seven-day delay and the Intelligence Committee calls for a fourteen-day waiting period before action on a nomination. In addition, the Intelligence panel rules require that the committee not act until seven days after the committee receives background and financial information on the nominee. The Agriculture, Nutrition, and Forestry; Banking, Housing, and Urban Affairs; Budget; Homeland Security and Governmental Affairs; and Small Business committees require that nominees testify before their committees under oath. The Energy and Natural Resources; Indian Affairs; and Veterans' Affairs committees have provisions requiring the nominee and, if requested, anyone testifying at a nomination hearing to testify under oath. The Finance Committee allows any member to request that the testimony from witnesses be taken under oath. Investigations Several committees require advance permission for staff or a Senator to launch an investigation (see Table 4 ). The Select Intelligence Committee, for example, prohibits investigations unless five committee members request it. The Banking, Housing, and Urban Affairs Committee requires that either the full Senate, the full committee, or the chair and ranking member jointly authorize an investigation before it may begin. The Select Aging Committee authorizes its staff to initiate an investigation with the approval of the chair and ranking minority member and requires that all investigations be conducted in a bipartisan basis. The Energy and Natural Resources Committee requires that the full committee authorize any formal investigation. The Agriculture, Nutrition, and Forestry Committee requires full committee approval for any investigation involving subpoenas and depositions, and the Health, Education, Labor, and Pensions Committee requires majority approval for any investigation involving a subpoena. Subpoenas Five Senate committees do not have specific rules that set out how the panel will decide to issue subpoenas (see Table 4 ). The lack of a subpoena provision does not mean the committees cannot issue subpoenas, just that the process for doing so is not specified in the committee's written rules. Of the committees that do have rules on subpoenas, one, the Special Committee on Aging, grants the authority to issue the subpoena to the chair alone. Nine other committees, Agriculture, Nutrition, and Forestry; Banking; Commerce; Energy and Natural Resources; Finance; Homeland Security and Governmental Affairs; Indian Affairs; Small Business and Entrepreneurship; and Veterans' Affairs, require that the chair seek the agreement, approval, concurrence, or consent of the ranking member before issuing a subpoena. In all instances, however, the chair also may gain approval for a subpoena from a majority of the committee. Three committees—Foreign Relations; Health, Education, Labor, and Pensions; and Select Intelligence—give the decision as to whether to issue a subpoena to the full committee as a whole, while Ethics allows the chair and ranking minority member acting jointly or a majority of the committee to approve a subpoena. It is not clear how the Members would communicate their support to the chair, either by polling or through a committee vote. Miscellaneous Some committees have unique provisions that are not included in other committee rules. The Budget Committee's rules limit the size and number of charts a Senator can display during debate on a subject. The Commerce, Science and Transportation Committee permits broadcasting of its proceedings only upon agreement by the chair and ranking member. The chair and ranking member of the Rules and Administration Committee are authorized to approve any rule or regulation that the committee must approve, and the Small Business and Entrepreneurship Committee allows any member to administer the oath to any witness testifying "as to fact." Both the Finance and the Judiciary committees allow the chair to call a vote on whether to end debate on a pending measure or matter. This ability to end debate on a measure or matter does not appear in any other committees' rules and may allow these committees to move controversial measure through their panels. The Foreign Relations Committee includes in its rules a provision stating that, as much as possible, the committee not "resort" to formal parliamentary procedure. That would seem to suggest a committee where Senators attempt to resolve controversial issues before the committee markup, rather than relying on parliamentary tools to push legislation or nominations through. Both the Veterans' Affairs and the Environment and Public Works committees are charged with naming certain federal facilities, so their rules provide guidance on how those names may be chosen. The rules of the Banking, Housing, and Urban Affairs Committee require that any measure seeking to give out the Congressional Gold Medal have 67 cosponsors to be considered. The Select Intelligence Committee gives direction to its staff director to ensure that covert programs are reviewed at least once per quarter. The Appropriations Committee rules empower any member of the committee who is managing an appropriations bill on the floor to make points of order against amendments being offered that would seem to violate Senate rules. The Armed Services Committee's rules reach out to the executive branch and call on the committee to obtain executive branch response to any measure referred to the committee. The Homeland Security and Governmental Affairs Committee requires that any report on a measure also include an evaluation of the regulatory impact of the measure. The Select Committee on Aging requires that investigative reports containing findings or recommendations may be published only with the approval of a majority of committee members. The Indian Affairs Committee urges its Members to disclose their finances in the same way in which they require nominees to presidentially appointed positions to do. The Energy and Natural Resources Committee appears to allow any Member to place a measure or matter on the committee's agenda, if the Member does so at least one week in advance of the business meeting at which it will be considered. The Judiciary Committee allows any member to delay consideration for one week any item on its agenda. The Select Committee on Ethics also allows any member of the committee to postpone discussion of a pending matter until a majority of the committee is present.

Senate Rule XXVI spells out specific requirements for Senate committee procedures. In addition, each Senate committee is required to adopt rules that govern its organization and operation. Those committee rules then elaborate, within Senate rules, how the committee will handle its business. Rules adopted by a committee may "not be inconsistent with the Rules of the Senate" (Senate Rule XXVI, paragraph 2). Committees may add to the basic rules, but they may not add anything that is in conflict with Senate rules. This report first provides a brief overview of Senate rules as they pertain to committees. The report then compares the different approaches Senate committees have taken when adopting their rules. A committee's rules can be extensive and detailed or general and short. The tables that conclude this report compare selected, key features of the rules by committee. The tables, however, represent only a portion of each committee's rules. Provisions of the rules that are substantially similar to, or that are essentially restatements of, the Senate's standing rules are not included. This report reviews the requirements contained in Senate rules pertaining to committees; it then explores how each Senate committee addresses 11 specific issues: meeting day, hearing and meeting notice requirements, scheduling of witnesses, hearing quorum, business quorum, amendment filing requirements, proxy voting, polling, nominations, investigations, and subpoenas. In addition, the report looks at the unique provisions some committees have included in their rules in the miscellaneous category. This report will be not be updated.

History of Electronic Voting Before 1970 In 1869, Thomas Edison registered a patent for the first electric vote recorder. Edison designed the system after learning that the Washington, DC, city council and the New York state legislature were considering systems to record votes automatically. In Edison's system "each legislator moved a switch to either a yes or no position, thus transmitting a signal to a central recorder that listed the names of the members in two columns of metal type headed 'Yes' and 'No'." Edison and his colleague Dewitt Roberts demonstrated the machine to Congress, where Edison recalled: We got hold of the right man to get the machine adopted, and I enthusiastically set forth its merits to him. Just imagine my feelings when, in a horrified tone, he exclaimed: "Young man, that won't do at all! That is just what we do not want. Your invention would destroy the only hope the minority have of influencing legislation. It would deliver them over, bound hand and foot, to the majority. The present system gives them a weapon which is invaluable, and as the ruling majority always know that it may some day become a minority, they will be as much averse to any change as their opponents." In 1886, electric and mechanical voting was proposed for the House with the introduction of two separate resolutions. Representative Lewis Beach introduced a resolution in February directing the Committee on Rules to "inquire into the feasibility of a plan for registering votes." In June, Representative Benjamin Le Fevre submitted a resolution on the electrical recording of the yeas and nays. The resolutions were referred to the Committee on Rules. No further action was taken on either resolution. During the 63 rd Congress (1913-1914), Representative Allan Walsh introduced H.Res. 513, providing for an electrical and mechanical system of voting for the House of Representatives. A special subcommittee of the Committee on Accounts held hearings on an automated system where each Member would have a voting box with three or four buttons attached to a desk. Each voting box would have a unique key and each Member would be assigned to a box that only his or her key would operate. The votes would then be transmitted electrically and recorded mechanically by a machine installed on the clerk's desk, with votes displayed on boards throughout the chamber and in the cloak rooms. Following the subcommittee's hearing, no further action was taken on H.Res. 513. A similar proposal, H.Res. 223, was introduced in the 64 th Congress (1915-1916) by Representative William Howard. Hearings were held by the Committee on Accounts on the proposal and testimony was heard from outside experts, including representatives of the company then installing an electrical voting system in the Wisconsin legislature. H.Res. 223 was favorably reported by the Committee on Accounts, but was not acted upon by the House. During the hearings on H.Res. 513 and H.Res. 223, Members' statements and questions dealt with the length of time needed to vote in the House, the accuracy of such roll-call votes, and the cost of developing and implementing an electrical vote recording system. For example, during his testimony on H.Res. 513, Representative Walsh testified that "taking 45 minutes as the average time consumed in a roll call, the time consumed in the Sixty-second Congress in roll calls was 275 hours, or 55 legislative days." Members of the Committee on Accounts, however, were concerned that shortening votes could "flood the country with legislation" as well as speed up the voting process, thus disrupting then-used delaying tactics resulting in "filibuster by means of roll calls." The hearings also addressed Members' concerns that voting mistakes could be made using an electrical and mechanical system. In the hearings on H.Res. 513, Representative Walsh testified that the voting system he envisioned would automatically cut off the circuit after a prescribed time to end a vote. In the instance where a Member missed a vote, Representative Walsh desired to let the Speaker decide whether the Member would be allowed to vote. Representative Howard's resolution, H.Res. 223, overcame this perceived deficiency and allowed for vote changes either through the mechanical system or through a more traditional paper method. The issue of cost was also raised during the hearings. During the hearings on H.Res. 513, members of the Committee on Accounts expressed concern about the cost of development and installation of the electric voting system. Representative Walsh testified in the 63 rd Congress that his proposed voting system was estimated to cost no more than $25,000. In the 64 th Congress, however, in the report recommending adoption of Representative Howard's resolution, the Committee on Accounts estimated that the electrical voting system would cost $106 per unit, with a total cost of approximately $125,000. Although the report on H.Res. 223 recommended the resolution's adoption, there was still division in the Committee on Accounts over the desirability of such a voting system. A majority found that an electrical and mechanical system could help Members save time and avoid the practice of reading each name twice for every roll-call vote and quorum call: From the statements of the experts before the committee it is evident that such a device can be constructed. From a view of the working model of one device, it is evident that a practical voting system can be instituted, and from the statements of various Members of the House, it is evident that there is a very strong desire for some means of saving the time of Members.… Believing that a system can be adopted which will save time, encourage the regular attendance of Members, and insure absolute accuracy in registering and recording the votes of the Members, the adoption of this resolution is recommended. A minority opposed the concept of an electronic system and the potential loss of floor time to review proposals before casting a vote: It must be frankly admitted that the proposed device, if properly installed in the House, will rapidly record the vote if all Members are present. Voting, however, is the most important function of a Member of Congress, and we seriously question the wisdom of hurrying this branch of the work. It frequently happens under the present system that Members are required to vote before they have fully formed their judgment. The time taken in voting is obviously time of deliberation, of conference, of quiet discussion, and of interchange of views. Often, under the present system, before the voting has closed, Members change their votes. It is not an unreasonable thing to require a half hour or more to take the votes of 435 men who, as frequently happens, have been engaged in debate on an important question for weeks.... Speed is not the most necessary thing in legislation. While no action beyond committee reports occurred for either H.Res. 513 or H.Res. 223, proposals to install automatic, electrical, or mechanical vote counting systems continued to be introduced. In 1923, Representative Melville Kelly introduced H.Res. 497, "providing for the purchase and installation of an electromechanical voting system in the House of Representatives." Referred to the Committee on Accounts, H.Res. 497 was reported by the committee on February 28, without recommendation. In the report, the committee noted that similar resolutions were favorably reported by the committee in the 63 rd and 64 th Congresses and "that all Members could vote simultaneously, if so desired. It was also shown that a great saving in times could be affected [sic] in the calling of the roll in the House by the use of one of these voting machines." With the exception of H.Res. 513 introduced by Representative Walsh in 1915, H.Res. 223 introduced by Representative Howard in 1916, and H.Res. 497 introduced by Representative Kelly in 1923, none of the bills or resolutions subsequently introduced received committee or floor attention. Each was introduced, referred to committee, and not acted on. The Appendix lists each of the proposals to install automatic, electrical, or mechanical voting in the House of Representatives. The cycle of introduction and non-action for automated voting bills continued into the 1950s. At that time, Representative Charles Bennett, a longtime proponent of automated voting, wrote an article for U.S.A. The Magazine of American Affairs advocating that the House of Representatives should adopt modern technology to vote and that not doing so proved how antiquated the House of Representatives was compared with state and foreign legislatures: There once was a congressman who, when notified that a vote was to be taken, would race to the legislative chamber in time to beat the final rap of the gavel—from his home 19 miles away! He'd usually make it, too, because the taking of a record vote in the House of Representatives requires about 45 minutes the way it is done now. Not until the 91 st Congress (1969-1970) was further action taken by the House to advance proposals on automated voting. In 1969, during the Democratic Caucus's organizational meeting for the 91 st Congress, Representative C. Melvin Price introduced a resolution on vote recording procedures in the House of Representatives. The resolution stated: RESOLVED: That it is the sense of the caucus that the Speaker of the House shall immediately proceed to take such steps as may be necessary to improve the vote recording procedures in the House of Representatives. The resolution was agreed to by the Caucus and sent to the Speaker of the House. In response to the resolution, Speaker John McCormack sent a letter to the Committee on House Administration asking it to examine automated voting. In his letter, Speaker McCormack indicated that he was sure, while the resolution was adopted by the Democratic Caucus, "that all of our Republican colleagues would approve of the same." The Committee on House Administration formed a special subcommittee on electrical and mechanical office equipment, which held a hearing in April 1969 on electrical and mechanical voting. During the hearing, Representative Fred Schwengel, the ranking member, summarized the subcommittee's desire for an electronic voting system: "On electronic voting, I think this is something we can do now which will improve the effectiveness and efficiency, particularly the efficiency, of our operations. So I am all for moving forward as fast as we possibly can to the consideration of the matter." At the hearing, Clerk of the House W. Pat Jennings testified that to anticipate the approval of an electronic voting system, he included a request to support the development and installation of an electronic voting system in his proposed operating budget. Jennings estimated that the system would cost between $80,000 and $600,000, with $500,000 considered adequate to install a comprehensive system. The special subcommittee did not report on the Democratic Caucus's resolution. Creation of Electronic Voting, 1970 to 1973 As part of the Legislative Reorganization Act of 1970, the House agreed to develop an electronic voting system. As design and development of the system neared completion, the House amended its rules to accommodate the system. On January 23, 1973, the House used the electronic voting system for the first time. The Legislative Reorganization Act of 1970 In the 91 st Congress, Congress debated and passed the Legislative Reorganization Act of 1970. As introduced and reported in the House, the Act did not mention electronic voting. In an attempt to add electronic voting to the Act, Representative Robert McClory offered a floor amendment to authorize the development of an electronic voting system and to amend then House Rule XV to allow the system to be used to conduct votes and quorum calls. The amendment, agreed to by voice vote, was contained in Section 121 of the act. Section 121 states: Sec. 121. (a) Rule XV of the Rules of the House of Representatives is amended by adding at the end thereof the following new clause: "5. In lieu of the calling of the names of Members in the manner provided for under the preceding provisions of this Rule, upon any roll call or quorum call, the names of such Members voting or present may be recorded through the use of appropriate electronic equipment. In any such case, the Clerk shall enter in the Journal and publish in the Congressional Record, in alphabetical order in each category, a list of the names of those Members recorded as voting in the affirmative, of those Members recorded as voting in the negative, and of those Members voting present, as the case may be, as if their names had been called in the manner provided for under such preceding provisions." (b) The contingent fund of the House of Representatives shall be available to provide the electronic equipment necessary to carry out the purpose of the amendment made by subsection (a). Section 121 (b) of the Act authorized funding from the contingent fund of the House. Providing funding in this manner allowed work on the design and installation of the system to begin without an additional funding resolution. In a report by the Clerk of the House, the initial cost of the voting system was estimated as no more than $600,000. Coupled with later rules changes, the change to Rule XV made by section 121 (b) established the electronic voting system as the primary method for conducting a roll-call vote or quorum call, in the House and in the Committee of the Whole. In his floor speech in support of his amendment, Representative McClory, a Republican, acknowledged the work done on the subject of automated voting by other Members of both parties and the Committee on House Administration: I should like to point out that a report on this subject was made by a member of the original Reorganization Committee, the gentleman from Missouri (Mr. HALL). It is also the subject of legislation at this session introduced by the gentleman from Florida (Mr. BENNETT), and the gentleman from Wisconsin (Mr. DAVIS). I know that the Committee on House Administration has already undertaken studies. I know that the Clerk has made recommendations to the Committee on House Administration, and I feel that this amendment is an expression of support of the House for the work of the Committee on House Administration and perhaps to emphasize the need to bring their recommendations to the floor of the House in the form of a more specific and detailed change at the earliest possible time. It does not specify a particular system. President Richard M. Nixon signed the Legislative Reorganization Act of 1970 into law on October 26, 1970. Designing the Electronic Voting System In December 1970, following the enactment of the Legislative Reorganization Act, the Clerk of the House contracted with Informatics Inc. to design the voting system. In addition, the House created House Information Systems (HIS) in 1971 to "satisfy the requirements for information, information technology, and related computer services of the Members, committees and staff of the U.S. House of Representatives." Among its responsibilities, HIS developed, implemented, and maintained the electronic voting system. Guided by instructions from House Information Systems (HIS) and the House Administration Committee, Informatics set five objectives and guidelines for designing the system. They were as follows: 1. The system should significantly reduce the time required to vote and also meet the information needs of system users. 2. Each system user, Representative, Tally Clerk, press, etc., should have a simple and consistent interface with the system from both a hardware and software viewpoint. 3. The system should have a very high degree of reliability with appropriate levels of automatic testing. 4. Hardware should be highly compatible with the Chamber decor so as to be as unobtrusive as possible and still function properly. 5. Absolute lowest cost is not a prime consideration when weighed against other design objectives; however, costs should be handled prudently. Informatics estimated that completing these objectives would cost a total of $900,000. Informatics worked on the preliminary design concept for the electronic voting system until September 1971, when HIS recommended the termination of the contract. HIS took Informatics' design and continued to refine and develop the electronic voting system. In November 1971, Representative John Dent introduced, and the House agreed to, H.Res. 601. This resolution authorized funds for the maintenance and improvement of existing computer systems and the creation of a computer systems staff, whose primary task was the creation of the electronic voting system. Also in November 1971, the Committee on House Administration approved a contract with Control Data Corporation to "develop a fully operational electronic voting system" based on the work of Informatics and HIS. In October 1972, the cost for designing and installing the electronic voting system was estimated to be $1,065,000. While that was substantially greater than the estimated costs in 1915, 1916, or 1969, Representative Wayne L. Hays, chair of the Committee on House Administration, justified the additional cost as a consequence of the use of electronic technology. Instead of having an electrical and mechanical system, the House chose a fully electronic, computer-based system with an electronic display board "which flashes a running tally and records each member's vote on an overhead scoreboard and a computer printout." In contrast to earlier proposals that linked voting to individual voting boxes that were affixed to desks in the House chamber, the electronic voting system consisted of voting stations strategically located throughout the House chamber. In this respect, the system was unlike those used in many state and local legislative bodies. Representative Joe D. Waggonner enumerated the impracticality of returning to the pre-1913 practice of assigning seats as a function of the number of seats in the House chamber and the imbalance between Democrats and Republicans in a Congress. "How many Democrats are in the House of Representative today? It was 244, I believe.... How many seats are there on this side of the aisle? There are 224. And there are 224 over there." Initial Use of the Electronic Voting System While use of the electronic voting system was expected to begin on January 3, 1973, Speaker Carl Albert announced that the voting system was not yet operational and that "Members will be given sufficient notice as to when the electronic voting system will be activated." Between January 3 and January 23, the House used roll-calls to record votes. The electronic voting system was used for the first time on January 23, 1973, for a quorum call after Representative Hays made a point of order that a quorum was not present. Mr. Speaker, I am going to make a point of order that a quorum is not present. It is my understanding we will use the new voting system. I just want to say to the Members that their cards will work if they put in either end or either side out. Any way the Members can get it into the slot, it will work, either end or either side; it does not matter. The Congressional Record does not indicate any problems with the quorum call. The dialogue between the presiding officer and Representative Hays was conducted as it had been in the past, with the exception that the quorum call was conducted by "electronic device." Dr. Frank Ryan, HIS's first director, worked with the clerk of the House to operate the system and assist the tally clerks responsible for counting votes. Operation of Voting Equipment Beginning in the 93 rd Congress (1973-1974), HIS staff put the electronic voting system through a daily four-step process to ensure it was working properly. First, the electronic voting system was initialized each morning of a legislative day and tests were conducted on all chamber equipment, including the main display panels, summary display panels, voting stations, and video consoles. Second, the electronic voting system was placed in production mode and made available for votes. Third, during use, a computer technician monitored the system to ensure the system remained operational. Finally, a member of the Clerk's office acted as a floor monitor to assist Members using the system and to close down inoperable voting stations as necessary. Data collected by the electronic voting system is housed in four internal House files that are not made public. These files are the transaction log, the checkpoint file, the vote journal log, and the hardware and software error log. The final report of the Select Committee to Investigate the Voting Irregularities of August 2, 2007, explains the four files: The transaction log records all voting transactions by each Member during a particular vote, including every vote cast, the time each vote is cast, any changes, and the manner in which the vote is cast (i.e., from a voting terminal or by well card) and allows for the generation of a detailed report. The checkpoint file is written at the conclusion of the record vote and contains a snapshot of the vote data at the end of the vote. The vote journal log records when a vote begins and ends and when voting stations are closed, opened, or reopened. The hardware and software error logs record any errors which occur during the execution of the record vote. Each of these files can be used to evaluate a particular vote and to verify the operational status of the electronic voting system. Opening a Vote When the chair announces, "The yeas and nays are ordered. Members will record their vote by electronic device," the seated tally clerk turns on the electronic voting system for that specific vote and enables it to receive votes cast from the 46 floor voting stations. In enabling the electronic voting system, the seated tally clerk verifies that the correct bill or resolution number is in the computer, verifies the length of the vote (two minutes, five minutes or 15 minutes), and allows the system to begin accepting votes. Voting House Members may vote at any station located throughout the chamber. To vote, a Member inserts "a little plastic card which is punched on either end identically, so you can put it in upside down or backwards" into one of the voting stations, and presses one of three colored buttons: Yea, green; Nay, red; or Present, amber. (A fourth button illuminates to indicate a voting station is activated. It is blue.) A Member's vote is then displayed in panels above the press gallery seats, directly above the Speaker's dais. A green light indicates a Member voted Yea, a red light indicates a Member voted Nay, and an amber light indicates a Member voted Present. Today, Member voting cards have magnetic strips that contain identification information. Figure 1 shows an electronic voting station. Two summary displays, on the balconies to the right and left of the Speaker's dais, keep a running total of votes cast and how much time remains for a vote. Members today, in general, have a minimum of 15 minutes to record a vote. Once he or she has voted, a Member may check his or her vote by reinserting the card and noting which light is illuminated at the voting station. During the first 10 minutes of a 15-minute vote, a Member may also change his or her vote in the same manner by depressing the corresponding button. If a Member wishes to change his or her vote after the first 10 minutes of a 15-minute vote, the Member must use a ballot card (well card) in the well of the House. These ballot cards are manually entered into the electronic voting system by a tally clerk. Members' votes so recorded are reflected on the panels above the Speaker's dais (along with the votes of Members who voted at the voting stations), in the running total display boards on either side of the chamber, and as a vote change in the Congressional Record . For a five-minute or two-minute vote, changes may be made electronically throughout the voting process. Closing a Vote After time for a vote has expired and the chair has determined that a record vote is to be concluded, the clerks on the rostrum initiate a five-stage process to end the vote, tabulate the results, and reset the computer system in preparation for the next vote. Each stage of the process is carried out by the tally clerks. The five stages are (1) closing the voting stations, (2) terminating the vote, (3) setting the vote to final, (4) releasing the displays, and (5) verifying the release. 1. Closing the Voting Stations The process of closing the voting stations begins when the chair asks whether any Members wish to vote or change their vote. This statement signals the seated tally clerk to close the 46 floor-based voting stations. A Member wishing to vote or change a vote after this announcement must fill out a well card, unless the voting stations are left open to allow additional members to vote. The vote is then manually entered into the electronic voting system. 2. Terminating the Vote A vote is terminated by the chair when no additional Members are in the well casting votes and the seated tally clerk has finished entering all well cards into the electronic voting system. Once the electronic voting system has processed all votes, the seated tally clerk notifies the standing tally clerk that the displayed tally is accurate. The standing tally clerk creates a "tally slip" listing the vote totals and hands it to the parliamentarian. The parliamentarian then provides the slip to the chair for the chair's announcement of the vote. 3. Setting the Vote to Final Following the termination of a vote, the computer system is set to display the word "Final" on the summary display boards. The clerk, however, can still enter votes into the electronic voting system once the word "Final" has appeared on the screen: thus, the word "Final" does not have parliamentary significance. 4. Releasing the Displays Releasing the displays is the first step in resetting the electronic voting system and preparing for the next vote. This occurs when the chair completes the reading of the vote tally in an "unequivocal announcement." House Parliamentarian John V. Sullivan explained the process during the Select Committee to Investigate the Voting Irregularities of August 7, 2007, hearing conducted on the House floor: "[U]sually if the Chair says, 'The amendment is adopted,' that is the unequivocal statement of the results. 'The bill is passed.' When he utters that sentence, that should be the end of the vote." 5. Verifying the Release While the first four stages can be reversed at any time should additional Members be allowed to cast a vote, once the verification process begins, the electronic voting system is shut down, the display panels are cleared, and the computer is readied for additional votes. At the conclusion of the vote, the tally clerks cross check any tally cards against the electronic voting system results and then release the vote results to the clerk's website. Conclusion The history and development of the electronic voting system frames the process for recording votes and quorum calls in the House of Representatives and the Committee of the Whole. It was 101 years from the time Thomas Edison invented a vote recording device in 1869 until the House reached a consensus to adopt an automated vote recording system. Over the course of those years, proposals for the system changed from mechanical relays, to electrical switches, to the computer-driven electronic recording system approved in 1970. The electronic voting system, as designed and installed, was forward-looking technology. The electronic voting system also fit the House's traditions and practices. Unlike many earlier proposals, the electronic voting system did not use assigned seats as the basis for voting stations. Instead of requiring all Members to be present on the floor for a vote, the electronic voting system in addition allowed them to come and go from the House floor, so long as they voted during the time frame established by the Speaker or chair of the Committee of the Whole, within House rules and precedents. Appendix. Proposals to Establish Automated Voting in the House of Representatives Proposals to establish automated voting in the House of Representatives were first introduced during the 49 th Congress (1885-1886), 17 years after Thomas Edison proposed his electrical voting system to Congress. The table below lists each of the bills and resolutions proposing to use an electrical, mechanical, and automated voting system in the House of Representatives, and includes the Congress and date the bill or resolution was introduced, bill number, and sponsor of the measure.

On January 23, 1973, 87 years after the first legislative proposal to use an automated system to record votes was introduced, the House of Representatives used its electronic voting system for the first time. The concept of automated voting dates back even farther to 1869, when Thomas Edison filed a patent for a vote recorder and demonstrated the system to Congress. Between the first legislative proposal for automated voting in 1886, and the passage of the Legislative Reorganization Act of 1970, which contained language authorizing an electronic voting system, 51 bills and resolutions were introduced to provide for automated, electrical, mechanical or electronic voting. Following the passage of the Legislative Reorganization Act of 1970, the Committee on House Administration and House Information Systems worked to develop, install, and implement the electronic voting system. The electronic voting system was first used on January 23, 1973, to record a quorum call. This report examines the legislative history of electronic voting in the House of Representatives, discusses the design and initial use of the electronic voting system, and examines the day-to-day operations of the system, including the process for conducing a vote electronically.

Introduction Prescription drug abuse is the second-most common form of illicit drug abuse among teenagers in the United States, trailing only marijuana use. The director of the White House Office of National Drug Control Policy (ONDCP), R. Gil Kerlikowske, has called prescription drug abuse "the fastest-growing drug problem in the United States" and "a serious public health concern." Controlled substances, such as the narcotic pain relievers OxyContin® and Vicodin®, are among the most often abused prescription drugs. Young adults and teenagers may have easy access to prescription drugs via their parents' medicine cabinets, from their friends or relatives, or they may retrieve expired or unwanted medication from the trash. A possible approach to addressing the prescription drug abuse problem is to reduce the availability of such drugs by patients disposing of unwanted medications that have been accumulating in their homes. Yet throwing prescription medications into the trash, flushing them down the toilet, or pouring them down a sink or drain—such that they end up in solid waste landfills or wastewater treatment systems—may have undesirable environmental consequences. As Director Kerlikowske testified before Congress, These drugs are dispensed for legitimate purposes and too often, the public's perception is that they are safe for uses other than those for which they are prescribed. We must change public perception so the societal norm shifts to one where unused or expired medications are disposed of in a timely, safe, and environmentally responsible manner. We envision a future where disposal of these medications is second-nature to most Americans, in much the same way as proper and responsible recycling of aluminum cans has become. Creating a method of disposal of expired or unused prescription drugs is essential to public health, public safety, and the environment. Some local and state government agencies and grassroots organizations have established drug disposal programs (often referred to as pharmaceutical "take-back" programs) to facilitate the collection of unused, unwanted, or expired medications for incineration or other method of destruction that complies with federal and state laws and regulations, including those relating to public health and the environment. There are several different types of take-back programs, including the following: permanent locations where unused prescription drugs are collected; special one-day events in which patients can drop off unwanted drugs at pharmacies or hazardous waste collection sites; and mail-in/ship-back programs. One of the action items set forth in the ONDCP's 2010 National Drug Control Strategy calls for an increase in the creation and operation of take-back programs in communities around the country to address the pharmaceutical abuse problem. However, these take-back programs often exclude controlled substance medications because federal law currently does not allow for a patient to deliver a controlled substance to another entity for disposal purposes, unless local law enforcement has obtained a waiver from the federal Drug Enforcement Administration (DEA) to take custody of the unused controlled substances from patients and destroy them. As a consequence, those seeking to reduce the amount of unwanted controlled substances in their households have few alternative disposal options beyond discarding or flushing them. Current Federal Guidelines on Proper Disposal of Prescription Drugs The ONDCP has issued the following recommendations regarding disposing of expired or unused prescription medications in such a way that makes it difficult for the drugs to be easily retrieved: This consumer guidance was developed in collaboration with the U.S. Food and Drug Administration (FDA). The FDA also maintains a list of less than 30 medicines that the agency recommends patients flush down the sink or toilet if they wish to dispose of them, although the agency is careful to note that "disposal by flushing is not recommended for the vast majority of medicines." The FDA warns that the particular medications on its list, if taken accidentally by children, pets, or anyone for whom they were not prescribed, could cause harmful health effects including breathing difficulties, heart problems, or even death. Thus, in the FDA's view, flushing serves not only to deter illegal drug abuse, but also to reduce the danger of unintentional use of these medicines. In support of flushing certain medicines down the toilet or sink, the FDA has addressed concerns over whether such action poses a risk to human health and the environment: We are aware of recent reports that have noted trace amounts of medicines in the water system. The majority of medicines found in the water system are a result of the body's natural routes of drug elimination (in urine or feces). Scientists, to date, have found no evidence of harmful effects to human health from medicines in the environment. Disposal of these select, few medicines by flushing contributes only a small fraction of the total amount medicine found in the water. FDA believes that any potential risk to people and the environment from flushing this small, select list of medicines is outweighed by the real possibility of life-threatening risks from accidental ingestion of these medicines. In addition to the ONDCP and FDA recommendations described above, a public-private collaboration between the U.S. Fish and Wildlife Service, the American Pharmacists Association, and the Pharmaceutical Research and Manufacturers of America has produced a national campaign called "SMARxT DISPOSAL™," to provide information regarding the safe disposal of medication and to raise public awareness about the possible environmental impacts from improper disposal of drugs. The advice disseminated under the SMARxT DISPOSAL™ campaign regarding unused medication disposal is substantially similar to that offered by the ONDCP and FDA. While the federal guidelines encourage consumers to utilize community pharmaceutical drug take-back programs, the current legal restrictions on collecting controlled substances necessarily limit many programs. In January 2009, in response to the concerns raised about these impediments, the DEA, an agency within the U.S. Department of Justice, requested public comments in advance of a proposed rulemaking to permit the disposal of dispensed controlled substances in a manner that is consistent with the federal Controlled Substances Act. As of the date of this report, the DEA has not yet promulgated a regulation concerning this matter. However, the DEA has recently explained in testimony before Congress that it cannot move forward with the regulatory proposal in the absence of legislation that provides the agency with the necessary statutory authority to fully implement it. This report presents an overview of the Controlled Substances Act and its implementing regulations that relate to patient disposal of unwanted prescription medication, as well as describes legislation introduced in the 111 th Congress that would amend federal law to provide for more accessible methods of secure and environmentally responsible disposal of dispensed controlled substances. Overview of the Controlled Substances Act The vast majority of prescription drugs are not controlled substances and therefore are not regulated under the Comprehensive Drug Abuse Prevention and Control Act of 1970, commonly referred to as the Controlled Substances Act (CSA). However, some prescription drugs—in particular those most susceptible to abuse such as narcotics and opiates that are often used in the treatment of pain —come within the purview of the CSA because they have a greater potential for abuse than other prescription drugs and may lead to physical and psychological dependence. Enacted in 1970, the CSA is designed to regulate and facilitate the use of controlled substances for legitimate medical, scientific, research, and industrial purposes and to prevent these substances from being diverted for illegal purposes. By delegation from the U.S. Attorney General, the DEA is responsible for administering and enforcing the CSA and its implementing regulations. The CSA assigns various plants, drugs, and chemicals to one of five schedules, ranging from Schedule I, which contains substances (such as heroin) that have no currently accepted medical use in treatment and cannot be dispensed under a prescription, to Schedules II, III, IV, and V, which include substances that have recognized medical uses and may be manufactured, distributed, and used in accordance with the CSA. The order of the schedules reflects substances that are progressively less dangerous and addictive. Schedule II narcotics include the drugs morphine, codeine, and OxyContin®. Schedule III substances include Vicodin® and anabolic steroids, while Schedule IV includes Xanax® and Valium®. Schedule V contains, among other things, cough medicines that contain a limited amount of codeine (Robitussin AC®). Prescriptions for Controlled Substances It is unlawful for any person to prescribe or dispense controlled substances without first registering with the DEA Administrator. No controlled substance that is a prescription drug (as determined under § 503(b) of the Federal Food, Drug, and Cosmetic Act) assigned to Schedules II, III, IV, and V may be dispensed without a prescription. A prescription for a controlled substance may be issued only for a "legitimate medical purpose" by a physician "acting in the usual course of his professional practice." The CSA authorizes the DEA Administrator to suspend or revoke a physician's prescription privileges upon a finding that the physician has "committed such acts as would render his registration ... inconsistent with the public interest." In determining the public interest, the DEA Administrator is required to consider the following factors: the recommendation of the appropriate state licensing board or professional disciplinary authority; the applicant's experience in dispensing, or conducting research with respect to controlled substances; the applicant's conviction record under federal or state laws relating to the manufacture, distribution, or dispensing of controlled substances; compliance with applicable state, federal, or local laws relating to controlled substances; and such other conduct which may threaten the public health and safety. CSA Regulatory Scheme The regulatory structure of the CSA creates a "closed system" in which distribution of controlled substances may lawfully occur among registered handlers. The CSA places several regulatory requirements upon legitimate handlers of controlled substances, including registration, providing effective security, recordkeeping, and reporting. Every person who manufactures, distributes, dispenses, imports, or exports any controlled substance, or who proposes to engage in the manufacture, distribution, dispensing, importation, or exportation of any controlled substance, must obtain a registration issued by the DEA (unless exempt). Manufacturers and distributers of controlled substances must register annually, and those who dispense controlled substances must obtain registrations that may not be issued for less than one year or more than three years. Registrations specify the extent to which registrants are authorized to manufacture, possess, distribute, or dispense controlled substances. All registrants must provide "effective controls and procedures" to prevent the theft or diversion of the controlled substances in their possession. In addition, the CSA imposes accountability requirements on all registered handlers of controlled substances. Registrants must keep strict records and maintain inventories in compliance with federal law and rules adopted by the relevant state. For example, a registrant must maintain a complete and accurate record of each substance manufactured, received, sold, delivered, or otherwise disposed of by the registrant. Registrants must also complete and submit to the DEA periodic reports of every sale, delivery, or other disposal of any controlled substance. The DEA has described the movement of a controlled substance from manufacture to the patient as follows: [A] controlled substance, after being manufactured by a DEA-registered manufacturer, may be transferred to a DEA-registered distributor for subsequent distribution to a DEA- registered retail pharmacy. After a DEA-registered practitioner, such as a physician or a dentist, issues a prescription for a controlled substance to a patient (i.e., the ultimate user), that patient can fill that prescription at a retail pharmacy to obtain that controlled substance. In this system, the manufacturer, the distributor, the practitioner, and the retail pharmacy are all required to be DEA registrants, or to be exempted from the requirement of registration, to participate in the process. This "closed system" of distribution guarantees that a particular controlled substance is always under the control of a DEA-registered person until it reaches the patient or is destroyed, and the CSA's regulatory requirements "ensure that all controlled substances are accounted for from their creation until their dispensing or destruction." CSA Civil and Criminal Penalties For persons who lawfully handle controlled substances, failure to comply with the regulatory requirements of the CSA may result in civil penalties involving fines. Examples of violations include the distribution or dispensing of a controlled substance not authorized by the person's registration with the DEA, as well as the refusal or failure to make, keep, or furnish any record or report required under the CSA. The CSA provides that violations of its regulatory requirements generally do not constitute a crime, unless the violation was committed knowingly , in which case imprisonment of up to one or two years is authorized. The CSA provides a variety of criminal sanctions for unlawful possession, manufacturing, distribution, or importation of controlled substances. The CSA outlaws simple possession of controlled substances regardless of intent, stating that, "It shall be unlawful for any person knowingly or intentionally to possess a controlled substance." However, the CSA permits patients to possess a controlled substance that "was obtained directly, or pursuant to a valid prescription or order, from a practitioner, while acting in the course of his professional practice." Any person who violates the simple possession offense may be sentenced to a term of imprisonment of not more than one year, and fined a minimum of $1,000, or both. A second violation raises the minimum fine to $2,500 and a minimum imprisonment term of 15 days with a maximum of two years; a third offense carries a minimum fine of $5,000 and minimum imprisonment for 90 days, with a maximum term of three years. The CSA also prohibits any person from knowingly or intentionally acquiring or obtaining possession of a controlled substance by misrepresentation, fraud, forgery, deception, or subterfuge. A violation of this section may result in a term of imprisonment of not more than four years or a fine of up to $250,000, or both; second offenses involving this section increases the maximum imprisonment term to eight years. The CSA broadly defines "distribution" to include virtually every transfer of possession. Dispensing a controlled substance means "to deliver a controlled substance to an ultimate user ... by, or pursuant to the lawful order of, a practitioner, including the prescribing and administering of a controlled substance." The term "deliver" means "the actual, constructive, or attempted transfer of a controlled substance or a listed chemical, whether or not there exists an agency relationship." It is unlawful for any person knowingly or intentionally to distribute or dispense, or to possess with intent to distribute or dispense, a controlled substance, except as authorized by law. The criminal penalties for violating this prohibition on unlawful distribution of a controlled substance vary depending on whether the individual is a first-time offender or a repeat offender, the type of substance involved, and the quantity of the type of substance involved. For example, a violation of § 841(a) by a first-time offender involving a schedule II substance such as codeine is punishable by a term of imprisonment of up to 20 years and a fine of up to $1,000,000. For a second offense, the fine increases to $2,000,000 and the maximum imprisonment term increases to 30 years. Disposal of Controlled Substances Disposal By DEA Registrants DEA registrants may need to dispose of controlled substances in their possession when they are expired, damaged, contaminated, or otherwise unwanted. Under the CSA and DEA regulations, there are three different options for registrants to dispose of controlled substances: 1. The distributor or dispenser may return the controlled substance to the pharmaceutical manufacturer who accepts returns of outdated or damaged controlled substances. 2. The distributor, dispenser, or manufacturer may itself dispose of the controlled substances under procedures specified by federal regulation, 21 C.F.R. § 1307.21. 3. The distributor, dispenser, or manufacturer may transfer the controlled substances to a "reverse distributor" to take custody of the controlled substances for the purpose of returning them to the manufacturer or arranging for their disposal. Disposal By Ultimate Users While disposal of controlled substances by DEA registrants is governed by the federal regulations described above (and also perhaps local, county, or state environmental and waste disposal laws), disposal of controlled substances by patients is left to their discretion. The CSA and DEA regulations are largely silent on the ways in which patients may discard controlled substances that have been dispensed to them. The CSA refers to an individual patient as an "ultimate user," meaning "a person who has lawfully obtained, and who possesses, a controlled substance for his own use or for the use of a member of his household or for an animal owned by him or by a member of his household." Ultimate users are not required to register with the DEA because the controlled substances in their possession "are no longer part of the closed system of distribution and are no longer subject to DEA's system of corresponding accountability." Therefore, an individual patient may dispose of a controlled substance prescription medication without prior approval from the DEA, or without notifying any legal authority beforehand or afterwards. However, DEA regulations do permit any person in possession of any controlled substance, including both registrants and non-registrants, to request assistance with disposal of such substance from the DEA Special Agents in Charge (SAC) of the area where the person is located. An ultimate user who seeks the help of the DEA in disposing of a controlled substance must submit a letter to the SAC that provides several pieces of information, including the following: (1) the user's name and address; (2) the name and quantity of the controlled substance to be disposed of; (3) how the applicant obtained the substance (if known); and (4) the name, address, and DEA registration number of the person who possessed the controlled substance before the user (if known). Upon receipt of this letter, a SAC may authorize the ultimate user to dispose of the controlled substance by one of the following methods: (1) by transfer to a DEA registrant; (2) by delivery to a DEA agent or to the nearest DEA field office; (3) by destruction in the presence of a DEA agent; or (4) by "such other means as the Special Agent in Charge may determine to assure that the substance does not become available to unauthorized persons." The DEA has conceded that ultimate users have very rarely utilized this procedure that is available to them. The DEA's testimony offered in congressional hearings, the DEA's website, and the agency's comments published in the Federal Register have all repeatedly asserted the DEA's view that the CSA prohibits consumers from returning unwanted or unused controlled substances to their pharmacies or giving them to other DEA-registered entities for disposal purposes. The DEA has stated that the CSA has no provisions that allow a DEA registrant (such as a pharmacy) to accept and take custody of controlled substances from a non-registrant (individual patient). The DEA has previously explained the following: The Controlled Substances Act is unique among criminal laws in that it stipulates acts pertaining to controlled substances that are permissible. That is, if the CSA does not explicitly permit an action pertaining to a controlled substance, then by its lack of explicit permissibility the act is prohibited. Not only does the CSA lack provisions that permit the transfer of a controlled substance between non-registrants and DEA registrants, but the CSA expressly prohibits an ultimate user to engage in "distribution" of a controlled substance. Because the CSA defines "distribute" to mean "deliver ... a controlled substance" and further defines "deliver" to mean "the actual, constructive, or attempted transfer of a controlled substance," it is illegal for an ultimate user to give a controlled substance to another person (whether DEA-registered or not) for disposal purposes. Some state and community drug take-back programs accept controlled substances from patients because they have been granted "temporary allowances" from the DEA to do so—such programs involve the participation of law enforcement agencies that have sought authorization from the SAC to directly receive the controlled substances from ultimate users for disposal purposes. In the absence of such DEA approval, however, community pharmaceutical take-back programs are not permitted to collect controlled substances from consumers. The DEA has acknowledged that "[a]t this time, most U.S. communities do not offer programs to properly dispose of excess controlled substances or waste medication. Many consumers keep the drugs in their possession because they do not know how to dispose of them." Legislation in the 111th Congress As noted earlier, the DEA has asserted that legislation is required to provide the DEA with statutory authority to "promulgate regulations that set forth a comprehensive framework for communities and regulated entities to use as guides to establish secure disposal programs for unused controlled substances." Several bills have been introduced in the 111 th Congress that would change current law and make it easier for patients to dispose of unused controlled substances by participating in drug take-back programs or delivering them to entities authorized by law to dispose of them; Congress has passed one of these bills, the Secure and Responsible Drug Disposal Act of 2010 ( S. 3397 ). Secure and Responsible Drug Disposal Act of 2010 Introduced on May 24, 2010, by Senator Klobuchar, S. 3397 amends the CSA to allow an ultimate user—without being registered—to deliver controlled substances to an entity that is authorized under the CSA to dispose of them, providing that such disposal occurs in accordance with regulations issued by the Attorney General to prevent diversion of controlled substances. Also, the bill grants the Attorney General discretion to promulgate regulations that authorize long-term care facilities to dispose of controlled substances on behalf of ultimate users who reside (or have resided) at the long-term care facilities. The DEA has observed that "[t]his provision is necessary because nursing homes and other long-term care facilities sometimes gain possession of controlled substances that are no longer needed by patients, but the CSA currently does not allow such facilities, which are usually not registered under the Act, to deliver controlled substances to others for the purposes of disposal." The bill includes a congressional findings section. Among other things, the findings observe that "[l]ong-term care facilities face a distinct set of obstacles to the safe disposal of controlled substances due to the increased volume of controlled substances they handle," and that "[t]he goal of this Act is to encourage the Attorney General to set controlled substance diversion prevention parameters that will allow public and private entities to develop a variety of methods of collection and disposal of controlled substances in a secure and responsible manner." The DEA has offered its support for the Secure and Responsible Drug Disposal Act, noting that the measure allows "ensuing regulations to be implemented uniformly throughout the nation" and grants the DEA the flexibility to allow, by regulation, "a wide variety of disposal methods that are consistent with effective controls against diversion." On July 29, 2010, the Senate Judiciary Committee approved S. 3397 after adopting an amendment that directs the Attorney General, in developing regulations governing drug disposal, to take into consideration the public health and safety, as well as the ease and cost of program implementation and participation by various communities. The amendment specifies that such regulations may not require any entity to establish or operate a delivery or disposal program. In addition, the legislation contains a provision that allows "any person lawfully entitled to dispose of a decedent's property" to deliver that decedent's controlled substances to authorized persons for disposal purposes. The amendment also requests that the U.S. Sentencing Commission review and, if appropriate, amend the Federal Sentencing Guidelines to provide increased imprisonment penalties if a person is convicted of a drug offense involving drugs that were obtained from a drug disposal process authorized under the act. The Senate passed S. 3397 on August 3, 2010, by unanimous consent. The House passed the bill on September 29, 2010, after making technical corrections to the findings section that, among other things, emphasize that one of the goals of the act is to "reduce instances of diversion and introduction of some potentially harmful substances into the environment." Later that same day, the Senate passed the measure as amended by the House. On October 12, 2010, President Obama signed S. 3397 into law ( P.L. 111-273 ). Other Related Bills Representative Inslee introduced the Safe Drug Disposal Act of 2010 ( H.R. 5809 ) on July 21, 2010. The House Energy and Commerce Committee, Subcommittee on Health held hearings and a markup session on H.R. 5809 on July 22, 2010. The subcommittee approved the bill (with a substitute amendment) by voice vote and referred the measure to the full committee for its consideration. As amended, the legislation largely resembles the Secure and Responsible Drug Disposal Act of 2010, although it does not contain a congressional findings section and the section regarding the U.S. Sentencing Commission. However, it includes additional provisions that are not found in S. 3397 . H.R. 5809 includes a provision that would require the Attorney General to allow long-term care facilities to deliver for disposal controlled substances on behalf of ultimate users (unlike S. 3397 , which states that the Attorney General may authorize this activity). H.R. 5809 would direct the ONDCP Director, in consultation with the EPA Administrator, to carry out public education and outreach campaigns to increase awareness of lawful and safe disposal of prescription drugs. The legislation would require the Comptroller General of the United States to collect data on disposal of controlled substances by ultimate users and submit its findings and recommendations to Congress regarding the use, effectiveness, and accessibility of disposal programs. Finally, H.R. 5809 would direct the EPA Administrator to conduct a study (and report to Congress the results of such study) that examines the environmental impacts of disposal of controlled substances "through existing methods," offer recommendations on disposing controlled substances that take into consideration such impacts (as well as the ease and cost of implementing drug take-back programs and participation in such programs by various communities), and "identify additional authority needed to carry out such recommendations if the Administrator determines that the Administrator's existing legal authorities are insufficient to implement such recommendations." On July 28, 2010, the House Energy and Commerce Committee approved the bill and ordered it to be reported. The House passed H.R. 5809 on September 22, 2010. Introduced on February 25, 2009, by Representative Inslee and on June 24, 2009, by Senator Murray, the Safe Drug Disposal Act of 2009 ( H.R. 1191 , S. 1336 ) would amend the CSA to allow states to operate drug disposal programs that accept from patients unwanted or unused controlled substances without requiring the presence of law enforcement personnel. Specifically, the bill would direct the Attorney General to promulgate regulations that describe five drug take-back program models from which states may choose and implement, to permit an ultimate user (or a care taker) to dispose of unused or partially used controlled substances through delivery to a designated facility. Beyond these five model state programs, the regulations must also allow states to devise an alternative means of disposal that best suits the state and that receives the approval of the Attorney General. The bill requires that any approved state drug disposal program must, among other things, permit ultimate users to dispose of controlled substances through non-law-enforcement personnel and incorporate environmentally sound practices for disposal. Furthermore, the bill would amend Section 505 of the Federal Food, Drug, and Cosmetic Act and Section 351 of the Public Health Service Act to require the Secretary of Health and Human Services to ensure that the labeling for drugs or biological products does "not include any recommendation or direction to dispose of the drug by means of a public or private wastewater treatment system, such as by flushing down the toilet." In testimony offered before Congress, the DEA has expressed its concern about "the complexity of the regulatory scheme called for" in the Safe Drug Disposal Act of 2009. Representative Shea-Porter introduced the Safe Prescription Drug Disposal and Education Act ( H.R. 5925 ) that would, among other things, allow the Attorney General to distribute federal grant awards to eligible entities to facilitate the establishment and operation of prescription drug disposal units (that must be clearly marked as a "prescription drug drop-off box") at various locations. The bill first provides an amendment to the CSA that would permit an ultimate user (or an individual authorized to act on his behalf) to deliver, without being registered, a controlled substance to another person for the purpose of disposal. In addition, the bill would allow "a person to whom such controlled substance is being delivered may, without being registered, receive such controlled substance for such purpose." The Attorney General would be required to determine the places where the prescription drug drop-off boxes may be located, subject to state and local requirements related to waste or hazardous waste management and any regulations issued by the Food and Drug Administration. Entities that would be eligible to apply for a federal grant include a state, local government unit, nonprofit organization, Indian tribe, corporation, and community coalition. The funds received under the grant would be available to establish, maintain, and operate the drug disposal unit, as well as to hire a reverse distributor, a waste or hazardous waste management organization, or other state or local government entity, to collect the drugs that have been deposited in the drop-off boxes. H.R. 5925 would authorize to be appropriated $5 million for each of fiscal years 2011 through 2014 to carry out the grant program. Finally, the bill would direct the Director of National Drug Control Policy, in consultation with the EPA Administrator, to carry out an education and outreach campaign to increase public awareness of safe and lawful prescription drug disposal methods.

According to the White House Office of National Drug Control Policy, the intentional use of prescription drugs for non-medical purposes is the fastest-growing drug problem in the country and the second-most common form of illicit drug abuse among teenagers in the United States, behind marijuana use. Young adults and teenagers may find their parents' prescription drugs in unsecured medicine cabinets or other obvious locations in the home, or they may retrieve expired or unwanted medication from the trash. It is believed that properly disposing of unwanted medications would help prevent prescription drug abuse by reducing the accessibility and availability of such drugs. Yet throwing prescription medications into the trash or flushing them down the toilet may not be environmentally desirable. In response, many local communities and states have implemented pharmaceutical disposal programs (often referred to as drug "take-back" programs) that collect unused and unwanted medications from patients for incineration or other method of destruction that complies with federal and state laws and regulations, including those relating to public health and the environment. Prescription drugs may be categorized as either controlled substance medication or non-controlled substance medication. Pharmaceutical controlled substances, such as narcotic pain relievers OxyContin® and Vicodin®, are among the most commonly abused prescription drugs. However, community take-back programs usually only accept non-controlled substance medication, in compliance with the federal Controlled Substances Act. This statute comprehensively governs all distributions of controlled substances, and it currently does not allow for a patient to transfer a controlled substance to another entity for any purpose, including disposal of the drug. (Federal regulations provide a limited exception to this general prohibition—local law enforcement may obtain a waiver from the federal Drug Enforcement Administration to collect unused controlled substances from patients and destroy them.) As a consequence, patients seeking to reduce the amount of unwanted controlled substances in their possession have few alternative disposal options beyond discarding or flushing them. The 111th Congress has considered legislation that would create a legal framework governing disposal of controlled substances that have been dispensed to patients. On October 12, 2010, President Obama signed the Secure and Responsible Drug Disposal Act of 2010 (S. 3397) into law (P.L. 111-273). P.L. 111-273 amends the Controlled Substances Act to allow a patient to deliver controlled substances to an entity that is authorized by federal law to dispose of them, providing that such disposal occurs in accordance with regulations issued by the Attorney General to prevent diversion of controlled substances. The Attorney General is required, in developing those regulations, to take into consideration the public health and safety, as well as the ease and cost of drug disposal program implementation and participation by various communities. Also, P.L. 111-273 gives the Attorney General discretion to issue regulations that authorize long-term care facilities to dispose of controlled substances on behalf of patients who reside in those facilities. Other related bills in the 111th Congress include the Safe Drug Disposal Act of 2010 (H.R. 5809), the Safe Drug Disposal Act of 2009 (H.R. 1191, S. 1336), the Secure and Responsible Drug Disposal Act of 2009 (H.R. 1359, S. 1292), and the Safe Prescription Drug Disposal and Education Act (H.R. 5925).

Background Department of Defense (DOD) fuel consumption varies from year to year in response to changes in mission and the tempo of operations. DOD may consume upwards of 1% of the petroleum products annually refined in the United States. Foreign purchased petroleum products may double DOD's consumption. The Defense Energy Support Center (DESC), under the command of the Defense Logistics Agency (DLA), has the mission of purchasing fuel for all of DOD's services and agencies, both in the continental United States (CONUS) and outside (OCONUS). DESC's origins date back to World War II, when the Army-Navy Petroleum Board fell under the Department of the Interior. Its mission transferred to the War Department in 1945 and its designation changed to the Joint Army-Navy Purchasing Agency. In 1962, the agency became a part of the former Defense Supply Agency, now known as the Defense Logistics Agency (DLA). Designated the Defense Fuel Supply Center (DFSC) in 1964, it served as a single entity to purchase and manage the DOD's petroleum products and coal. In 1998, it was re-designated the Defense Energy Support Center with an expanded new mission to manage a comprehensive portfolio of energy products. In practice, DESC typically awards fuel contracts based on the lowest cost to the point of delivery, typically for lengths of one year. DESC's fuel procurement categories include bulk petroleum products (JP-8, JP-5, and diesel fuel), ships' bunker fuel, into-plane (refueling at commercial airports), and post-camp-and-station (PC&S). Although DOD may represent the single largest consumer of petroleum products, its consumption primarily of JP-8, JP-5, and diesel fuel aligns more closely with the narrower market for middle-distillate fuels. This report summarizes DOD's fuel purchases over the current decade (FY2000 through FY2008); and compares fuel spending to overall DOD spending. It also compares the prices that DOD pays for fuel to commercially equivalent fuel, and the quantities of DOD fuel purchases to the net production of U.S. refined petroleum products. To place DOD's fuel requirement in a larger perspective, the report discusses refining and refineries supplying DOD's jet fuel, and DESC's fuel procurement practices. The report concludes by discussing recent legislation and policies that affect fuel procurement. In the past, when crude oil and refined petroleum prices were high, Congress has looked at DOD's fuel demand as a means of stimulating private sector interest in producing alternative fuels. Recent legislation directs DOD to consider using alternative fuels to meet its needs, and to stimulate commercial interest in supplying the needs. Recent high fuel prices did stimulate DOD and private interest in producing alternative fuels from coal and oil shale, though no project has yet reached commercial operation. Legislation ensuring that federal agencies do not spend taxpayer dollars on new fuel sources that will exacerbate global warming now counters earlier policy objectives. Proposed rules that mandate greenhouse gas emission reporting may minimally affect refineries. Recently introduced legislation that would cap greenhouse gas emissions is likely to affect some refinery operations, if not the refining industry's responsiveness to DOD's fuel requirements. Fuel Purchases DOD's fuel consumption varies from year to year in response to changes in mission and the tempo of operations. The majority of DESC's bulk fuel purchases are for JP-8 jet fuel, which has ranged from 60 to 74 million barrels annually over the past decade (the equivalent of 165,000 to 200,000 barrels per day). The Air Force and the Army represent the primary consumers of JP-8 fuel. The Navy consumes JP-5 jet fuel. All services to varying degrees consume diesel fuel. DESC's total fuel purchases peaked at 145.1 million barrels in FY2003, when U.S. forces invaded Iraq. JP-8 purchases peaked in FY2004 and have since been declining (as discussed further below). In FY2000, JP-8 represented almost 60% of overall DESC's overall purchases and by FY2008 only 46%. Overall DESC fuel expenditures grew from roughly $3.6 billion in FY2000 to nearly $18 billion by FY2008—a nearly 500% increase. Actual volumes purchased had only increased by 30% over the same time. DESC petroleum product purchases, summarized by volume and total cost, appear in Table 1 . DESC's purchases, however, do not necessarily correspond with DOD's actual consumption. DESC may draw fuel down from storage to supplement demand and may replenish fuel stores with purchases. DOD also maintains a fuel "war reserve" that it may draw down in contingencies. While DOD's full consumption began leveling off after the Iraq war, fuel costs and average fuel prices continued increasing; in part, from increasing crude oil prices (which spiked to nearly $140 per barrel in the summer of 2008) and, in part, from increasing refining margins (discussed below). The average cost of all petroleum products purchased rose from $34.62 per barrel in FY2000 to over $133 per barrel in FY2008; an increase of nearly 370% (see Figure 1 ). DOD Fuel Cost vs. Commercial Fuel Price Earlier, JP-8 and JP-5 jet fuels held a comparative price advantage over their commercial equivalent—Jet A fuel. With commercial aviation's setback after September 11, 2001, and the Iraq invasion in 2003, the military jet fuel price-advantages reversed. Jet and diesel fuel prices appear in the graph of Figure 2 and the summary in Table 2 . Note that as all fuel-prices increased, the margin between refiners' crude oil cost and refined product prices also increased; from an average of 15¢/gallon in FY2000 to an average of 91¢/gallon by FY2008. DOD did respond when refiners offered commercial jet fuel at lower prices than military specification fuel. As shown in Table 1 , DESC offset decreasing JP-8 purchases with increasing purchases of alternate jet fuels (commercial aviation specification fuels that can substitute for military specification). Diesel fuel purchases also picked up. DESC Fuel Cost vs. DOD Outlays Outlays represent cash payments made to liquidate the government's obligations in a fiscal year. The obligations may be incurred over a number of years as there is a time lag between budgeting funds (congressional appropriation), signing contracts and placing orders (obligations), receiving goods or services and making payments (liquidating obligations). Outlays, as used here, represent DOD's actual spending, rather than its authority to incur legally binding obligations or budget authority. From FY2000 through FY2007, total defense outlays increased 200% (in current dollars), while Operation and Maintenance (O&M) spending increased by 231% (see Table 3 ). Fuel costs increased 497% during the same period, owing in large part to rapidly escalating crude oil prices. Stated in other terms, fuel costs represented 1.2% of DOD's spending in FY2000, and more than doubled to 3% by FY2008. Refining, Suppliers, and the Crude Oil Supply Crude Oil Supply The U.S. produces roughly one-third of the crude oil it consumes annually with the balance supplied by Canada, Saudi Arabia, Mexico, Venezuela, Nigeria, and other smaller producers ( Figure 3 ) . A range of crude oils assays appears in Table 4 . In the past, when U.S. crude oil production was higher than today, refineries could depend on steady supplies of light sweet (low sulfur) crude oil. The benchmark for this crude oil grade, West Texas Intermediate (WTI), is the reference for pricing of U.S. domestic crudes, as well as oil imports into the United States. With the diminishing supply of sweet crudes, refineries have increasingly turned to heavier sour crudes. Refining Crude oil contains natural components in the boiling range of gasoline, kerosene/jet fuel and diesel fuel as shown in Figure 4 . These products separate out in a refinery's atmospheric distillation tower. The term "straight-run" applies to the product streams that condense during this initial refining process. Many refineries now process the residuum that remains after atmospheric distillation into gasoline and middle distillate range products using heat and pressure, hydrogen, and catalysts (hydrocracking and catalytic cracking in refining terms). Depending on their complexity, refineries may also produce kerosene/jet fuel and diesel fuel in this manner. As would be expected, specifications for jet fuel, particularly military grade, are more rigorous than for kerosene. Generally, refineries are set up to run specific grades of crude oil, for example light sweet or heavy sour. Light sweet crude is particularly desirable as a feedstock for gasoline refining because its lighter-weight hydrocarbons make it easier to refine. Heavier crude oils require more complex processing than light crudes, and sour crudes require a desulfurization. Refineries may be set up as: Topping refineries separate crude oil into its constituent petroleum products simply by distillation, also referred to as atmospheric distillation. A topping refinery produces naphtha but no gasoline. Hydroskimming refineries are equipped with atmospheric distillation, naphtha reforming and necessary processes to treat for sulfur. More complex than a topping refinery, hydroskimmers run light sweet crude and produce gasoline. Cracking refineries add vacuum distillation and catalytic cracking to run light sour crude to produce light and middle distillates; Coking refineries are high conversion refineries that add coking/resid destruction (delayed coking process) to run medium/sour crude oil. A refinery's atmospheric distillation capacity sets the limit of its crude oil processing (usually expressed as barrels per calendar day or barrels per stream day). Catalytic cracking, coking, and other conversion units, referred to as secondary processing units, add to a refinery's complexity and can actually increase the volume of its output. Relative size, however, can be measured using refinery complexity—a concept developed by W.L. Nelson in the 1960s. The Nelson Complexity Index rates the proportion of secondary processes to primary distillation (topping) capacity. The index varies from about 2 for hydroskimming refineries to about 5 for cracking refineries, and over 9 for coking refineries. While the average index for U.S. refineries is 10, only 59 have coking capacity. A typical refinery yields a limited supply of jet and diesel fuel yield depending on the type of crude oil processed. Gulf Coast (Texas and Louisiana) refineries with an average complexity of 12 to 13 may yield up to 8% jet fuel, and over 30% diesel as shown in Figure 5 . Sulfur Regulations Changes in crude oil supplies have led some refineries to upgrade their processes (increasing their complexity) to handle heavier sour crude oils. At the same time, the Environmental Protection Agency (EPA) has taken action to reduce the sulfur content of diesel fuel. By the end of 2010, the sulfur content of all highway-use diesel fuel imported or produced in the United States will be limited to 15 parts-per-million (ppm) or 0.0015%; a fuel now termed "ultra-low sulfur diesel" (ULSD). The EPA regulations require measuring the sulfur content at the retail outlet, not the refinery. Petroleum product pipelines transport a variety of fuels; for example, a slug of gasoline followed by a slug of diesel fuel. To limit the additional sulfur picked up during pipeline transit, refiners are faced with producing even lower sulfur diesel fuel, or disposing of contaminated "transmix"—the interface between the slug of diesel and a higher sulfur-content product that preceded the diesel in the pipeline—by reprocessing. In the late 1980s, DOD adopted the "single battlefield fuel" concept that envisioned using the same fuel for aircraft and ground equipment operating within a theater. DOD has steadily substituted JP-8 for diesel fuel in operating land-based equipment tactical vehicles and equipment. (This concept did not apply to naval operations or include carrier-based aircraft.) The quality of diesel fuel, particularly the sulfur content, varies significantly in other parts of the world. To minimize the length of the fuel supply chain to a theater of operation, the Army must rely on regionally supplied diesel fuel or JP-8, which can expose vehicles to fuel with elevated sulfur levels. The U.S Army has adopted the American Society of Testing and Materials (ASTM) standard MIL-DTL-83133E for JP-8 that limits the maximum allowable sulfur content to 3,000 ppm, though a content of 140 ppm is typical. The sulfur content of most kerosene is currently 400 ppm. EPA's "Guidelines for National Security Exemptions of Motor Vehicle Engines – Guidelines for Tactical Vehicle Engines" recognizes that tactical vehicles may need to operate on JP-8 or JP-5 fuel while in the United States to facilitate their readiness. EPA has not indicated that it will act on reducing the sulfur content of jet fuel. Greenhouse Gas Regulations In 2007, the Unites States Supreme Court ruled that EPA has the authority under the Clean Air Act to regulate carbon dioxide (CO 2 ) emissions from automobiles, and directed the EPA to conduct a thorough scientific review. After the ordered review, EPA issued a proposed finding, in April 2009, that greenhouse gases contribute to air pollution that may endanger public health or welfare. Though the finding pertained to automobile emissions, it has wide ranging implications. EPA recently proposed a Mandatory Reporting of Greenhouse Gases (GHGs) rule that would require petroleum refineries (among other industrial facilities) to report emissions from refining processes and all other sources located at the facility as defined in the rule. Petroleum refineries emit approximately 205 million metric tons CO 2 annually, which (according to the rule) represents approximately 3% of the U.S. GHG emissions. The cost of complying with the proposed could be minimal. However, the rule establishes the basis for future legislation and regulations that could cap GHG emissions from refineries as well as other industrial sources. Recently introduced bills (for example H.R. 2454 ─ The American Clean Energy and Security Act of 2009, which the House passed June 26, 2009) that would amend the Clean Air Act to establish a cap-and-trade system designed to reduce greenhouse gas emissions would cap emissions from refineries and allow trading of emissions permits ("allowances"). Over time, H.R. 2454 's provisions would reduce the cap to 83%, forcing industries to reduce emissions by that amount or purchase allowances or offsets from others who would have reduced emissions more than required or who are not covered by the cap. U.S. Refiners Supplying DOD Fuel Currently, 142 refineries operate in the United States. The Energy Information Administration (EIA) reports their aggregate kerosene and jet fuel production (due to their overlapping boiling ranges) but does not break out production statistics by refinery. DESC does report refiners and suppliers that it awards contracts under its fuel solicitations. Between FY2003 and FY2008, DESC reported that its 4 top domestic suppliers included Shell, Valero Marketing and Supply Company, ExxonMobil, and BP Corporation ( Table 5 ). Combined, the companies in Table 5 operate 31 refineries in the United States (shown in Table 6 ), and represent nearly 6 million barrels per day of crude capacity. Not all may supply jet fuel to DOD, however. This suite of refineries averages 10 as rated by the Nelson Complexity Index. Two-thirds have the coking capacity needed to refine medium sour crude. Between 2000 and 2009, the number of refineries operating in the United States declined from 155 to 141. However, the atmospheric crude oil distillation capacity increased from 17.8 million to 18.6 million barrels per stream day (bpsd). The 1 million bpsd increase is due in part to increased diesel fuel capacity (now 3.5 million bpd). The downstream charge capacity for kerosene/jet fuel has averaged slightly over 1 million barrels per stream day. The median capacity of all currently operating refineries is roughly 80,000 bpd, and the 70 some refineries above the median capacity make up 85% of overall U.S. refining capacity. Refinery Jet Fuel Yield and Supply A typical refinery yields a limited supply of jet and diesel fuel depending on the type of crude oil processed. Gulf Coast refineries may yield up to 8% jet fuel, and over 30% diesel (see Figure 5 above). U.S. refineries produce roughly ten times more commercial jet fuel than military specification jet fuel, which has ranged from less than 50 to over 60 million barrels annually since 2000 (see Table 7 ). Restating the data of Table 7 in percentages, military jet fuel production ranges from 9% to 11% of the U.S. net production of jet fuel, but makes up less than 1% of all U.S. refined petroleum products (see Table 8 ). DESC's worldwide jet fuel purchases have exceeded the U.S. refining industry's jet fuel output in recent years (see Table 9 ). In some years, U.S. refineries supplied less than 50% of DESC's jet fuel purchases. That is, the current capacity of U.S. refineries does not meet all of DOD's demand for military specification jet fuel. To make up the disparity, DESC has increased its purchase of commercial jet fuels, such as Jet A, which it upgrades to military specification. More recently, this strategy has reduced DESC's spending on fuel, as commercial jet fuel has priced lower (see retail kero-jet price curve in Figure 2 ). The lack of U.S. refining capacity does not necessarily compromise DOD's fuel supply. A lengthy fuel supply chain that extends from the continental United States to forward operating areas (Iraq or Afghanistan, for example) is not desirable. Logistics demand that closer refineries supply the fuel. DESC makes up the balance of its purchases through contracts with foreign refineries and suppliers to support U.S. forces and installations outside the continental United States. Fuel Acquisition Originally, DOD's authority to procure fuel extends from power originally granted to the Navy. Under 10 U.S.C. § 7229 (Purchase of Fuel), "... the Secretary of the Navy may, in any manner he considers proper, buy the kind of fuel that is best adapted to the purpose for which it is to be used." Section 7229 superseded 34 U.S.C. 580 "which had been interpreted as authorizing the Armed Services Petroleum Purchasing Agency to negotiate contracts for the purchase of fuel, not only when acting as a procuring activity for the Navy, but also when filling the consolidated fuel requirements of the armed forces." However, DESC now relies on the general procurement authority under 10 U.S.C. 2304 (Contract: competition requirement), since this gives DOD the authority to buy almost any kind of supply or service. DESC awards contracts and purchases fuel in a one-step process under the Defense Working Capital Fund (DWCF). It internally transfers the fuel to DOD customers, which it refers to as "sales." This operation permits the Department to take advantage of price breaks for large quantity purchases, and in most years provides the DOD customer a stabilized price for all products during that fiscal year. Acquisition Regulations The term "acquisition," as defined by Title 41 (Public Contracts) U.S.C. Section 403, means the process of acquiring, with appropriated funds, by contract for purchase or lease, property or services that support the missions and goals of an executive agency. The term "procurement" includes all stages of the process of acquiring property or services, beginning with the process for determining a need for property or services and ending with contract completion and closeout. Title 10 U.S.C. Chapter 137 – Procurement codifies general military laws governing the Armed Forces acquisition process. The primary document for federal agency acquisition regulations consists of the Federal Acquisition Regulation (FAR), as promulgated in Title 48 Code of Federal Regulations (CFR) – The Federal Acquisition Regulations System . The FAR System does not include internal agency guidance, however. DOD has promulgated the Defense Acquisition Regulation System (DFARS) in 48 CFR Parts 201 through 299. Multiyear Contracting Authority In practice, DESC has typically awarded one-year bulk-fuel contracts and multi-year direct delivery fuel contracts. DESC uses fixed-price contracts with an economic price adjustment that provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies. Generally, these types of contracts use the clauses at FAR 52.216–2, Economic Price Adjustment—Standard Supplies. DESC uses economic price adjustment provisions in contracts when general economic factors make the estimation of future costs too unpredictable, as is typically the case for refined petroleum products. DESC has determined supplies and related services are eligible for the multi-year contracting provisions under FAR17.105-1(b) and DFARS 217.170(a) and 217.172(b). DESC adopted contracting instructions for entering into multiyear contracts for bulk petroleum, ships' bunker, into-plane, and post-camp-and-station for the interim period of October 1, 2008, through September 30, 2009. DOD and the military departments are authorized to enter initial five-year contracts for storage, handling, or distribution of liquid fuels or natural gas under 10 U.S.C §2922. These contracts may contain options for up to three five-year renewals, but not for more than a total of twenty years. "Multiyear contract" means a contract for the purchase of supplies or services for more than one, but not more than five, program years. A multiyear contract may provide that performance under the contract during the second and subsequent years of the contract is contingent upon the appropriation of funds, and (if it does so provide) may provide for a cancellation payment to the contractor if Congress does not appropriate funds. The key difference between a multiyear contract and a multiple year contract is that multiyear contracts buy more than one year's requirement (of a product or service) without establishing and having to exercise an option for each program year after the first, whereas multiple year contracts have a term of more than one year regardless of fiscal year funding. Multiyear contract authority for supplies derives from the general procurement statutes for acquisition of property under 10 U.S.C. 2306b (Multiyear contracts: acquisition of property). DOD agencies, as regulated under 48 CFR 17.172 (Multiyear Contract for Supplies), may enter into multiyear contracts for supplies if the use of such contracts will promote national security. DOD may enter into a multiyear contract for supplies if the contract will result in substantial savings of the total estimated costs of carrying out the program through annual contracts (48 CFR 17.105-Uses). If Congress does not appropriate funds to support the succeeding years' requirements, the agency must cancel the contract. Multiyear contracting is encouraged in order to take advantage of lower costs, among other objectives under 48 CFR 17.105-2 (Objectives). A multiyear contract for supplies, in addition to the conditions listed in FAR 17.105-1(b), can be entered into if the contract will promote the national security of the United States (10 U.S.C. § 2306b (a) (6)) and promulgated in 48 CFR 217.172 - Multiyear contracts for supplies). The multiyear contract cannot exceed $500 million (when entered into or when extended) until the Secretary of Defense identifies the contract and any extension in a report submitted to the congressional defense committees. Acquisition of Alternative Fuels DOD is authorized to procure fuel derived from coal, oil shale, and tar sands under 10 U.S.C. § 2922d. This also includes a direct authority for multi-year contracts. Contracts for procurement of these fuels "may be for one or more years at the election of the Secretary of Defense." The Secretary of Defense has broad waiver authority over acquisition of alternative fuels. If the Secretary determines that market conditions will adversely affect DOD's acquisition for a certain defined fuel source, the Secretary may waive any provision of law prescribing the formation of contracts, prescribing terms and conditions to be included in contracts, or regulating the performance of contracts. The term "defined fuel source" means petroleum (which includes natural or synthetic crude, blends of natural or synthetic crude, and products refined or derived from natural or synthetic crude or from such blends), natural gas, coal, and coke. The five-year limit on multi-year contracts would be a "term and condition" which could be waived upon the requisite finding of the Secretary. DESC has not determined whether it could or would want to waive statutory limits on multiyear contracts, as it is not clear to DESC that either DDO or Congress would agree with exercising the waiver authority for this purpose. DESC has not wanted to take the chance of jeopardizing the delegation or losing the sales authority granted under 10 U.S.C. § 2922e by taking this position. Fully Burdened Cost of Fuel DESC bases contract delivery price on the "lowest laid down cost" to the government. A typical delivery point, a Defense Fuel Supply Point (government owned or leased tank farms), redistributes fuel to bases and installations. DESC levels the price of fuel for all DOD's "customers" and includes a surcharge for its operating costs. While DESC's contract may specify the final destination, an additional cost may be incurred by the operational command that tactically delivers the fuel forward ─ for example, air-to-air refueling, underway replenishment, or ground transport. In the past, DOD had not factored these hidden costs into fuel costs. The Duncan Hunter National Defense Authorization Act for FY2009 ( P.L. 110-417 ) now requires that analyses and force planning processes consider the requirements for, and vulnerability of, fuel logistics. By making fuel logistics part of the acquisition processes, new military capabilities must take a life-cycle cost analysis into account that includes the fully burdened cost of fuel. The act also directs the appointment of a director responsible for the oversight of energy required for training, moving, and sustaining military forces and weapons platforms for military operations. Policy Considerations Over the current decade, which saw an unprecedented spike in crude oil prices, DOD experienced a 500% increase in the cost of fuel cost (dollars per barrel). The concern over declining worldwide crude oil production had preceded rising fuel costs also for several years. In 2006, due to increasing fuel costs and military operations in Iraq and Afghanistan, the Air Force had to reduce funding available for flying hours used to train Air Combat Command aircrews. Fuel costs have represented as much as 3% of DOD's spending and over 7% of the Operation and Maintenance budget in the past decade. In comparison, the airline industry's major operating costs are fuel. However, the airline industry has the option during periods of high fuel cost of passing the costs on to customers, adjusting flight schedules, withholding stock dividends, or even declaring insolvency. Unlike the airlines, DOD's only recourse has been to request supplemental appropriations to pay for the increased costs and supplies. For example, DOD identified $0.5 billion in the FY2007 Emergency Supplemental Request for increases in baseline fuel costs resulting from higher market costs in the first half of FY2007. DOD has looked at several options to limit its vulnerability to fuel price swings and supply shortages. These include "fuel hedging," multi-year contracting, and alternate fuels. In particular, increasing purchases of more widely available commercial Jet A fuel have not only reduced DOD's fuel costs but have expanded the range of supplies ─ an arguable goal for an alternative fuel. DESC's "business model" provides the flexibility needed to meet changing operational requirements from year-to-year. As noted above, DESC uses fixed-price contracts that include an economic price adjustment clause that provides for upward and downward price revisions. DESC has designed this contract provision to take advantage of swings in fuel prices, which ultimately reflect crude oil prices. If prices decline, DESC's costs decline. If prices rise, the economic clause adjusts the price that DESC would pay to the going market rate. This limits DESC's risk in holding contracts for fuel priced above the going market rate, but does not hold down costs during rapidly escalating prices. (DESC will pay higher prices, but look for the best offer.) A practice used in the airline industry makes use of various "hedging" strategies to minimize the risk of future jet fuel price increases. A simple hedge involves buying "futures" contracts to lock in prices. For example, when crude oil prices peaked at nearly $147 per barrel in the summer of 2008, Southwest Airlines reportedly had managed earlier to hedge its fuel at $51/barrel. In 2004, the Defense Business Board convened the Fuel Hedging Task Group to examine potential ways of reducing DOD's exposure to fuel price volatility by hedging in commercial markets. Although the Board Task Group concluded that DOD could feasibly hedge its fuel purchases, it gave broader support to engaging in "no-market" hedging through the Department of the Interior's Mineral Management Service. During crude oil price spikes, additional Interior Department oil could apply lease revenues to offset increasing DOD fuel costs. The Group concluded that DOD could request that the Office of Management and Budget (OMB) seek legislative authority to transfer funds from Interior to Defense, or vice versa; depending on which Department benefits from unanticipated price changes. However, Interior derives the bulk of its revenues from Outer Continental Shelf (OCS) leases, and Congress has already statutorily allocated those revenues among various government accounts, including coastal states. Furthermore, OCS lessees pay royalties-in-kind, in the form of oil delivered to the Strategic Petroleum Reserve (SPR). Congress created the SPR as a response to the 1970s Arab oil embargo to prevent a reoccurrence of supply disruptions. When filled to its 727 million barrel capacity, the SPR represents roughly 70 days of imported supply. A drawdown of the SPR under the Energy Policy and Conservation Act (EPCA – P.L. 94-163 ) can take the form of a sale to the highest bidder (42 U.S.C. § 6241), or an exchange (the company receiving the oil must later replace it with a comparably valued volume). During the opening days of the 1991 Persian Gulf War, President George H.W. Bush's drawdown authorization precipitated a rapid crude oil price decline. The Government Accountability Office (GAO) reported that in 2006, 40% of the crude oil refined in U.S. refineries was heavier than that stored in the SPR. Refineries that process heavy oil cannot operate at normal capacity if they run lighter oils. The types of oil currently stored in the SPR would not be fully compatible with 36 of the 74 refineries considered vulnerable to supply disruptions. GAO cited a DOE estimate that U.S. refining throughput would decrease by 735,000 barrels per day (or 5%) if the 36 refineries had to use SPR oil—a substantial reduction in the SPR's effectiveness during an oil disruption, especially if the disruption involved heavy oil. The SPR does not have a defined role in mitigating a DOD fuel supply disruption. Presumably, a refinery under contract to supply DOD would have the option of bidding on a drawdown sale. A typical refinery yields only 8% jet fuel on average. That is, for every gallon of jet fuel a refinery yields, it also produces roughly 11.5 gallons of other petroleum products (gasoline, diesel). This operational limitation on producing jet fuel limits the SPR's role during a supply disruption, if the only objective is supporting DOD's requirement. As a final recourse, DOD may look to an alternative or replacement for crude oil, as provided in the 2005 Energy Policy Act. However, the Energy Independence and Security Act of 2007 ( P.L. 110-140 ) prohibits federal agencies from procuring alternative or synthetic fuels, unless contract provisions stipulate that life-cycle greenhouse gas emissions do not exceed equivalent conventional fuel emissions produced from conventional petroleum sources. The provision was included to ensure that federal agencies are not spending taxpayer dollars on new fuel sources that will exacerbate global warming—a response to proposals under Air Force consideration to develop coal-to-liquid (CTL) fuels. The Air Force has since abandoned plans to attract private investment in a CTL fuel plant to supply Malmstrom Air Force Base, Montana, but DESC is interested in pursuing a pilot program for synthetic fuels to support DOD JP-8 fuel requirements in Alaska. Although crude oil prices have precipitously declined, as of late, the reoccurrence of crude oil supply shortages and price spikes may be inevitable. Both policy and economics keep fossil-based alternatives out-of-reach for now. Confronted with the same realities facing all energy consumers, DOD is shifting its thinking toward efficiency. DOD might better inform Congress by reporting on the fully burdened cost of fuel for military operations and contingencies. Another potential concern for Congress may be the refining sector's lack of responsiveness to DOD's procurement announcements when periods of high petroleum prices make the demands of commercial-sector more profitable. In response to proposed greenhouse gas emission caps, refinery operators may question whether the value of emission credits outweighs the continued operation of marginally profitable refineries. In the long term, Congress may be concerned whether some operators may shut down their refineries and if such actions might reduce the number of defense fuel suppliers. For Further Reading For background on alternative fuel sources, see CRS Report RL34133, Fischer-Tropsch Fuels from Coal, Natural Gas, and Biomass: Background and Policy . CRS Report RL33359, Oil Shale: History, Incentives, and Policy . For background information on greenhouse gas legislation and the cap-and-trade system, see CRS Report R40643, Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House of Representative . Appendix. Terms Avgas (aviation gasoline) is a high octane fuel used in light aircraft powered by reciprocating spark-ignition engines. Crude Oil Classification DFM (diesel fuel marine) has been used in all shipboard propulsion plants (diesel, gas turbine, and steam-boiler) since 1975. Its NATO equivalent is F-76. DF2 (No. 2 diesel fuel) is the primary fuel for ground mobility vehicles. FSII stands for Fuel Systems Icing Inhibitor FOB (free on board) is a trade term requiring the seller to deliver goods on board a vessel designated by the buyer. The seller fulfills its obligations to deliver when the goods have passed over the ship's rail. When used in trade terms, the word "free" means the seller has an obligation to deliver goods to a named place for transfer to a carrier. Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery and payment, when the risk of loss shifts from the seller to the buyer, as well as who pays the costs of freight and insurance. Jet A-1 (JA1) is a civilian-aviation kerosene-based turbine fuel adopted by international commercial aviation. Its ASTM specification is D16555 (Jet A-1), and identified by NATO as F-35. Jet A, normally available in the United States has the same flash point (100 "F) as JET A-1 but a higher freeze point. Jet A (JA) is civilian-aviation kerosene type of jet fuel (similar to JA-1), produced to an ASTM specification and normally only available in the United States. It has the same flash point as Jet A-1 but a higher freeze point maximum (-40°C). It is supplied under ASTM D1655 (Jet A) specification. Jet B is a distillate covering the naphtha and kerosene fractions. It can be used as an alternative to Jet A-1 but because it is more difficult to handle (higher flammability), there is only significant demand in very cold climates where its better cold weather performance is important. It is supplied in Canada under Canadian Specification is CAN/CGSB 3.23. JP-4 (JP for "jet propellant") is the military equivalent of Jet B with the addition of corrosion inhibitor and anti-icing additives; it meets the requirements of the U.S. Military Specification MIL-DTL-5624U Grade JP-4. (As of January 5, 2004, JP-4 and 5 meet the same U.S. Military Specification). JP-4 also meets the requirements of the British Specification DEF STAN 91-88 AVTAG/FSII (formerly DERD 2454). Its NATO Code is F-40. JP-5 is a fuel developed for use in military aircraft stationed aboard aircraft carriers where the risk of fire is a great concern, particularly in the confined spaces of the hanger deck. It is kerosene-based, and has a relatively higher flash-point (140 "F) than other aviation turbine fuels (Jet A-1 and JP-8). Its specification is MIL-DTL-5624 U. Its NATO code is F-44. JP-5 is also suitable for use as ship turbine fuel. JP-8 is the military equivalent of Jet A-1 but with corrosion inhibitors and icing inhibitors. The Air Force switched to JP-8 in 1996 out of concerns for safety and combat survivability. It is a less flammable and a less hazardous fuel than the previously used naphtha-based JP-4. (The Alaska Air Guard still relies on JP-4 for its cold-climate properties.) Though JP-8 contains less benzene (a carcinogen) and less n-hexane (a neurotoxin) than JP-4, it has as stronger smell and is oily to the touch, whereas JP-4 is more solvent-like. Its ASTM specification is MIL-DTL-83133, and is identified by NATIO as F-34. JP-8+100 includes an additive that increases thermal stability. JP-8 has also been adopted for use in diesel-powered tactical ground vehicles. Middle Distillate range fuels include kerosene, jet fuel, and diesel fuel. Military installation means a base, camp, post, station, yard, center, or other activity under the jurisdiction of the Secretary of a military department or, in the case of an activity in a foreign country, under the operational control of the Secretary of a military department or the Secretary of Defense (10 U.S.C. 2801(c)(2)). Mogas (motor gasoline) is the primary fuel for non-tactical ground vehicles. Multiyear contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for up to five years unless otherwise authorized by statute, even though the total funds ultimately to be obligated may not be available at the time of contract award (48 CFR 17.104 General) . This method may be used in sealed bidding or contracting by negotiation. Agency funding of multiyear contracts must conform to OMB Circulars A-11 (Preparation and Submission of Budget Estimates) and A-34 (Instructions on Budget Execution). Naphtha is a petroleum distillate with a boiling range between gasoline and heavier benzene. It is used as a feedstock in gasoline production where it is catalytically reformed from a lower to a higher octane product termed reformate.

Department of Defense (DOD) fuel consumption varies from year to year in response to changes in mission and the tempo of operations. DOD may consume upwards of 1% of the petroleum products refined in the United States annually. Petroleum products purchased and consumed overseas may double DOD's consumption. The majority of DOD's bulk fuel purchases are for jet fuel, which has ranged as high as 101 million barrels annually in the past decade. The U.S. refining industry has been supplying 50% of the jet fuel demand. DOD has consumed as much as 145 million barrels in overall petroleum products annually. In FY2000, fuel costs represented 1.2% of the total DOD spending, but by FY2008 fuel costs had risen to 3.0%. Over the same time, total defense spending had more than doubled, but fuel costs increased nearly 500%. Prices paid for military specification JP-8 and JP-5 jet fuel have exceeded the price of commercial equivalent fuel. In a recent move to contain fuel costs, DOD has begun substituting commercial grade jet fuel for some of its purchases, and upgraded the fuel to military-specification. Currently, 141 refineries operate in the United States. DOD's top four fuel suppliers operate a combined 31 refineries in the United States, which represents nearly 6 million barrels per day of crude oil distillation capacity. A typical U.S. refinery yields a limited supply of jet and diesel fuel depending on the type of crude oil processed. Gulf Coast (Texas and Louisiana) refineries yield up to 8% jet fuel. Generally, refineries are set up to run specific grades of crude oil, for example light sweet crude or heavy sour crude. Light sweet crude is particularly desirable as a feedstock for gasoline refining because its lighter-weight hydrocarbons make it easier to refine. Heavier crude oils require more complex processing than light crudes, and sour crudes require desulfurization. Changing crude oil supplies have consequently forced refineries to upgrade their processes (thus increase refinery complexity) to handle heavier sour crude oils. At the same time, the Environmental Protection Agency (EPA) has taken action to require lower sulfur content of diesel fuel, and has proposed a final rule that will require refineries to report their greenhouse gas emissions as a prelude to expected legislation that will limits emissions. The Defense Energy Support Center (DESC), which falls under the Defense Logistics Agency, has the mission of purchasing fuel for all of DOD's services and agencies. In practice, DESC has typically awarded fuel contracts for lengths of one year, but there are other buying programs with longer contract periods. DESC uses fixed-price contracts with economic price adjustments. These adjustments provide for upward and downward revision of the stated contract price upon the occurrence of specified contingencies. DESC has determined that supplies and related services are eligible for the multi-year contracting provisions under the Federal Acquisition Regulation, and has adopted contracting instructions for entering into multiyear contracts. Bulk petroleum contracts and direct delivery fuel contracts are likely to remain one-year contracts, however. DESC bases contract delivery price on the lowest cost to the government; however, the hidden logistical cost born by operational commands moving the fuel to their area of operations may not be fully accounted. The acquisition process for new military capabilities now requires that DOD account for fuel logistics when evaluating lifecycle costs.

Introduction Individual Retirement Accounts (IRAs) are tax-advantaged accounts that individuals (or married couples) can establish to accumulate funds for retirement. Depending on the type of IRA, contributions may be made on a pretax or post-tax basis, and investment earnings are either tax-deferred or tax-free. IRAs were first authorized by the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93 - 406 ). Originally limited to workers without pension coverage, all workers and spouses were made eligible for IRAs by the Economic Recovery Act of 1981 ( P.L. 97 - 34 ). The Tax Reform Act of 1986 ( P.L. 99 - 514 ) limited the eligibility for tax-deductible contributions to individuals whose employers do not sponsor plans and to those whose employers sponsor plans but who have earnings below certain thresholds. The Taxpayer Relief Act of 1997 ( P.L. 105 - 34 ) allowed for certain penalty-free withdrawals and authorized the Roth IRA, which provides tax-free growth from after-tax contributions. The Economic Growth and Tax Relief Reconciliation Act of 2001 ( P.L. 107 - 16 ) significantly affected the contribution limits in these plans in three ways: (1) it increased the limits, (2) it indexed the limits to inflation, and (3) it allowed for individuals aged 50 and older to make additional "catch-up" contributions. Among other provisions, the Pension Protection Act of 2006 ( P.L. 109 - 280 ) temporarily allowed for tax-free distributions for charitable contributions; made permanent the indexing of contribution limits to inflation; and allowed taxpayers to direct the Internal Revenue Service (IRS) to deposit tax refunds directly into an IRA. This report describes the two kinds of IRAs that individual workers can establish: traditional IRAs and Roth IRAs. It describes the rules regarding eligibility, contributions, and withdrawals. It also describes a tax credit for retirement savings contributions. An Appendix explains rules related to penalty-free distributions for those affected by the 2005 Gulf of Mexico hurricanes and the 2008 Midwestern floods. The Appendix also describes relief provided by the IRS to those affected by Hurricane Sandy in 2012 and Hurricanes Harvey, Irma, and Maria in 2017. Traditional IRAs Traditional IRAs are funded by workers' contributions, which may be tax-deductible. The contributions accrue investment earnings in an account, and these earnings are used as a basis for retirement income. Among the benefits of traditional IRAs, two are (1) pretax contributions, which provide larger bases for accumulating investment earnings and, thus, provide larger account balances at retirement than if the money had been placed in taxable accounts; and (2) taxes are paid when funds are distributed. Since income tax rates in retirement are often lower than during working life, traditional IRA holders are likely to pay less in taxes when contributions are withdrawn than when the income was earned. Eligibility Individuals under 70½ years old in a year and who receive taxable compensation can set up and contribute to IRAs. Examples of compensation include wages, salaries, tips, commissions, self-employment income, nontaxable combat pay, and alimony (which is treated as compensation for IRA purposes). Individuals who receive income only from noncompensation sources cannot contribute to IRAs. Contributions Individuals may contribute either their gross compensation or the contribution limit, whichever is lower. In 2018, the annual contribution limit is $5,500, unchanged from 2017. Since 2009, the contribution limit has been subject to cost of living adjustments, but the change was insufficient to necessitate a change in 2018. Individuals aged 50 and older may make additional annual $1,000 catch-up contributions. For households that file a joint return, spouses may contribute an amount equal to the couple's total compensation (reduced by the spouse's IRA contributions) or the contribution limit ($5,500 each, if younger than the age of 50, and $6,500 each, if 50 years or older), whichever is lower. Contributions that exceed the contribution limit and are not withdrawn by the due date for the tax return for that year are considered excess contributions and are subject to a 6% "excess contribution" tax. Contributions made between January 1 and April 15 may be designated for either the current year or the previous year. Because IRAs were intended for workers without an employer-sponsored pension to save for retirement, contributions to an IRA may only come from work income, such as wages and tips. The following noncompensation sources of income cannot be used for IRA contributions: earnings from property, interest, or dividends; pension or annuity income; deferred compensation; income from partnerships for which an individual does not provide services that are a material income-producing factor; and foreign earned income. Investment Options IRAs can be set up through many financial institutions, such as banks, credit unions, mutual funds, life insurance companies, or stock brokerages. Individuals have an array of investment choices offered by the financial institutions and can transfer their accounts to other financial institutions at will. Several transactions could result in additional taxes or the loss of IRA status. These transactions include borrowing from IRAs; using IRAs as collateral for loans; selling property to IRAs; and investing in collectibles like artwork, antiques, metals, gems, stamps, alcoholic beverages, and most coins. Deductibility of Contributions IRA contributions may be non-tax-deductible, partially tax-deductible, or fully tax-deductible, depending on whether the individual or spouse is covered by a pension plan at work and their level of adjusted gross income (AGI). Individuals are covered by a retirement plan if (1) the individuals or their employers have made contributions to a defined contribution pension plan or (2) the individuals are eligible for a defined benefit pension plan (even if they refuse participation). For individuals and households not covered by a pension plan at work, Table 1 contains the income levels at which they may deduct all, some, or none of their IRA contributions, depending on the spouse's pension coverage and the household's AGI. Individuals without employer-sponsored pensions and, if married, whose spouse also does not have pension coverage may deduct up to the contribution limit from their income taxes regardless of their AGI. For individuals and households who are covered by a pension plan at work, Table 2 contains the income levels at which they may deduct all, some, or none of their IRA contributions, depending on the individual's or household's AGI. Individuals may still contribute to IRAs up to the contribution limit even if the contribution is nondeductible. Nondeductible contributions come from post-tax income, not pretax income. One advantage to placing post-tax income in traditional IRAs is that investment earnings on nondeductible contributions are not taxed until distributed. Only contributions greater than the contribution limits as described above are considered excess contributions. Worksheets for computing partial deductions are included in "IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)." Withdrawals Withdrawals from IRAs are subject to income tax in the year that they are received. Early distributions are withdrawals made before the age of 59½. Early distributions may be subject to an additional 10% penalty. To ensure that IRAs are used for retirement income and not for bequests, IRA holders must begin making withdrawals by April 1 of the year after reaching the age of 70½ (i.e., the required beginning date). The minimum amount that must be withdrawn (i.e., the required minimum distribution) is calculated by dividing the account balance on December 31 of the year preceding the distribution by the IRA owner's life expectancy as found in IRS Publication 590-B. Although females live longer on average than males, the IRS does not separate life expectancy tables for males and females for this purpose. Required minimum distributions must be received by December 31 of each year. Failure to take the required minimum distribution results in a 50% excise tax on the amount not distributed as required. Congress suspended the Required Minimum Distribution (RMD) provision for 2009. Beginning in 2007, distributions from IRAs after the age of 70½ could be made directly to qualified charities and excluded from gross income. This provision for Qualified Charitable Distributions was made permanent in P.L. 114-113 . Early Distributions Early distributions are withdrawals made before the age of 59½. Early distributions—just like distributions after the age of 59½—are subject to federal income tax. To discourage the use of IRA funds for preretirement uses, most early distributions are subject to a 10% tax penalty. The early withdrawal penalty does not apply to distributions before the age of 59½ if they occur if the individual is a beneficiary of a deceased IRA owner; occur if the individual is disabled; are in substantially equal payments over the account holder's life expectancy; are received after separation from employment after the age of 55; are for unreimbursed medical expenses in excess of 7.5% of AGI; are for medical insurance premiums in the case of unemployment; are used for higher education expenses; are used to build, buy, or rebuild a first home up to a $10,000 withdrawal limit; occur if the individual is a reservist called to active duty after September 11, 2001; were distributions to residents in areas affected by Hurricanes Katrina, Rita, and Wilma from around the storms' landfalls to January 1, 2007; were distributions to residents in areas affected by the Midwestern floods in 2008 from after the applicable disaster date and before January 1, 2010; or were distributions in areas affected by Hurricanes Harvey, Irma, and Maria from around the storms' landfalls to January 1, 2019. Although individuals may make early withdrawals from IRAs without a reason, they will be subject to the 10% tax penalty unless they meet one of the conditions above. There are no other general "hardship" exceptions for penalty-free distributions from IRAs. Rollovers Rollovers are transfers of assets from one retirement plan to another upon separation from the original employer. Rollovers are not subject to the 59½ rule, the 10% penalty, or the contribution limit. Rollovers can come from traditional IRAs, employers' qualified retirement plans (e.g., 401(k) plans), deferred compensation plans of state or local governments (Section 457 plans), tax-sheltered annuities (Section 403(b) plans), or the Thrift Savings Plan for federal employees. Rollovers can be either direct trustee-to-trustee transfers or issued directly to individuals who then deposit the rollovers into traditional IRAs. Individuals have 60 days from the date of the distribution to make rollover contributions. Rollovers not completed within 60 days are considered taxable distributions and may be subject to the 10% early withdrawal penalty. In addition, in cases where individuals directly receive a rollover, 20% of the rollover is withheld for tax purposes. Direct trustee-to-trustee transfers are not subject to withholding taxes. In cases where individuals directly receive a rollover, they must have an amount equal to the 20% withheld available from other sources to place in the new IRA. If the entire distribution is rolled over within 60 days, the amount withheld is applied to individuals' income taxes paid for the year. Rollovers Limited to One Per Year A January 2014 U.S. Tax Court decision required that, in certain circumstances, individuals are limited to a total of one rollover per year for their IRAs. Rollovers subject to this rule are those between two IRAs in which an individual receives funds from an IRA and deposits the funds into a different IRA within 60 days. The one-rollover-per-year limit applies to rollovers between two traditional IRAs or two Roth IRAs. It does not apply to rollovers from a traditional IRA to a Roth IRA. The limitation does not apply to trustee-to-trustee transfers (directly from one financial institution to another) or rollovers from qualified pension plans (such as from 401(k) plans). Inherited IRAs When the owner of an IRA dies, ownership passes to the account's designated beneficiary or, if no beneficiary has been named, to the decedent's estate. Federal law has different distribution requirements depending on whether the new owner is a designated beneficiary who is the former owner's spouse; designated beneficiary who is not the former owner's spouse; or nondesignated beneficiary. The distribution rules are summarized in Table 3 . The distribution rules also depend on whether the IRA owner died prior to the required beginning date, the date on which distributions from the account must begin. This is April 1 of the year following the year in which the owner of an IRA reaches the age of 70½. Distributions from inherited IRAs are taxable income but are not subject to the 10% early withdrawal penalty. Failure to take the RMD results in a 50% excise tax on the amount not distributed as required. Designated spouse beneficiaries who treat inherited IRAs as their own can roll over inherited IRAs into traditional IRAs or, to the extent that the inherited IRAs are taxable, into qualified employer plans (such as 401(k), 403(b), or 457 plans). Nonspouse beneficiaries cannot roll over any amount into or out of inherited IRAs. In some cases, IRAs have beneficiaries' distributions requirements that are more stringent than those summarized in Table 3 . For example, an IRA's plan documents could require that a designated spouse or designated nonspouse beneficiary distribute all assets in the IRA by the end of the fifth year of the year following the IRA owner's death. In such a case, the beneficiary would not have the option to take distributions over a longer period of time. Unless the IRA plan documents specify otherwise, it is possible to take distributions faster than required in Table 3 . For example, a beneficiary may elect to distribute all assets in a single year. In such a case, the entire amount distributed is taxable income for that year. Roth IRAs Roth IRAs were authorized by the Taxpayer Relief Act of 1997 ( P.L. 105 - 34 ). The key differences between traditional and Roth IRAs are that contributions to Roth IRAs are made with after-tax funds and qualified distributions are not included in taxable income; investment earnings accrue free of taxes. Eligibility and Contribution Limits In contrast to traditional IRAs, Roth IRAs have income limits for eligibility. Table 4 lists the adjusted gross incomes at which individuals may make the maximum contribution and the ranges in which this contribution limit is reduced. For example, a 40-year-old single taxpayer with income of $90,000 can contribute an annual contribution of $5,500 in 2018. A similar taxpayer making $120,000 would be subject to a reduced contribution limit, whereas a taxpayer with income of $140,000 would be ineligible to contribute to a Roth IRA. Individuals aged 50 and older can make additional $1,000 catch-up contributions. The AGI limit for eligibility has been adjusted for inflation since 2007; beginning in 2009, the traditional and Roth IRA contribution limit has also been adjusted for inflation. A worksheet for computing reduced Roth IRA contribution limits is provided in IRS Publication 590-A. Investment Options Roth IRAs must be designated as such when they are set up. As with traditional IRAs, they can be set up through many financial institutions. Transactions prohibited within traditional IRAs are also prohibited within Roth IRAs. Conversions and Rollovers Individuals may convert amounts from traditional IRAs, SEP-IRAs, or SIMPLE-IRAs to Roth IRAs. Since 2008, individuals have been able to roll over distributions directly from qualified retirement plans to Roth IRAs. The amount of the conversion must be included in taxable income. Conversions can be a trustee-to-trustee transfer, a same trustee transfer by redesignating the IRA as a Roth IRA, or a rollover directly to the account holder. Inherited IRAs cannot be converted. A provision in P.L. 115-97 (originally called the Tax Cuts and Jobs Act) repealed a special rule that allowed IRA contributions to one type of IRA to be recharacterized as a contribution to the other type of IRA. Prior to the repeal of the special rule, an individual could have made contributions to a traditional IRA and then, prior to the due date of the individual's tax return, could have transferred to the assets to a Roth IRA. In certain circumstances, this could have a beneficial effect on an individual's taxable income. Recharacterization of IRA contributions for the 2017 tax year can be completed by October 15, 2018. The rules for rollovers that apply to traditional IRAs, including completing a rollover within 60 days, also apply. Additionally, withdrawals from a converted IRA prior to five years from the beginning of the year of conversion are nonqualified distributions and are subject to a 10% penalty. Tax-free withdrawals from one Roth IRA transferred to another Roth IRA are allowed if completed within 60 days. Rollovers from Roth IRAs to other types of IRAs or to employer-sponsored retirement plans are not allowed. Withdrawals The three kinds of distributions from Roth IRAs are (1) return of regular contributions, (2) qualified distributions, and (3) nonqualified distributions. Returns of regular contributions and qualified distributions are not included as part of taxable income. Return of Regular Contributions Distributions from Roth IRAs that are a return of regular contributions are not included in gross income nor are they subject to the 10% penalty on early distributions. Qualified Distributions Qualified distributions must satisfy both of the following: they are made after the five-year period beginning with the first taxable year for which a Roth IRA contribution was made, and they are made on or after the age of 59½; because of disability; to a beneficiary or estate after death; or to purchase, build, or rebuild a first home up to a $10,000 lifetime limit. Nonqualified Distributions Distributions that are neither returns of regular contributions nor qualified distributions are considered nonqualified distributions. Although individuals might have several Roth IRAs from which withdrawals can be made, for tax purposes nonqualified distributions are assumed to be made in the following order: 1. the return of regular contributions, 2. conversion contributions on a first-in-first-out basis, and 3. earnings on contributions. Nonqualified distributions may have to be included as part of income for tax purposes. A worksheet is available in IRS Publication 590-B to determine the taxable portion of nonqualified distributions. A 10% penalty applies to nonqualified distributions unless one of the exceptions in 26 U.S.C. Section 72(t) applies. The exceptions are identical to those previously listed for early withdrawals from traditional IRAs. Distributions After Roth IRA Owner's Death If the owner of a Roth IRA dies, the distribution rules depend on whether the beneficiary is the spouse or a nonspouse. If the beneficiary is the spouse, then the spouse becomes the new owner of the inherited Roth IRA. If the spouse chooses not to treat the inherited Roth IRA as their own, or if the beneficiary is a nonspouse, then there are two options. The beneficiary can distribute the entire interest in the Roth IRA (1) by the end of the fifth calendar year after the year of the owner's death, or (2) over the beneficiary's life expectancy. As with an inherited traditional IRA, a spouse can delay distributions until the decedent would have reached the age of 70½. Distributions from inherited Roth IRAs are generally free of income tax. The beneficiary may be subject to taxes if the owner of a Roth IRA dies before the end of (1) the five-year period beginning with the first taxable year for which a contribution was made to a Roth IRA or (2) the five-year period starting with the year of a conversion from a traditional IRA to a Roth IRA. The distributions are treated as described in the " Nonqualified Distributions " section of this report. Retirement Savings Contribution Credit The Economic Growth and Tax Relief Reconciliation Act of 2001 ( P.L. 107 - 16 ) authorized a nonrefundable tax credit of up to $1,000 for eligible individuals, or $2,000 if filing a joint return, who contribute to IRAs or employer-sponsored retirement plans. The Retirement Savings Contribution Credit, also referred to as the Saver's Credit, is in addition to the tax deduction for contributions to traditional IRAs or other employer-sponsored pension plans. To receive the credit, taxpayers must be at least 18 years old, not full-time students, not an exemption on someone else's tax return, and have AGI less than certain limits. The limits are in Table 5 . For example, individuals who make a $2,000 IRA contribution in 2018, have income of $15,000, and list their filing status as single would be able to reduce their 2018 tax liability by up to $1,000. Taxpayers must file form 1040, 1040A, or 1040NR. The Saver's Credit is not available on form 1040EZ, which may limit the use of the credit. Data on IRA Assets, Sources of Funds, and Ownership Table 6 contains data on the end-of-year assets in traditional and Roth IRAs from 2005 to 2016. According to the Investment Company Institute, traditional IRAs held much more in assets than Roth IRAs. At the end of 2016, there was $6.7 trillion held in traditional IRAs and $660 billion held in Roth IRAs. Within traditional IRAs, more funds flowed from rollovers from employer-sponsored pensions compared with funds from regular contributions. For example, in 2014 (the latest year for which such data are available) funds from rollovers were $423.9 billion, whereas funds from contributions were only $17.5 billion. However, within Roth IRAs in 2014 more funds flowed from contributions ($21.9 billion in 2014) than from rollovers ($5.7 billion in 2014). Table 7 and Table 8 provide additional data on IRA ownership amounts among U.S. households. The data are from CRS analysis of the 2016 Survey of Consumer Finances (SCF). The SCF is a triennial survey conducted on behalf of the Board of Governors of the Federal Reserve and contains detailed information on U.S. household finances, such as the amount and types of assets owned, the amount and types of debt owed, and detailed demographic information on the head of the household and spouse. The SCF is designed to be nationally representative of the 126.0 million U.S. households in 2016. Table 7 categorizes IRAs by the amount in the account. Among households that have IRAs, 61.1% have account balances of less than $100,000 and 4.4% have account balances of $1 million or more. Table 8 provides data on IRA ownership and account balances among households that owned IRAs in 2016. The following are some key points from Table 8 regarding ownership of IRAs: In 2016, 29.8% of U.S. households had an IRA. Among households that owned IRAs, the median account balance ($52,000) was smaller than the average account balance ($201,240), which indicates that some households likely had very large IRA account balances. Households were more likely to own IRAs as the age of head of household increased. The median and average account balances also increased as the head of the household increased. The percentage of households with an IRA and the median and average account balances increased with the income of the household. Among the explanations for this finding are that (1) households with more income are better able to save for retirement and (2) households with higher income are more likely to participate in a defined contribution (DC) plan (like a 401(k)) and therefore have an account to roll over. Married households were more likely to have an IRA than single households and their median and average account balances were also larger. The explanations could include the following: both spouses in a married household might have work histories, enabling both to save for retirement or married household might need larger retirement savings because two people would be using the retirement savings for living expenses in retirement. Appendix. Qualified Distributions Related to Natural Disasters As part of the response to the 2005 hurricanes that affected the communities on and near the Gulf of Mexico, Congress approved provisions that exempted individuals affected by the storms from the 10% early withdrawal penalty for withdrawals from IRA. In 2008, Congress approved similar provisions in response to the storms and flooding in certain Midwestern states. Following Hurricane Sandy in October 2012, the California wildfires in 2017, and the hurricanes in 2017, the Internal Revenue Service (IRS) eased certain requirements for hardship distributions from defined contribution plans. However, the IRS was unable to exempt distributions from retirement plans from the 10% early withdrawal penalty because such an exemption requires congressional authorization. Qualified Distributions Related to Hurricanes Katrina, Rita, and Wilma In response to Hurricanes Katrina, Rita, and Wilma, Congress approved the Gulf Opportunity Zone Act of 2005 ( P.L. 109 - 135 ). The act amended the Internal Revenue Code to allow residents in areas affected by these storms who suffered economic losses to take penalty-free distributions up to $100,000 from their retirement plans, including traditional and Roth IRAs. The distributions must have been received after August 24, 2005 (Katrina), September 22, 2005 (Rita), or October 22, 2005 (Wilma), and before January 1, 2007. The distributions were taxable income and could be reported as income either in the year received or over three years (e.g., a $30,000 distribution made in May 2006, could have been reported as $10,000 of income in 2006, 2007, and 2008). Alternatively, part or all of the distribution could have been repaid to the retirement plan within three years of receiving the distribution without being considered taxable income. Qualified Distributions Related to the Midwestern Disaster Relief Area In response to severe storms, tornados, and flooding that occurred in certain Midwestern states, the Heartland Disaster Tax Relief Act of 2008 allowed residents of specified Midwest areas to take penalty-free distributions up to $100,000 from their retirement plans, including traditional and Roth IRAs. This act was passed as Division C of P.L. 110 - 343 , the Emergency Economic Stabilization Act of 2008. The bill amended 26 U.S.C. 1400Q, which was enacted as part of the Gulf Opportunity Zone Act of 2005 ( P.L. 109 - 135 ). The distributions must have been received after the date on which the President declared an area to be a major disaster area and before January 1, 2010. Apart from the dates and the areas affected, the provisions were identical to the provisions for individuals who were affected by Hurricanes Katrina, Rita, and Wilma. Qualified Distributions Related to Hurricanes Harvey, Irma, and Maria In response to Hurricanes Harvey, Irma, and Maria, Congress approved the Disaster Tax Relief and Airport and Airway Extension Act of 2017 ( P.L. 115-63 ). The act amended the Internal Revenue Code to allow residents in areas affected by these storms who suffered economic losses to take penalty-free distributions up to $100,000 from their retirement plans, including traditional and Roth IRAs. The distributions must have been made on or after August 23, 2017 (Harvey), September 4, 2017 (Irma), or September 16, 2017 (Maria), and before January 1, 2019. The distributions are taxable income and can be reported either in the year received or over three years. Alternatively, part or all of the distribution may be repaid to the retirement plan within three years of receiving the distribution without being considered taxable income. Hurricane Sandy and California Wildfire Relief In the cases of Hurricane Sandy in 2012 and the California wildfires in 2017 no legislation was passed that would have (1) exempted individuals in areas affected by these natural disasters from the 10% penalty for early withdrawals from IRAs or defined contribution retirement plans or (2) eased requirements for loans from defined contribution pensions for individuals affected by them. The IRS eased requirements for hardship distributions in areas affected by Hurricane Sandy in 2012 and the California wildfires in 2017. Among the relief offered by the IRS in Announcement 2012-44 and 2017-15 respectively, "Plan administrators may rely upon representations from the employee or former employee as to the need for and amount of a hardship distribution" rather than require documentation from the employee of the need. The relief offered by the IRS did not include an exemption from the 10% penalty for distributions before the age of 59½. Exemptions from the 10% penalty require congressional authorization. In addition, in the announcement, the IRS suspended the provision that requires an individual to suspend contributions to 401(K) and 403(b) plans for the six months following a hardship distribution.

In response to concerns over the adequacy of retirement savings, Congress has created incentives to encourage individuals to save more for retirement through a variety of retirement plans. Some retirement plans are employer-sponsored, such as 401(k) plans, and others are established by individual employees, such as Individual Retirement Accounts (IRAs). This report describes the primary features of two common retirement savings accounts that are available to individuals. Although the accounts have many features in common, they differ in some important aspects. Both traditional and Roth IRAs offer tax incentives to encourage individuals to save for retirement. Contributions to traditional IRAs may be tax-deductible for taxpayers who (1) are not covered by a retirement plan at their place of employment or (2) have income below specified limits. Contributions to Roth IRAs are not tax-deductible and eligibility is limited to those with incomes under specified limits. The tax treatment of distributions from traditional and Roth IRAs differs. Distributions from traditional IRAs are generally included in taxable income whereas distributions from Roth IRAs are not included in taxable income. Some distributions may be subject to an additional 10% tax penalty, unless the distribution is for a reason specified in the Internal Revenue Code (for example, distributions from IRAs after the individual is aged 59½ or older are not subject to the early withdrawal penalty). Individuals may roll over eligible distributions from other retirement accounts (such as an account balance from a 401(k) plan upon leaving an employer) into IRAs. Rollovers preserve retirement savings by allowing investment earnings on the funds in the retirement accounts to accrue on a tax-deferred basis, in the case of traditional IRAs, or a tax-free basis, in the case of Roth IRAs. A provision in P.L. 115-97 (originally called the Tax Cuts and Jobs Act) repealed a special rule that allowed IRA contributions to one type of IRA to be recharacterized as contributions to the other type of IRA. The Retirement Savings Contribution Credit (also known as the Saver's Credit) is a nonrefundable tax credit of up to $1,000. It was authorized in 2001 to encourage retirement savings among individuals with income under specified limits. This report explains the eligibility requirements, contribution limits, tax deductibility of contributions, and rules for withdrawing funds from the accounts, and provides data on the account holdings. It also describes the Saver's Credit and provisions enacted after the Gulf of Mexico hurricanes in 2005, the Midwestern storms in 2008, and the hurricanes in 2012 and 2017 to exempt distributions to those affected by the disasters from the 10% early withdrawal penalty.

Introduction Excise taxes are selective taxes on specific forms of consumption or behavior (compared to general sales taxes which tend to apply to all forms of consumption, with some exceptions). Today, federal excise taxes apply to a wide variety of consumer goods and economic activities, such as alcohol, tobacco, firearms and ammunition, gasoline, the industrial use of ozone-depleting chemicals, and indoor tanning services. There are four common purposes of excise taxes: (1) sumptuary (or "sin") taxes, (2) regulatory or environmental taxes, (3) benefit-based taxes (or user charges), and (4) luxury taxes. Sumptuary (or "sin") taxes were traditionally imposed for moral reasons, but are currently rationalized, in part, to discourage a specific activity that is thought to have negative spillover effects (or "externalities") on society. Generally, sumptuary taxes in the United States refer to excise taxes on alcohol or tobacco consumption. Regulatory or environmental taxes are imposed to offset for external costs associated with regulating public safety or to discourage consumption of a specific commodity that is thought to have negative externalities on society. Benefit-based taxes are imposed to charge users for the benefits received from a particular public good and are often used for maintenance and upkeep of that public good. Lastly, luxury taxes are primarily imposed as one way to raise revenue, particularly from higher-income households. The role of excise taxes has changed over time. Excise taxes narrowly imposed on the consumption of certain products, such as alcohol and tobacco, formed the basis for much of federal tax revenue until the modern income tax was enacted in the early 20 th century. Although excise taxes have played a diminishing role in the mix of federal revenue sources over time, there has been persistent interest in the possible use of excise taxes to raise revenue or provide disincentives to behavior that is believed by some to have negative effects on society (e.g., a tax on carbon emissions). On the other hand, there is also interest in reducing current excise tax rates as a means to encourage short-term growth in particular industries. This report provides an introduction and general analysis of excise taxes. First, a brief history of the role of excise taxes is provided. Second, the various forms of excise taxes and their respective administrative advantages and disadvantages are described. Third, the effect of federal excise taxes on federal, state, and local tax revenue is discussed. Fourth, the economic effects of various types of excise taxes are analyzed. The effects on consumer behavior and equity among taxpayers could be important issues for assessment of current excise tax policy or for the design of new excise taxes. Lastly, the Appendix to this report contains a list of references to other CRS reports on specific excise taxes. Historical Summary of Federal Excise Taxes Federal excise taxes have had a dynamic role within the U.S. tax system. The history of the federal excise tax system is often one that coincides with wars, serving as an emergency source of funds, or reflects periodic concerns about rising budget deficits. Except for taxes on tobacco and liquor, new excise taxes seem to have been used extensively for the control of social costs and as user charges in recent years. Excise taxes played a key fiscal role in the early history of the United States. The federal government initially relied on customs duties (tariffs) on foreign trade. In 1791, during the presidency of George Washington, Secretary of the Treasury Alexander Hamilton implemented the first federal excise tax on whiskey. The whiskey tax was used as a means to fund the fledgling federal government, repay debts from the American Revolution, and help to establish federal supremacy over the states. The burden of the tax was controversial along geographic divisions (Westerners on the frontier tended to both consume more whiskey and use it as a medium of financial exchange) and ideological divisions (Federalists versus Anti-Federalists). This opposition peaked in the famous "Whiskey Rebellion" of 1794 in southwestern Pennsylvania, where President Washington led 13,000 troops to suppress an armed rebellion. After the suppression of the Whiskey Rebellion in 1794, Congress passed excise taxes on tobacco, snuff tobacco, sugar, and carriages. In 1797, a direct tax was imposed on the ownership of houses, land, and slaves as tariff revenue declined during a period when European powers were engaged in war (with the United States sided against France). The unpopularity of the taxes contributed to Thomas Jefferson's defeat of Federalist Party candidate John Adams during the presidential election of 1800. All internal excise taxes were repealed in 1802, as the fiscal demand arising from the war in Europe abated. Federal excise taxes continued to play a significant role in public finances throughout the 1800s. Excises were temporarily reintroduced during the War of 1812, but were repealed from 1817 until the Civil War. Following the onset of the Civil War, Congress passed the Revenue Act of 1861, which restored earlier excise taxes. Most of these excise taxes were repealed after the end of the Civil War, with taxes on distilled spirits and tobacco remaining in effect. In the decades after the Civil War, excise taxes accounted for between one-third and one-half of all federal revenue. Excises were the single largest source of internal revenue during this era. During the Spanish-American War (1898), excise tax revenue was a larger source of federal tax collections than even customs duties on foreign imports, as revenue from tariffs tended to decline during wartime. Emergency excise taxes were levied on a variety of items to fund military spending during the Spanish-American War, such as pianos, playing cards, yachts, and billiard tables. After the end of the war most of these emergency excise taxes were repealed. Excise taxes were utilized to fund war-time spending during the early 20 th century. Temporary excise tax provisions were imposed in the Revenue Act of 1918, passed during World War I, to help fund war-time spending, including the first excise tax on firearms, shells, and cartridges. As a result, excise tax collections quadrupled from 1914 to 1919. Excise tax revenues declined significantly after the beginning of Prohibition (falling to less than half of the pre-Prohibition revenue levels by 1930) but rebounded above the pre-Prohibition levels after the consumption of alcohol was made legal again after 1933. Existing excise tax rates were increased again virtually across-the-board around the time of World War II, and new taxes on luxury goods (such as toiletries and furs) were introduced. Additionally, Congress rejected adopting a general sales tax twice during this era (1932 and 1942), despite critiques that the costs of administering excises to a growing list of products was high and the revenue gained from many excises was small. Excise taxes underwent a time of dynamic reform during the latter half of the 20 th century. The Revenue Act of 1951 increased many excise tax rates in existence at the time (such as alcohol and tobacco) and increased the tax base for some user charges. However, the Excise Tax Reduction Act of 1954 (P.L. 83-324) and the Excise Tax Reduction Act of 1965 (P.L. 89-44) reduced the number of provisions and their respective tax rates. In particular, the Excise Tax Reduction Act of 1965 eliminated most federal excise taxes with the goal being to "help sustain economic expansion." Certain excise taxes were also expanded, in part, to reflect a desire for a wider role for the federal government. An example of this linkage between excise taxes and the expansion of federally provided public goods would be the modern highway system. The Highway Revenue Act of 1956 (P.L. 84-627) increased the federal gasoline tax (in effect since 1932) and directed its collections from the Treasury's General Fund specifically towards funding of public highways. Specific excise taxes linked to trust funds related to air travel, mining, waterway travel, oil spills, and other hazardous chemicals (among others) were created in the 1970s and 1980s. A rising budget deficit helped to bring about the excise tax increases in the Omnibus Budget Reconciliation Act of 1990 (OBRA90; P.L. 101-508 ). OBRA90 increased tax rates on distilled spirits (last increased in 1985), beer and wine (last increased in 1951), tobacco (last increased in 1982), and gasoline (last increased in 1982). Since 2000, excise taxes have played a diminishing role in the mix of federal revenue sources even as new provisions have been introduced. As discussed later in the " Revenue " section of this report, excise tax collections have increased in nominal amounts, but have decreased in inflation-adjusted (real) values and as a share of overall federal revenue. The rates on major excise taxes have remained unadjusted for inflation for years, such as the excise taxes on gasoline (since 1997) and alcohol (1991). The excise tax on tobacco was last increased with the Children's Health Insurance Program Reauthorization Act of 2009 ( P.L. 111-3 ), but revenue from the tobacco tax has declined over time in part due to decreased demand for tobacco products. Recently, new excise taxes have been introduced. Several new excise taxes were created by the Patient Protection and Affordable Care Act ( P.L. 111-148 and P.L. 111-152 , as amended), such as taxes on indoor tanning bed services, medical devices, and certain high-value insurance plans. The future role of federal excise taxes in federal policy is still unclear. Excise taxes in the form of user charges could continue to play a role in financing public goods and services. Excises could be one tool to raise revenue, particularly in the absence of a general consumption tax at the federal level. Some long-standing excise tax proposals to correct a perceived social issue have also resurfaced in policy discussions. Some of these proposals could be targeted towards specific products or activities (e.g., a "sugar-sweetened beverages" tax), while others could affect a broad range of economic activity and raise a significant amount of revenue (e.g., a carbon tax). Administration All forms of excise tax use some sort of physical control or measurement by the excise authorities to determine tax liability and ensure compliance with the law. This section of the report describes the different ways that excise taxes are structured, and the advantages and disadvantages of each model. Setting the Tax Rate For excise taxes intended to compensate for the social costs of certain activities, economic theory suggests that the excise tax rate should be set at a level that offsets the negative costs of that consumption to society. In general, an excise tax rate can be applied in one of two ways: Per unit : where the tax rate is applied per individual unit produced, purchased, or sold. For example, different per-unit rates are levied on tobacco products based on the product type: 1,000 units of cigarettes or one pound of pipe tobacco. Ad valorem : where the tax rate is applied as a percentage of the value of the product, either based on the manufacturer's, wholesale, or retail price. For example, the excise tax on firearms and ammunition is set at 10% of the wholesale price for pistols and revolvers, and 11% for other firearms as well as shells or cartridges. Economists say that per-unit excise taxes are more appropriate when marginal consumption of the targeted commodity is allegedly deleterious. For example, cigarette taxes are levied per unit sold because the alleged spillover effects of smoking (e.g., second-hand smoking) occur with every pack of cigarettes smoked. The excise tax on gasoline is levied per gallon of gasoline sold because the amount of gasoline consumed was a rough approximation of how much driving one did, and thus how much wear and tear a driver would impose on federally managed highways. However, arguments can be made against these justifications for per unit taxes. Per-unit taxes can invite issues of both horizontal and vertical equality (as addressed later in this report). Also, because per-unit taxes are often set at static rates in statute, these rates often fall in inflation-adjusted (or "real") terms. For example, the statutory federal excise tax rate on distilled spirits in 1951 was set to $10.50 per proof gallon (ppg). Legislation was passed in 1985 increasing the statutory tax rate from $10.50 to $12.50 ppg, and again in 1990 increasing the tax rate from $12.50 to $13.50 ppg. The excise tax rate on distilled spirits still remains at the 1990 level of $13.50 ppg, or $2.14 per 750ml bottle (a "fifth") of 80-proof liquor. If the 1951 tax rate was indexed for inflation, it would be over $95.65 ppg in 2013 dollars, or approximately $19.49 per 750 ml bottle of 80 proof liquor. In contrast, ad valorem tax rates largely avoid a real decline in value because they are applied based on the price of commodity or activity rather than the quantity consumed or produced. Ad valorem rates can also be more progressive than per-unit rates especially if the commodity taxed is a luxury good (whereby demand increases more than proportionally as income rises). However, ad valorem rates also have the capability to be regressive if the consumers of the commodity are not limited to those at the upper end of the income distribution. Choosing the Stage of Production to Levy the Tax An excise tax can also be levied at different stages along a commodity's production and distribution chain: Production level: collected on sales by producers to wholesalers, retailers, or other producers. Transactions prior to the sale by the last producer are often partially exempted or taxed at reduced rates. Manufacturing level: collected on sales by manufacturers to wholesalers or retailers, including occasional direct sales to consumers. Wholesale level: collected on sales by the last wholesaler or manufacturer to retailers, including occasional direct sales to consumers. Retail level: collected on sales by retailers to final consumer, including wholesalers or manufacturers selling occasionally to consumers. Turnover taxes: collected on sales at all or nearly all stages, and also known as "cascade taxes" on account of their cumulative effects. Generally, an excise tax that is levied at earlier stages in the production process has lower administrative costs and fewer opportunities for tax evasion. In most situations, consumers vastly outnumber producers. Trying to implement an excise tax at the level of the consumer retail outlet results often in a duplication of bureaucratic processes compared to a tax on manufacturers. For example, more than 303 billion cigarettes were purchased across the United States in 2010, but 85% of these cigarettes were manufactured by three companies. However, ad valorem taxes imposed at the manufacturer's level could provide an incentive for value-added options to be ordered further down the supply chain in an attempt to minimize the tax burden. For example, the manufacturer tax on firearms is levied on the assembly of a complete rifle, but any add-ons or modification kits to that rifle are not taxed. Taxes imposed at the manufacturing level could lead to an effective tax rate that is higher than the statutory tax rate. This outcome occurs because some manufactured goods have a long inventory life, and a considerable time period may elapse between when the tax is paid (when the good leaves the manufacturer's premises) and the date that the good is sold. In effect, the manufacturer incurs an interest cost to borrow the money to pay the tax. The advantage of imposing a tax at the retail level is that it can more easily exclude certain consumers from an excise tax's revenue base, if desired. For example, farmers can receive an excise tax credit for certain fuel purchased for farm use, as this activity generally has a minimal effect on the quality of interstate highways. On the other hand, exemptions could diminish the effect of the tax on the original goal of the tax. An exemption, in the form of a refund, can be implemented through a manufacturer's tax, although this might require additional administrative resources. Transition Issues Special rules are sometimes used to accompany the imposition of a new excise tax or increases in any existing tax rates to prevent tax avoidance. If an excise tax is announced effective as of a specific date in the future, then individuals might stockpile the taxed commodity. One policy to prevent this behavior is a "floor stocks" tax, or an excise tax on all existing inventory as of a particular date. The floor stocks tax is usually imposed on the date a new tax takes effect or the date after a tax-rate increase takes effect; all new inventory subject to tax that is acquired after the new tax becomes effective is then subject to the new tax. Excise Tax Reporting Tax liability for most federal excise taxes is reported on IRS Form 720 "Quarterly Federal Excise Tax Return." This form is generally due at the end of April, July, October, and January, and reports taxes due the preceding quarter ending March, June, September, and December, respectively. Most of the excise taxpayers using Form 720 must deposit the tax owed before filing the form with the IRS. Several excise taxes trigger a requirement to file a form in addition to Form 720 (e.g., Form 6197 [Gas Guzzler Tax], Form 2290 [Heavy Highway Vehicle Use Tax Return], and Form 6627 [Environmental Taxes]). Revenue Excise taxes have had a diminishing role in federal public finance over time. Several forms of data analysis, presented in this section, illustrate this point. One concern with per unit excise taxes is that they are often set in statute at specific levels, thus the inflation-adjusted value, or real value , often falls over time. This trend usually continues absent legislative action to increase the statutory rates to reflect the effects of inflation. The decline in the real value of excise tax receipts over time is apparent in Figure 1 . Although nominal excise tax collections have increased from $11.86 billion in FY1960 to $56.17 billion in FY2012 (an increase of more than five times), real excise tax revenue has decreased by more than six times over that same period. In FY1960, excise tax collections amounted to approximately to $355.49 billion in 2012 constant dollars. The brief spike in excise tax collection during the early 1980s was largely due to the enactment of the excise tax on windfall profits in the oil industry, which was phased-out by 1993. While the number, rates, and types of excise taxes in effect have changed between 1960 and 2012, these data illustrate the declining role of excise taxes in federal public finance Furthermore, federal excise tax receipts as a share of gross domestic product (GDP) are lower today than they were in the past. As shown in Figure 2 , annual excise tax receipts averaged between 2.0% and 2.5% during the Great Depression, before hitting a peak above 3.0% of GDP during World War II. After the end of the war, federal excise tax receipts declined as a share of GDP — particularly after the reforms in the mid-1960s. After a brief spike in the early 1980s, largely due to the enactment of the oil industry windfall profits tax, excise tax revenue as a share of GDP trended back below 1.0% by the end of the 1980s. In FY2012, federal excise tax receipts were 0.5% of GDP. Federal excise taxes have also declined as a share of all federal tax receipts. As shown in Figure 3 , federal excise taxes comprised 45.8% of all federal tax receipts in FY1934. After the end of World War II, the share of federal tax receipts from excises began a slow decline below 15% towards a recent trend around 3.2% (in FY2012). This decline in the share of federal tax receipts collected from excises corresponded with an increase in the role of other sources of tax receipts, notably from the individual income tax code. In 1934, individual income taxes amounted to 14.2% of all federal tax receipts and applied primarily to a narrow tax base. During World War II, the individual tax code supplanted excises as being the primary source of federal revenue, as income taxes accounted for 45.0% of all tax receipts in 1944 (compared to 10.9% from excises). Additionally, receipts from social insurance and retirement programs have increased over time. Interactions Between Federal and State and Local Excise Taxes Higher federal excise tax rates tend to reduce state and local excise tax revenues derived from the same products (and vice versa ). As federal excise taxes increase the price of the targeted product, then consumer demand may decrease depending on the response of consumers. This decrease in consumer demand reduces the tax base. States can increase their excise tax rates to help offset any reductions in the tax base, although higher state taxes can also drive down demand for products subject to excise taxes. Similar to trends at the federal level, though, excise tax collections comprise a relatively small share of state and local tax revenue. As shown in Figure 4 , personal property taxes were the largest source (34%) of tax revenue for state and local governments combined in 2012. Individual income taxes and general sales taxes accounted for 22% and 21% (respectively) of state and local tax collections in 2012. Excise taxes on motor fuel, tobacco, and alcohol have accounted for 5% of total tax collections. However, the data in Figure 4 underrepresent the amount of state tax revenue derived from tobacco sales because settlement payments from major tobacco companies to the states and territories are not included. In comparison, approximately $7.3 billion in payments were made by the major tobacco companies to the states in 2011 whereas state and local tax collections from tobacco excise taxes were approximately $17.5 billion (i.e., the payments to states amounted to 41.7% of state and local excise collections). Settlement payments allocated to each state and territory are largely based on tobacco consumption in that particular state or territory. Equity Economists generally measure tax equity using two measures: vertical equity and horizontal equity. Vertical equity generally implies that households with a greater ability to pay the tax (i.e., a higher income) pay a greater share of their household income in taxes than households with a lesser ability to pay the tax. A tax system is progressive if higher income households pay a greater share of their income in tax than lower income households, whereas the converse is true in a regressive tax system. Horizontal equity indicates that households with similar abilities to pay actually pay similar amounts in tax. For example, all households earning a particular amount of income would pay the same amount in taxes in a tax system with perfect horizontal equity. Note that the excise tax rate on a particular good does not reflect its effects on equity. Even if all consumers are subject to the same tax rate of $1.00 per unit, the tax cannot be immediately deemed as "equitable" from an economic perspective. The tax's effects on equity will ultimately be a function of who bears the tax's burden. Figure 5 shows the distribution of excise taxes paid in 2009, by average tax rates, as calculated by the Congressional Budget Office (CBO). Average tax rates represent the share of excise taxes paid as a share of pre-tax income. With regard to vertical equity, excise taxes tend to be regressive. The lowest income quintile of taxpayers paid, on average, 1.5% of their income on excise taxes in 2009 whereas the highest quintile of taxpayers paid 0.4% of their income in excise taxes. A luxury tax may be less regressive than other forms of excise taxes, but it could be difficult to isolate the burden of such a tax to upper-income households. First, middle-income consumers might purchase goods classified as "luxuries," such as jewelry or watches. Second, the definition of "luxury" changes over time. For example, a federal excise tax on telephone calls was first introduced in 1892 as a luxury tax to help finance the Spanish-American War. After several instances of repeal and reauthorization throughout the early 20 th century, the tax remained part of the permanent tax code from 1947 until 2006. Although one could make the argument in 1892 that telephone calls were "luxury" services, this was certainly not the case by the latter half of the 20 th century. With regard to horizontal equity, excise taxes have different effects on households with the same level of income. Households that consume the taxed good pay a larger share of taxes out of their current income than households that do not consume the taxed good. Excise taxes can also create horizontal inequities across consumers of a taxed product if unequal tax rates are applied to various forms of that product (e.g., beer vs. wine vs. distilled spirits). Efficiency In short, some excise taxes are intended to affect consumer choices. As such, they reduce economic efficiency by distorting what economists characterize as economically optimal consumer behavior. This distortion could be justified, in economic terms, if there is some sort of market failure whereby the consumer's price does not capture the effect of spillover effects to society that result from consumption of the good or service. Individual consumption of certain goods and services might have negative spillover effects, or externalities , on society. For excise taxes intended to compensate for the social costs of certain types of consumption, economic theory suggests that the excise tax rate should be set at a level that offsets the negative costs of that consumption to society. If taxes are used this way to reflect the full cost of a particular type of economic activity to society, then excise taxes can actually lead to a more efficient allocation of resources. General Behavioral Effects All types of excise tax have some similar economic effects in a competitive industry. In the short run, an excise tax increases the price of the taxed product (by some fraction of the tax amount), and tax burden could be shared by producers or the consumers. Next, the quantity of the product demanded is reduced. Lastly, the price received by producers for the product is also reduced (i.e., producers receive less for the product post-tax compared to pre-tax). The exact effect depends on the responsiveness, or elasticities , of demand and supply for the product (or the percent change in quantity demanded or supplied, respectively, divided by the percent change in price). The increase in retail price resulting from the tax will be greater as the elasticity of supply increases and the elasticity of demand falls. The effect on quantity will be greater as both the elasticity of demand and the elasticity of supply increase. In regard to sharing the price burden, the more inelastic the demand is, the larger the share of the tax borne by consumers. The more inelastic the supply is, the larger the share borne by producers. In the limiting cases, consumers will bear the full burden if demand is completely inelastic, whereas producers will bear the full price burden if supply is completely inelastic. Put differently, an excise tax on a product with a relatively inelastic demand will have less of an effect on consumption. Additionally, economic theory indicates that targeted excise taxes could have efficiency merits, but broadly drawn taxes that cover many product categories generally tend to lead to more distortions and reductions in economic activity than are warranted. From an efficiency perspective, the use of a broad-based tax on a wide range of activities (e.g., a general sales tax) would be preferable to a high excise tax rate on a small number of activities. Luxury Taxes Luxury taxes are usually levied to increase progressivity in the tax system or to increase revenue, not on the basis of improving economic efficiency. Some argue that luxury taxes in the past have dramatically reduced sales in the targeted industry. However, it is likely that demand for luxury goods is less sensitive to price changes than non-luxury goods, in part, because some luxury consumption goods are purchased by businesses rather than individuals (and could be deducted from a business's income tax returns as a business expense). A common case study cited in the analysis of luxury taxes includes the luxury boat industry during the early 1990s. Opponents of the luxury tax argued that the yacht industry experienced drastic reductions in sales following the enactment of a 10% ad valorem luxury tax in the Omnibus Budget Reconciliation Act of 1990 (OBRA90). According to this logic, the imposition of the excise tax was largely to blame for the decline in sales and rise in unemployment in the industry. However, economic analysis indicates that the yacht sales were beginning to decline from their peak in 1988 (before the tax), and that sales of yachts were more sensitive to changes in personal disposable income and corporate profits after tax rather than price changes due to the tax. In any case, the tax was repealed in the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ). Sumptuary Taxes Sumptuary tax increases are often based on market failures, relating to externalized costs of individual behavior associated with public health, public safety, and additional financial burdens placed on publically financed health services. In short, studies measuring the respective size of the externalities for alcohol and tobacco involve very complicated, technical calculations of lifetime external costs and savings associated with alcohol and tobacco consumption that are often subject to controversy and methodological scrutiny. An advanced review of this literature is beyond the scope of this particular report. Still, studies suggest that current law per-unit tax rates on cigarettes exceed the magnitude of the estimated net externalities whereas the opposite could be true for alcohol taxes. Behavioral responses to sumptuary taxes vary by consumption good. Demand for beer is not particularly responsive to changes in price (e.g., demand is inelastic). Meta-analyses tend to find the demand for beer is more inelastic (i.e., less responsive) to changes in price than demand for either wine or distilled spirits. However, studies diverge on the question of whether demand for wine is more or less elastic than distilled spirits. In comparison, CBO estimates the price elasticity of demand for cigarettes to be between (0.3) and (0.7), and that the average elasticity of the number of smokers is (0.3). In other words, a 1% increase in the price of cigarettes results in between a 0.3% and a 0.7% decrease in demand, and a 1% rise in the price of cigarettes results in roughly a 0.3% decrease in the number of smokers. Compared to a sumptuary tax on a product that is relatively elastic, a tax on a product that is relatively inelastic often results in a higher tax burden on lower-income households (due to the regressive nature of the tax) with a smaller degree of change in consumption. Benefit-Based Taxes If properly structured, benefit-based taxes could enhance economic efficiency by reducing the spread between private and social costs. In short, inefficiency arises because private markets tend to overproduce economic activities that lead to negative social externalities and underproduce economic activities that lead to positive externalities, absent government intervention. Theory suggests that government intervention can better incorporate social costs into the prices perceived by any one individual. However, it is often difficult to derive the "correct" tax rate that precisely accounts for the marginal social effects of an economic activity. Benefit-based taxes can affect consumer demand for public goods if the link between the tax and the use of the public good is clearly apparent. A lack of a direct link between the tax and the use of the public good could lead to declining revenues available for upkeep and maintenance of the public good. For example, one could argue that the purchase of gasoline does not necessarily lead to wear and tear on federal highways; some of this fuel could be used by drivers that commute just along local roads. Thus, many benefit-based taxes are levied on rough proxies that affect forms of consumption unrelated to the ultimate goal of the policy. An alternative policy could include more direct forms of benefit-based taxation, but there could be a tradeoff between the targeting precision of a tax and its administrative costs. For example, although a retail tax on gasoline sales might be an imperfect proxy for highway usage, it is less complicated than administering an excise tax based on the weight and mileage of every motor vehicle using a federal highway. The costs of the latter form of tax administration might exceed the benefits. Regulatory and Environmental Taxes Much like benefit-based taxes, regulatory and environmental taxes are typically imposed on economic activities that generate externalities. Whereas benefit-based taxes are concerned with an underproduction of some positive externality (e.g., a public good), regulatory and environmental taxes, however, are usually concerned with the overproduction of some negative externality (e.g., pollution). These negative externalities could include losses from damage to plants and animals and to their habitats, rapid deterioration to physical infrastructure, and various harmful effects on human health and mortality. Economic theory indicates that a tax on the marginal production of these negative externalities could be used as a disincentive for harmful production processes and as a means of compensating society for the cleanup and mitigation of those externalities. In the choice between a tax on pollution (or the regulation of some other activity with negative spillover effects on society) and a total ban on its production, economists generally prefer a tax. From an economic perspective, a society's "optimum level" of pollution is usually not zero; instead, economists look to minimize total waste disposal costs. These costs could include residual waste or by-product recycling, input switching to safer materials, production modification, or other technology adoption. It can be expected that marginal pollution costs increase with increased waste disposal activities as greater investment in more advanced (and more costly) cleanup technologies and mitigation strategies is necessary. Put differently, there may be a point where the marginal cost of eliminating a particular unit of pollution may exceed the marginal benefit. The tax increases the private costs of pollution to reduce the spread between private and social costs. To achieve optimum,economic efficiency, the excise tax rate would be set at a level such that the marginal, private cost of pollution is equal to the marginal, social benefits of production. Economic theory suggests that the tax should be imposed directly upon the activity which gives rise to the negative externality. The statutory incidence (or burden) of the tax may differ from the economic incidence, because the latter is affected by elasticities. Thus, consumers may bear some or all of the tax through higher prices. Appendix. References to CRS Reports on Specific Excise Taxes

There are four common types of excise taxes: (1) sumptuary (or "sin") taxes, (2) regulatory or environmental taxes, (3) benefit-based taxes (or user charges), and (4) luxury taxes. Sumptuary taxes were traditionally imposed for moral reasons, but are currently rationalized, in part, to discourage a specific activity that is thought to have negative spillover effects (or "externalities") on society. Regulatory or environmental taxes are imposed to offset external costs associated with regulating public safety or to discourage consumption of a specific commodity that is thought to have negative externalities on society. Benefit-based taxes (which include user charges) are imposed to charge users of a particular public good for financing and maintenance of that public good. Lastly, luxury taxes are primarily imposed as one way to raise revenue, particularly from higher-income households. This report provides an introduction and general analysis of excise taxes. First, a brief history of U.S. excise tax policy is provided. Second, the various forms of excise taxes and their respective administrative advantages and disadvantages are described. Third, the effect of federal excise taxes on federal, state, and local tax revenue is discussed. Fourth, the economic effects of various types of excise taxes are analyzed. The effects on consumer behavior and equity among taxpayers could be important issues for assessment of current excise tax policy or for the design of new excise taxes. Lastly, a list of references to other CRS reports on specific excise taxes is presented. Excise taxes have generally played a diminishing role in financing the federal government since the middle of the 20th century for multiple reasons. First, Congress has taken legislative action to eliminate many categories of excise taxes. Second, most excise tax rates set in statute have declined in value over time due to inflation and inaction by Congress to change tax rates set in statute. Excise taxes tend to be regressive, in that lower-income households generally pay a larger share of their income in excise taxes than higher-income households. Because excise taxes generally increase the price of the taxed commodity, they also tend to lower consumer demand. Excise taxes play a much smaller role in financing the federal government than they did in the past. In 1960, federal excise tax collections were $355.49 billion (in 2012 constant dollars, after accounting for inflation). In FY2012, federal excise tax collections were $56.17 billion (roughly one-sixth of their 1960 value in 2012 constant dollars). Federal excise taxes comprised 7.0% of all federal revenue in 1973, whereas they comprised 3.2% in 2012. Congress may be interested in revisiting the revenue and economic effects of excise taxes because these taxes could play a growing role in financing public goods. Some long-standing excise tax proposals to correct alleged social costs have resurfaced from time to time in policy discussions. Some of these proposals could be targeted towards specific products or activities (e.g., a "sugar-sweetened beverages" tax), while others could affect a broad range of economic activity and raise a significant amount of revenue (e.g., a carbon tax). On the other hand, there is also interest in reducing current excise tax rates as a means to encourage short-term growth in particular industries.

Highlights of the 2005 BRAC Commission Report Closures and Realignments In the 2005 BRAC round, the Department of Defense (DOD) recommended 190 closures and realignments. Of this number, the BRAC Commission approved 119 with no changes and accepted 45 with amendments. These figures represented 86% of the Department of Defense's overall proposed recommendations. In other words, only 14% of DOD's list was significantly altered by the Commission. Of the rest, the Commission rejected 13 DOD recommendations in their entirety and significantly modified another 13. It should be pointed out that the BRAC Commission approved 21 of DOD's 33 major closures, recommended realignment of 7 major closures, and rejected another 5. Costs and Savings Over the next 20 years, the total savings of the Commission's recommendations are estimated at $35.6 billion – significantly smaller than DOD's earlier estimate of $47.8 billion. The difference between Commission and DOD estimates has proved controversial. Results of Jointness According to the Commission, DOD achieved only minor success in promoting increased jointness with its recommendations. Most of the proposed consolidations and reorganizations were within, not across, the military departments. Air National Guard Among the most difficult issues faced by the 2005 BRAC Commission were DOD's proposals to close or realign Air National Guard bases. Thirty seven of 42 DOD Air Force proposals involved Air National Guard units. Commission Process According to the Commission, its process was open, transparent, apolitical, and fair. Commissioners or staff members made 182 site visits to 173 separate installations. It conducted 20 regional hearings to obtain public input and 20 deliberative hearings for input on, or discussion of, policy issues. Differences between Current and Prior Rounds In 2005, DOD adopted an approach supporting an emphasis on joint operations. The 1988, 1991, and 1993 rounds did not include a Joint Cross-Service element. The 1995 round did utilize Joint Cross-Service Groups in its analytical process, but the three military departments were permitted to reject their recommendations. In 2005, the Joint Cross-Service Groups were elevated to become peers of the military departments. The 2005 Commission consisted of nine members rather than eight, thereby minimizing the possibility of tie votes. For the 2005 round, the time horizon for assessing future threats in preparing DOD's Force Structure Plan was 20 years rather than six. The 1995 selection criteria stated that the "environmental impact" was to be considered in any base closure or realignment. The 2005 criteria required the Department of Defense (and ultimately the Commission) to consider "the impact of costs related to potential environmental restorations, waste management and environmental compliance activities." Existing BRAC law specifies eight installation selection criteria. The 2005 Commission emphasized the sixth, which directed consideration of economic impact on local communities. In prior rounds, homeland defense was not considered a selection criterion. It is now a significant element among the military value selection criteria. The 1991 Commission added 35 bases to the DOD list of recommendations, the 1993 Commission added 72, and the 1995 Commission added 36 – where as the 2005 Commission added only 8. Finally, prior BRAC rounds did not take place in the face of the planned movement of tens of thousands of troops from abroad back to the United States. Subsequent Commission-recommended Legislation Overview The 2005 Defense Base Closure and Realignment Commission recommended various changes to the existing statute governing its creation, organization, process, and outcome. The proposed revision of the governing Act, if enacted, would arguably represent a significant change in scope of the BRAC law. It would expand the Commission's lifespan and mission. It would explicitly link reconsideration of the defense infrastructure "footprint" to security threat analysis by the new Director of National Intelligence (DNI) and the periodic study of the nation's defense strategy known as the Quadrennial Defense Review. It would also formalize BRAC consideration of international treaty obligations undertaken by the United States, such as the scheduled demilitarization of chemical munitions. By passing legislation containing the Commission's recommended language, Congress would authorize the Secretary of Defense to conduct a 2014-2015 BRAC round, should he or she deem it necessary. Other recommended provisions would enable the Commission to suggest new vehicles for the expeditious transfer of title of real property designated for disposal through the BRAC process. In addition, recommended legislative language suggests expanding the requirement for Department of Defense release of analytical data and strengthens the penalty for failure to do so. It would increase the responsibilities of the Commission's General Counsel and would exempt the Commission from the Federal Advisory Committee Act (FACA) while retaining conformity with the Freedom of Information (FOIA) and Government in the Sunshine Acts. The recommended legislation would also make permanent the existing temporary authority granted to the Department of Defense to enter into environmental cooperative agreements with federal, state, and local entities (including Indian tribes). Finally, the recommended legislation, while it retains many of the features new to the 2005 round (such as the super majority requirement), it repeals others, such as statutory selection criteria. Placing BRAC in the Broader Security Context The 2005 BRAC round was the fourth in which an independent commission reviewed recommendations drawn up by the Department of Defense, amended them, and submitted the revised list to the President for approval. While the 2005 process resembled the previous three rounds, it was profoundly different in many respects. For example, the DOD's analytical process attempted to reduce former rounds' emphasis on individual military departments by enhancing the joint and cross-service evaluation of installations. BRAC analysis in 2005 also attempted to project defense needs out to 20 years, whereas previous rounds used a much shorter six-year analytical horizon. This encouraged DOD analytical teams to base their assessments on assumptions of the needs of transformed military services, not formations created for the Cold War. These assumptions were embodied in the force-structure plan and infrastructure inventory submitted by the Secretary of Defense. In its legislative recommendation, the Commission suggested that a potential 2014-2015 BRAC round be placed in a strategic sequence of defense review, independent threat analysis, and base realignment. The new statute would couple the existing Quadrennial Defense Review (QDR), currently required every four years, with consideration of a new BRAC round. If the QDR leads the Secretary of Defense to initiate a new BRAC round, the DNI would produce and forward to Congress an independent threat assessment. BRAC Commission Under the 2005 statute, the BRAC Commission was terminated on April 16, 2006. The proposed legislation would have extended the life of a subset of the Commission (Chairman, Executive Director, and staff of not more than 50), which would have maintained the Commission's documentation and formed the core of an expanded staff for a possible 2014-2015 Commission. In addition, the continued Commission would have been tasked to monitor and report on: (1) the use of BRAC appropriations; (2) the implementation and savings of 2005 BRAC recommendations; (3) the execution of privatizations-in-place at BRAC sites; (4) the remediation of environmental degradation and its associated cost at BRAC sites; and (5) the impact of BRAC actions on international treaty obligations of the United States. Commission Reports The proposed law would have required the prolonged Commission to prepare and submit three reports to Congress and the President: an Annual Report, a Special Report (due on June 30, 2007), and a Final Report (due on October 31, 2011). Annual Reports The Commission would have reported not later than October 31 of each year on Department of Defense utilization of the Defense Base Closure and Realignment Account 2005, implementation of BRAC recommendations, the carrying out of privatization-in-place by local redevelopment authorities, environmental remediation undertaken by the Department (including its cost), and the impact of BRAC actions on international treaty obligations of the United States. Special Report The legislation would have authorized the Commission to study and analyze the execution of BRAC 2005 recommendations. This report, undertaken if the Commission considered it beneficial, would have been completed not later than June 30, 2007. It would have focused on actions taken and planned for those properties whose disposal proves to be problematic, including: Properties Requiring Special Financing . Some properties planned for transfer to local redevelopment authorities or others may require special financial arrangements in the form of loans, loan guarantees, investments, environmental bonds and insurance, or other options. National Priorities List (NPL) Sites . NPL sites and other installations present particularly difficult environmental remediation challenges necessitating long-term management and oversight. The 2005 Commission report proposed that this study examine freeing the Department, after a set period, to withdraw from unsuccessful title transfer negotiations with local redevelopment authorities in order to seek other partners. It also envisioned potential Department contracts with private environmental insurance carriers after the completion of remediation in order to mitigate risk of future liability. The study could have considered the advisability of crafting a financial "toolbox," similar in concept to the special authorizations granted to the Department of Defense in the creation of the Military Housing Privatization Initiative, in order to expedite the disposal of challenging properties. Other alternatives studied were the creation of public-private partnerships, limited-liability corporations, or independent trusteeships to take title to and responsibility for properties. The Commission would have consulted closely with the Department of Defense, the military departments, the Comptroller General of the United States, the Environmental Protection Agency, and the Bureau of Land Management, Department of the Interior, in preparing its study and report. Final Report Existing law requires all BRAC implementation actions to be completed not later than six years after the date that the President transmitted the current Commission's report, or September 15, 2011. The recommended legislation would have required the Commission to submit a final report on the execution of these actions not later than October 31, 2011. Other Noteworthy Considerations The recommended legislation included other provisions suggested by the experience of the 2005 round. Submission of Certified Data The proposed legislation would require the Secretary of Defense to release the supporting certified data not later than seven (7) days after forwarding his or her base closure and realignment recommendations to the congressional defense committees and the Commission. Failure to do so would terminate the BRAC round. Prolongation of Commission Analysis and Recommendation Period The 2005 Commission report notes that the four months allotted by statute for the Commission to complete its work was shortened considerably by delays in staffing the Commission, the appointment of Commissioners, and the release of Defense Department certified data, among other considerations. The Commission proposed legislation to extend the period to seven (7) months. Commission Subpoena Power The 2005 Commission suggested that a future body be granted the Commission the power to subpoena witness for its hearings. Commission General Counsel as Sole Ethics Counselor The Commission recommended a statutory designation of the Commission's General Counsel as its sole ethics counselor. The 2005 Commission found that questions concerning recusal from consideration, potential conflicts of interest, etc., were not materially assisted by consultation with other agency counsel. Transparency Legislation recommended by the Commission stated that the "records, reports, transcripts, minutes, correspondence, working papers, drafts, studies or other documents that were furnished to or made available to the Commission shall be available for public inspection and copying at one or more locations to be designated by the Commission. Copies may be furnished to members of the public at cost upon request and may also be provided via electronic media in a form that may be designated by the Commission." It would continue the traditional practice of opening all unclassified hearings and meetings of the Commission to the public and provides for official transcripts, certified by the Chairman, to be made available to the public. Repeal of Existing Law The recommended legislation would have repealed Sec. 2912-2914 of the existing law. These sections authorized the 2005 round and include, among other provisions, the statutory installation selection criteria.

The 2005 Defense Base Closure and Realignment Commission (commonly referred to as the BRAC Commission) submitted to the President its report on domestic military base closures and realignments on September 8, 2005. The President approved the list and forwarded it to Congress on September 15. This report summarizes some of the report's highlights and examines in detail the Commission's proposed legislation for the conduct of a potential future BRAC round. It will not be updated.

Sugar Policy Overview The U.S. sugar program is singular among major agricultural commodity programs in that it combines a price support guarantee with a supply management structure that encompasses both domestic production for human use and sugar imports. The sugar program provides a price guarantee to the processors of sugarcane and sugar beets, and by extension, to the producers of both crops. The U.S. Department of Agriculture (USDA) is directed to administer the program at no budgetary cost to the federal government by limiting the amount of sugar supplied for food use in the U.S. market. To achieve both objectives, USDA uses four tools to keep domestic market prices above guaranteed levels. Measures one through three below were reauthorized through crop year 2018 without change by the 2014 farm bill ( P.L. 113-79 ). The fourth measure is found in long-standing trade law. The four are: 1. price support loans at specified levels—the basis for the price guarantee; 2. marketing allotments to limit the amount of sugar that each processor can sell; 3. a sugar-to-ethanol (feedstock flexibility) backstop—available if marketing allotments and import quotas fail to prevent a price-depressing surplus of sugar from developing (i.e., fail to keep market prices above guaranteed levels); 4. import quotas to control the amount of sugar entering the U.S. market. In addition to the foregoing policy tools, two agreements signed by the U.S. Department of Commerce (DOC) in late 2014—one with the government of Mexico and another with Mexican sugar producers and exporters—impose annual limits on Mexican sugar exports to the United States and establish minimum prices for imported Mexican sugar. The current sugar program has its roots in the Agriculture and Food Act of 1981 ( P.L. 97-98 ), according to the USDA. The sugar program that Congress enacted in the 1981 farm bill required the Secretary of Agriculture to support prices of U.S. sugarcane and sugar beets at minimum levels—initially through purchases of processed sugar, and subsequently by offering nonrecourse loans. The legislation also encouraged the President to impose duties, fees or quotas on foreign sugar to prevent domestic prices from moving below established support levels to avoid imposing budgetary costs on the government. In its report on the 1981 farm bill, the Senate Committee on Agriculture, Nutrition and Forestry cited the importance of sugar imports to U.S. sugar supplies, pointing out that volatile world market prices of sugar contributed to sharp fluctuations in U.S. sugar prices, while adding that the United States was alone among sugar producing nations in being without an effective government price support program. The sugar program has long been a source of political controversy over the degree of government support and market intervention it involves with sharply differing perspectives on the balance of benefits and drawbacks to the program. Critics of the program, including the Coalition for Sugar Reform, which represents consumer, trade and commerce groups, manufacturing associations and food and beverage companies that use sugar, argue the sugar program acts to keep domestic prices far above world sugar prices. In so doing, the Coalition contends the sugar program imposes a hidden tax on consumers and has led to the loss of jobs in the food manufacturing sector by encouraging imports of sugar-containing products and by providing manufacturers with an incentive to move facilities abroad to gain access to lower priced sugar. The American Sugar Alliance, consisting of sugarcane and sugar beet producers, including farmers, processors, refiners, suppliers and sugar workers, is a leading advocate for the U.S. sugar program. It points out that the price support feature of the sugar program fosters a reliable supply of sugar at reasonable prices at no cost to the government. The sugar program, it argues, is necessary to shield the domestic sugar industry from unfair competition from sugar imports at world market prices that it contends are distorted by heavily subsidized foreign sugar that is dumped on the world market at prices that are below production costs (see " Sugar Program Draws Sharply Differing Views " below). For background on sugar policy debate, see CRS Report R42551, Sugar Provisions of the 2014 Farm Bill (P.L. 113-79) , by Mark A. McMinimy. Price Support Loans Nonrecourse loans taken out by a processor of a sugar crop, not producers themselves, provide a source of short-term, low-cost financing until a raw cane sugar mill or beet sugar refiner sells sugar. The "nonrecourse" feature means that processors—to meet their loan repayment obligation—can exercise the legal right to forfeit sugar offered as collateral to USDA to secure the loan, if the market price is below the effective support level when the loan comes due. Figure 1 and Figure 2 illustrate the repayment options available to raw cane sugar mills and beet sugar refiners, respectively, and show loan rates and effective support levels for FY2016. The price levels at which processors can take out loans are referred to as "loan rates." The 2014 farm bill made no changes in the sugar program, so the current rates date from the 2008 farm bill, P.L. 110-246 . The raw cane sugar loan rate (18.75¢/lb) is lower than the refined beet sugar loan rate (24.09¢/lb) to reflect its unprocessed state. The raw sugar loan rate is lower because raw sugarcane must be further processed by a cane refinery to have the same value and characteristics as refined beet sugar for food use. These loan rates are national averages. Actual loan rates are adjusted by region to reflect marketing cost differentials. The minimum market price that a processor wants to receive in order to remove the incentive to forfeit sugar and instead repay a price support loan, though, is higher than the loan rate. This "effective support level," also called the loan forfeiture level, represents all of the costs that processors need to offset to make it economically viable to repay the loan. These costs equal the loan rate, plus interest accrued over the nine-month term of the loan, plus certain marketing costs. The effective support level for 2015-crop (FY2016) of raw cane sugar is 20.87¢/lb; for refined beet sugar, it ranges from 24.4¢ to 26.04¢/lb, depending on the region. If market prices are below these loan forfeiture levels when a price support loan usually comes due (i.e., July to September), and a processor hands over sugar earlier pledged to obtain this loan rather than repaying it, USDA records a budgetary expense (i.e., an outlay). If this occurs, USDA gains title to the sugar and is responsible for disposing of this asset. Two suspension agreements the DOC signed in December 2014—one with the Government of Mexico and another with Mexican sugar producers and exporters—have substantially modified the terms for importing sugar from Mexico and may have the practical effect of raising the effective support level. For one, Mexican sugar is an important source of the U.S. sugar supply, with imports of Mexican sugar averaging 15% of the sum of U.S. production plus imports during the three marketing years prior to the onset of the suspension agreements from 2011/2012 to 2013/2014. Imports of sugar from Mexico in 2014/2015, the year the suspension agreements took effect, represented 11% of the total of U.S. production plus imports. The agreements (see "Suspension Agreements Recast Sugar Trade with Mexico" below) establish minimum prices for Mexican sugar imports that are at, or above, effective U.S. support levels. These minimum prices are calculated at Mexican plants, so transportation costs to the U.S. processor or end user would add several cents per pound to the delivered cost of Mexican sugar. As a result, prices of imported Mexican sugar should track well above levels that would encourage U.S. loan forfeitures. Market prices for raw cane sugar and refined beet sugar since the 2008 farm bill provisions took effect were higher than loan forfeiture levels until mid-year 2013 ( Figure 3 and Figure 4 , respectively). Toward the end of FY2013, market prices that were below these effective support levels prompted processors to forfeit, or hand over, to USDA 381,875 tons of sugar (4.3% of FY2013 U.S. sugar output valued at almost $172 million). USDA actions taken to avert these forfeitures, and then to dispose of sugar acquired as a result of these forfeitures, are detailed below in "Sugar Purchases and Exchanges for Import Rights" and "Feedstock Flexibility Program for Bioenergy Producers." Tools for Balancing Supplies and Supporting Prices The government sets annual limits on the quantity of domestically produced sugar that can be sold for human use. It also restricts the level of imports that may enter the domestic market through tariff-rate quotas and via an import limitation agreement with Mexico. This is done to avoid costs during times when an imbalance between sugar supplies and demand could lead to low prices and sugar forfeitures under the loan program. Marketing Allotments Sugar marketing allotments limit the amount of domestically produced sugar that processors can sell each year. They do not, however, limit how much beet and cane farmers can produce, nor do they limit how much sugar beets and sugarcane that beet refiners and raw sugar mills can process. In a 2008 farm bill provision that was retained in the 2014 farm bill, USDA is required each year to set the overall allotment quantity (OAQ) at not less than 85% of estimated U.S. human consumption of sugar for food. This task is carried out by the USDA's Commodity Credit Corporation (CCC) at the beginning of each fiscal year. The OAQ is intended to ensure that permitted sales of domestic sugar, when added to imports under U.S. trade commitments, do not depress market prices below loan forfeiture levels for refined beet sugar and raw cane sugar. Sugar production that is in excess of a processors' marketing allotment may not be sold for human consumption except to allow another processor to meet its allocation or for export. In recent years, U.S. sugar production has consistently fallen short of the OAQ, averaging 88% of the OAQ threshold during the most recent three completed years from FY2013 through FY2015. Over this same period, U.S. sugar production has amounted to 74% of U.S. human use of sugar. Figure 5 illustrates the persistent gap between domestic sugar production, the higher levels of the OAQ, and U.S. domestic consumption for human use. Substantial quantities of sugar have been imported to cover the shortfall between domestic output and human consumption. For this reason, market participants view USDA's decisions on setting import quotas rather than marketing allotments as having more of an impact on market price levels (see " Import Quotas "). The national OAQ is split between the beet and cane sectors and then allocated to processing companies based on previous sales and production capacity. If either sector is not able to supply sugar against its allotment, USDA has authority to reassign such a "shortfall" to imports . Import Quotas The United States imports sugar in order to meet total food demand. From FY2013 through FY2015, imports accounted for 30% of U.S. sugar used in food and beverages. The amount of foreign sugar supplied to the U.S. market reflects U.S. commitments made under various trade agreements. At the same time, a 2008 farm bill provision—one retained in the 2014 farm bill—directs USDA to manage overall U.S. sugar supply, including imports, so that market prices do not fall below effective support levels. The most significant import limit is the World Trade Organization (WTO) quota commitment, which requires the United States to allow not less than 1.256 million tons, raw value, of sugar (almost all raw cane) to enter the domestic market from 40 countries (equivalent to 1.139 million metric tons, raw value [MTRV]). The raw cane sugar tariff-rate quota (TRQ), representing 98% of the WTO minimum quota commitment of the United States, is allocated based on trade in sugar from 1975 to 1981, years during which this trade was relatively unrestricted. The United States also grants much smaller import quotas to the six countries covered by the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA), and to Colombia, Panama, and Peru under separate free trade agreements (FTAs). For calendar year 2016, the TRQ under these FTAs totals 140,580 MTRV for the DR-CAFTA countries, 53,000 tons for Colombia, 7,325 tons for Panama, and 2,000 tons for Peru. Beyond these defined import commitments, unrestricted, duty-free access to Mexican sugar under the North American Free Trade Agreement (NAFTA) introduced uncertainty over how much sugar Mexico would ship north in any year. To illustrate, U.S. imports of Mexican sugar since 2008 have ranged from a low of about 800,000 tons in FY2010 to a high of almost 2.1 million tons in FY2013. This variability ( Figure 6 ) in part reflects large swings in the amount of Mexican sugar available for export in any year, depending on the impact of drought in some years in Mexico's sugarcane-producing regions, and the degree to which U.S. exports of cheaper high-fructose corn syrup displace Mexican consumption of Mexican-produced sugar. During the three most recently completed marketing years, FY2013-FY2015, Mexico was by far the largest source of U.S. sugar imports, supplying 55% of total U.S. sugar imports on average over this period. Reflecting Mexico's unique status as an unrestricted supplier up until December 2014, its annual shipments varied from a high of 2.1 million short tons, raw value (STRV) , comprising 66% of U.S. sugar imports in FY2013, to a low of 1.5 million STRV, comprising 43% of U.S. imports in FY2015. Sugar entering the United States under tariff-rate quota programs during these three years amounted to 36% of all imports, with DR-CAFTA countries supplying a subtotal of nearly 4% of total U.S. sugar imports ( Figure 6 ). To address the market uncertainty expected from imports of Mexican sugar once it achieved unrestricted access in 2008, the 2008 farm bill introduced a new policy to regulate imports, and this policy was retained by the 2014 farm bill. The farm bill directed that at the beginning of each marketing year (October 1) USDA was required to set the WTO quotas for raw cane and refined sugar at the minimum level—1.256 million STRV—necessary to comply with this trade commitment ( Figure 6 ). In case of an emergency shortfall of sugar prior to April 1, due to either weather or war, USDA was directed to increase these quotas. After April 1 (the midpoint of the marketing year), USDA may increase the WTO raw sugar quota consistent with the dual objectives of maintaining sugar prices above loan forfeiture levels and providing for adequate supplies of raw and refined sugar in the domestic market. Any increase in the import quota is temporary in that it applies only until the next marketing year, which begins on October 1. Suspension Agreements Recast Sugar Trade with Mexico While the 2014 farm bill reauthorized the sugar program intact for five years through 2018 crops, events since enactment of the farm bill have materially altered the program. A major change with substantial repercussions for the U.S. sugar program in late 2014 concerned the treatment of imported sugar from Mexico. From 2008 until December 2014, Mexican sugar exports were accorded unrestricted, duty-free access to the U.S. market under NAFTA. Two suspension agreements that the U.S. government signed with the Government of Mexico and with Mexican sugar producers and exporters in December 2014 have fundamentally altered trade in sugar with Mexico while creating ripple effects for the sugar program and for sugar users. The two suspension agreements stem from parallel countervailing duty (CVD) and antidumping (AD) investigations initiated in the spring of 2014 by the International Trade Commission (ITC) and the International Trade Administration (ITA) of the DOC in response to a petition filed by the American Sugar Coalition (ASC). The ASC represents sugarcane and sugar beet producers, processors, refiners, and sugar workers. Sections 704 and 734 of the Tariff Act of 1930 (19 U.S.C. §1671(c) and §1673(c)), as amended, provide the legal authority for the CVD and AD suspension agreements. Preliminary findings in the CVD investigation determined that the Mexican government was subsidizing Mexican sugar exports. The AD investigation concluded as a preliminary matter that Mexican sugar was being dumped into the U.S. market, that is, sold at less than fair value—defined as below the sale price in Mexico, or below the cost of production. The investigations determined these actions had injured the U.S. sugar industry, and based on these preliminary findings, the DOC imposed cumulative duties on U.S. imports of Mexican sugar to be deposited by U.S. importers of sugar, ranging from 2.99% to 17.01% under the CVD order, and from 39.54% to 47.26% under the AD order. In December 2014, the U.S. Department of Commerce (DOC) entered into suspension agreements with the Government of Mexico and with Mexican sugar industry interests. Under the CVD agreement that DOC entered into with the Government of Mexico and the AD order that DOC signed with Mexican sugar producers and exporters, the DOC agreed to suspend both the CVD and AD investigations and to remove the duties it had imposed on imports of Mexican sugar. In return, the Government of Mexico agreed to relinquish the unrestricted access to the U.S. sugar market it had negotiated under NAFTA. Further, the Mexican government and Mexican producer groups and exporters also agreed to observe the certain restrictions on Mexican sugar exports to the United States. The two suspension agreements have substantially recast U.S. sugar trade with Mexico by imposing three fundamental changes on Mexican sugar exports to the United States. Mexico's previously unlimited sugar exports to the U.S. market are henceforth limited to an assessment of U.S. needs, defined as the residual of projected U.S. human use less domestic production and imports from tariff-rate quota countries. Refined sugar exports from Mexico are limited to 53% of Mexico's allowable quantity in any given marketing year (October 1 to September 30), whereas previously no such restriction was in place. Mexican sugar is subject to minimum reference prices of $0.26 per pound for refined sugar and $0.2225 for all other sugar. Prior to the agreements, no floor price was imposed. To determine the quantity of Mexican sugar that may be imported into the United States in a given marketing year under the suspension agreements, DOC is tasked with making an initial calculation of the domestic requirement for Mexican sugar in July. This quantity is subject to a recalculation in September, December, and March that may result in increases in quantity from the initial calculation. The agreement with the government of Mexico suspending countervailing duties states that Mexico's export limit is determined according to a calculation of U.S. needs that is based on a U.S. sugar carryover of 13.5%. The carryover, or stocks-to-use ratio (SUA), is the quantity of sugar available at the end of the marketing year (September 30) expressed as a percentage of annual usage. This formula has been a point of concern for some U.S. sugar users. The Sweetener Users Association, for one, has argued that an SUA of 13.5% is too restrictive of supplies and runs the risk of creating shortages in the domestic sugar market. In commenting on the draft suspension agreements, the Sweetener Users Association contended that an SUA of at least 14.5%, if not 15.5%, would be a more appropriate level. In addition to imposing limits on the quantity of Mexican sugar that may be imported into the U.S. market, the agreements limit the concentration of Mexican sugar imports over the course of the marketing year to not more than 30% of the assessment of U.S. needs from October 1 through December 31 and not more than 55% from October 1 through March 31. For instance, in the wake of the agreement the initial export limit on Mexican sugar of 1,162,604.75 metric tons raw value for the 2014/2015 marketing year was subsequently increased to 1,383,969.68 metric tons raw value, which became effective on March 30, 2015. Potential Effects on Government Outlays and Sugar Prices In practice, the changes ushered in by the suspension agreements should greatly facilitate the USDA's task of operating the sugar program at no cost to the government, as Congress directed in the 2014 farm bill. Prior to the suspension agreements, imports of sugar from Mexico represented the only unmanaged source of supply under the sugar program. The USDA's ability to administer the sugar program at no net cost has been at issue since the 2012/2013 crop year, when net government outlays for the sugar program spiked to $259 million. That year, large quantities of domestic sugar under loan were forfeited in the face of excess supplies and low market prices. This obligated USDA to dispose of the forfeited sugar at a significant loss under the Feedstock Flexibility Program (FFP) and via exchanges in which the agency provided swapped forfeited domestic sugar for the right to import certain quantities of sugar. In an analysis issued in March 2015, the Food and Agricultural Policy Institute (FAPRI) at the University of Missouri projected net government outlays for the sugar program under two scenarios: with the suspension agreements, and without them. FAPRI concluded that under the suspension agreements net government outlays for sugar would be zero over marketing years 2016 through 2024. Without the agreements, FAPRI projected that annual outlays would average $16 million a year during marketing years 2016 through 2018, declining to $8 million a year on average from 2019 through 2024. In its March 2015 Baseline for Farm Programs, the Congressional Budget Office (CBO) projects government outlays for the sugar program at zero over the period FY2015 through FY2019. From FY2020 through FY2025 CBO projects outlays totaling $115 million, reflecting a likely re-examination of the agreement after five years and the potential for policy uncertainty over Mexican sugar imports thereafter. The USDA projects no sugar program costs through FY2026 based on the USDA A gricultural Projections to 2025 analysis, which assumes no changes in government agricultural policies and that existing trade arrangements remain in place. Assessing the potential for the suspension agreements to add to costs borne by sugar-using industries and consumers, the Coalition for Sugar Reform, representing consumer, trade, and commerce groups; manufacturing associations; and food and beverage companies that use sugar, contends that the suspension agreements will result in higher sugar prices for U.S. users and consumers. Following the signing of the suspension agreements in December 2014, the Coalition asserted, "These agreements will ensure that any Mexican sugar needed to adequately supply the U.S. market must be priced well above world market prices—prices that are even higher than mandated by the U.S. sugar program." The American Sugar Alliance, a coalition of sugar producers, including farmers, processors, refiners, sugar suppliers and workers, has expressed support for the agreements, contending they will foster free and fair trade in sugar, while benefiting U.S. sugar farmers, workers, consumers, and taxpayers. Considering that Mexican sugar is a significant source of U.S. sugar supplies that can vary in quantity from one year to the next, and considering also that minimum prices of Mexican sugar are at U.S. loan levels, or above them, without including transportation costs to U.S. destinations, it is evident that pricing on Mexican sugar should be well above U.S. loan levels as long as the suspension agreements remain in effect. Transportation from Mexican mills adds several cents per pound to the cost of sugar delivered to U.S. plants—as much as $0.03 to $0.06 per pound, according to FAPRI. Two Sugarcane Refiners Challenging Suspension Agreements Whether the new framework around trade in Mexican sugar imposed by the suspension agreements will remain in effect is not entirely certain. The agreements have no termination date, but the signatories may terminate them at any time. The suspended CVD and AD investigations are subject to a review after five years. Separately, two U.S. sugarcane refiners—Imperial Sugar Company and AmCane Sugar LLC—challenged the agreements in court. In January 2015, the two companies petitioned the U.S. International Trade Commission (ITC), contending the agreements do not eliminate completely the injurious effect of sugar imports from Mexico as the law permitting such agreements requires. In a unanimous decision issued in March 2015, the ITC concluded the agreements do eliminate entirely the injurious effect of Mexican sugar imports. In the wake of the ITC's determination, the two cane refiners filed petitions with the U.S. Court of International Trade, contending that the ITC's determination was not supported by the evidence and was not in accordance with the governing statute. The complaints were consolidated by the court, but AmCane's action was dismissed at the company's request in early April 2016, while the action brought by Imperial Sugar continued to be under review. On a separate track, the two cane refining companies also petitioned the DOC to continue the CVD and AD investigations to final determinations. In early May 2015, the DOC determined the two sugar-refining companies had standing under the law to make such a petition and announced it would resume the CVD and AD investigations. Pending final determinations in these investigations, the terms of the suspension agreements remained in force. In September 2015, the DOC issued its final determinations, affirming its preliminary findings that, prior to the entry into force of the suspension agreements, Mexican sugar exports were being subsidized by the government and dumped into the U.S. market at prices below their fair market value. The DOC found that dumping margins on Mexican sugar ranged from 40.48% to 42.14%, depending on the producer/exporter, and that government subsidies on exported sugar ranged from 5.78% to 43.93%. Following these determinations, the ITC reaffirmed its earlier finding that the U.S. sugar industry was injured as a result of these practices. As a consequence, the suspension agreements remain in force pending a decision by the U.S. Court of International Trade. Mechanisms Aimed at Countering Low Prices In addition to domestic marketing allotments and import quotas and limits, USDA has two policy mechanisms to help prevent prices from slipping below effective loan forfeiture levels, thereby limiting program costs that might otherwise accrue to the government as a result of substantial loan forfeitures. These include offering CCC sugar to processors in exchange for surrendering rights to import tariff-rate quota sugar; purchasing sugar from processors in exchange for surrendering tariff-rate quota sugar; and removing sugar from the human food market by purchasing sugar from processors for resale to ethanol producers for fuel ethanol production. Sugar Purchases and Exchanges for Import Rights To dispose of sugar owned by CCC without increasing the risk of loan forfeitures, the farm bill authorizes USDA to transfer ownership of CCC-owned sugar in exchange for rights to purchase tariff-rate quota sugar, or certificates of quota entry, which carry a low tariff rate or zero tariff. From July to September 2013, USDA completed four sugar "exchanges" in an effort to bolster market prices and forestall loan forfeitures of some 2012 crop sugar. Two exchanges involved bids made by refiners and brokers for sugar acquired by USDA from processors as a result of loan forfeitures in return for surrendering import rights. Two other exchanges involved USDA purchasing sugar from processors, which then was exchanged for import rights that cane refiners and brokers surrendered to USDA. The latter two initiatives were taken to reduce the amount of sugar expected to be supplied to the U.S. market and were implemented by USDA using 1985 farm bill authority. This cost reduction provision authorizes USDA to purchase a supported commodity deemed to be in surplus if such action results in program savings. Feedstock Flexibility Program for Bioenergy Producers If market prices fall to levels that threaten to result in loan forfeitures, the Secretary of Agriculture may purchase surplus sugar and sell it to bioenergy producers to avoid forfeitures. In the event that forfeitures of sugar loans do occur, the Secretary is required to administer a sugar-for-ethanol program using domestic sugar intended for food use. The objective of this Feedstock Flexibility Program (FFP) is to permanently remove sugar from the market for human consumption by diverting it into a non-food use—ethanol. When the Secretary activates this program, USDA will purchase surplus and other sugar acquired from processors and then sell that sugar to bioenergy producers for processing into fuel-grade ethanol and other biofuels. Competitive bids would be used by USDA to purchase sugar from processors and also to sell that sugar (together with any sugar forfeited by processors) to ethanol producers. An exception to the requirement to activate this program is that forfeited sugar may be sold back into the market for human food use in the event of an emergency shortfall of sugar. In August and September 2013, USDA activated this program as remaining loans came due and sugar prices headed below effective support levels ( Figure 3 and Figure 4 ). Sugar Program Draws Sharply Differing Views The sugar program has long been the subject of controversy, both among lawmakers and among competing interests within the sugar market. In part, disagreement over the sugar program has centered on whether it strikes the right balance between government support for the domestic sugar industry in the face of subsidized foreign sugar and the cost this support may impose on sugar users and consumers in the form of marketplace distortions and potentially higher sugar prices than might otherwise prevail. From one side of this controversy, the American Sugar Alliance (ASA), representing U.S. sugar industry interests, asserts that even though U.S. sugar producers are among the most efficient in the world, they cannot compete with foreign subsidies that encourage the production of surpluses that are dumped onto the world market at prices that are often below the cost of production. As to the competitiveness of U.S. sugar prices, ASA issued the results of a study from 2015 that indicated that U.S. retail prices of sugar in 2014 were below the average for developed countries and also below the average retail price in some major exporting countries, including Brazil and Australia. The Sugar Users Association, representing companies that use sweeteners in their business operations, has a very different perspective on this issue, contending that the sugar program is poorly designed. In particular, it argues that TRQ allocations are dated and that this has the effect of restricting export quotas to certain countries that in some cases either cannot fill their entire quotas or may not ship any sugar to the United States. As such, it asserts the TRQ program tends to distort and destabilize the U.S. sugar market, which it argues has led to job losses in sugar-using food industries. As to whether the sugar program harms consumers through higher sugar prices, an analysis issued in 2013 by the Center for Agricultural and Rural Development at Iowa State University concluded that eliminating the U.S. sugar program—including marketing allotments and import quotas and tariffs that restrict the availability of sugar for domestic human use—would increase U.S. consumers' welfare by between $2.9 billion and $3.5 billion each year while also supporting a modest increase in employment in the U.S. food processing industry. The paper was commissioned by the Sweetener Users Association. The ITC took a narrower approach to this question in a report from 2013 that analyzed the potential effects of removing only the existing restrictions on U.S. sugar imports. The ITC concluded that removing sugar import restrictions would result in a meaningful decline in U.S. sugar production and employment within the sugar production and processing sectors in tandem with a substantial expansion in total U.S. sugar imports. As for sugar prices, the report projected that the elimination of import restrictions would produce welfare gains for U.S. consumers amounting to $1.66 billion over the period 2012-2017, equating to a yearly benefit of $277 million. Administrative Year in the Sugar Program The text box below sets out specific dates, and calendar windows, for undertaking key administrative actions that are integral to managing the U.S. sugar program.

The U.S. sugar program provides a price support guarantee to producers of sugar beets and sugarcane and to the processors of both crops. The U.S. Department of Agriculture (USDA), as program administrator, is directed to administer the program at no budgetary cost to the federal government by limiting the amount of sugar supplied for food use in the U.S. market. To achieve both objectives, USDA uses four tools—as reauthorized without change by the 2014 farm bill (P.L. 113-79) and found in chapter 17 of the Harmonized Tariff Schedules of the United States—to keep domestic market prices above guaranteed levels. These are: price support loans at specified levels—the basis for the price guarantee; marketing allotments to limit the amount of sugar that each processor can sell; import quotas to control the amount of sugar entering the U.S. market; a sugar-to-ethanol backstop—available if marketing allotments and import quotas are insufficient to prevent a sugar surplus from developing, which in turn could result in market prices falling below guaranteed levels. To supplement these policy tools in supporting sugar prices above government loan levels, while avoiding costly loan forfeitures, important administrative changes were adopted in late 2014. These included imposing limits on U.S. imports of Mexican sugar and establishing minimum prices for Mexican sugar imports, actions that fundamentally recast the terms of bilateral trade in sugar. A U.S. sugar refiner is pursuing a legal challenge to the U.S. government's finding that these changes have eliminated the harm to the U.S. sugar industry, so although this new regime is in effect, a measure of uncertainty about its future remains. Under the U.S. sugar program, nonrecourse loans that may be taken out by sugar processors, not producers themselves, provide a source of short-term, low-cost financing until a raw cane sugar mill or beet sugar refiner sells sugar. The "nonrecourse" feature of these loans means that processors—to meet their repayment obligation—can exercise the legal right to forfeit sugar offered as collateral to USDA to secure the loan, if the market price is below the effective support level when the loan comes due. Sugar marketing allotments limit the amount of domestically produced sugar that processors can sell each year. In a 2008 farm bill provision, retained by the 2014 farm bill, USDA each year must set the overall allotment quantity (OAQ) at not less than 85% of estimated U.S. human consumption of sugar. The OAQ is intended to ensure that permitted sales of domestic sugar, when added to imports under U.S. trade commitments, do not depress market prices below loan forfeiture levels for refined beet sugar and raw cane sugar. The United States imports sugar in order to meet total food demand. The amount of foreign sugar supplied to the U.S. market reflects U.S. commitments made under various trade agreements. The most significant import obligation is the World Trade Organization (WTO) quota commitment, which requires the United States to allow not less than 1.256 million tons of sugar (almost all raw cane) to enter the domestic market from 40 countries. The United States also grants much smaller import quotas to nine countries covered by four free trade agreements. At the same time, a 2008 farm bill provision, also retained in the 2014 farm bill, directs USDA to manage overall U.S. sugar supply, including imports, so that market prices do not fall below effective support levels. If market prices fall below levels guaranteed by the sugar program, USDA must administer a sugar-for-ethanol program in which it buys domestically produced sugar from the market and sells it to ethanol producers as feedstock for fuel ethanol. A source of controversy over the sugar program is the balance it strikes between the interests of the sugar industry and sugar users.

Introduction For over 20 years, U.S. trade negotiations have followed two tracks: multilateral talks such as the Doha Development Round of the World Trade Organization (WTO) and bilateral and regional arrangements with other countries, known as free trade agreements (FTAs). To date, the United States has entered into a dozen FTAs with various trading partners including Israel, Canada, Singapore, Chile, and Australia. FTA agreements with Colombia, Panama, and South Korea are pending before Congress now. This report evaluates the implications of the potential U.S. agreement with South Korea for American manufacturers and compares it with a similar pending free trade agreement between South Korea and the European Union (EU). South Korea has already enacted FTAs with countries such as Chile, Singapore, and India, and also is currently negotiating FTAs with other trading partners, including Australia, Canada, Japan, and Mexico. The implications of these arrangements for the United States are not discussed in this report. A major outstanding issue in the commercial relationship between the United States and South Korea is the three-year old pending FTA, commonly referred to as the KORUS FTA. It was signed by the Bush Administration in 2007, but has yet to be submitted to Congress for approval. If accepted, it would be the second-largest free trade arrangement approved by the United States next to the North American Free Trade Agreement (NAFTA), which entered into force in 1994. On December 3, 2010, President Obama announced that cabinet-level negotiations and his discussions with South Korean President Lee Myung-bak produced modifications in the KORUS FTA that he believes addresses his concerns and those of Congress. In a nutshell, the pending KORUS FTA would eliminate tariff and non-tariff barriers for U.S. and South Korean manufacturers in a range of industrial sectors, including automobiles, consumer and industrial products, textiles and apparel, and pharmaceuticals and medical devices. The main section of this report compares the manufacturing components of the two agreements. In particular, it reviews automotive trade, the most politically and economically sensitive manufacturing sector in both agreements. Also included is a brief overview of the possible implications of the two pending FTAs on other selected industrial sectors affected by the FTAs: home appliances, consumer electronics, textiles and apparel, and pharmaceuticals and medical devices. The report begins by providing a legislative outlook and reviews the positions of key stakeholders. Agricultural and services trade are not covered. Legislative Prospects The KORUS FTA is a candidate for fast-track legislative consideration (automatic discharge from committee, no amendments, and limited debate) under the Bipartisan Trade Promotion Authority Act of 2002, because the agreement was entered into before July 1, 2007, the date on which the President's authority to enter into qualifying agreements expired. The implementing bill, which would be submitted to Congress by the Administration but, given past practice, would be drafted in consultation with Congress, would include a provision to approve the FTA, as well as provisions "necessary or appropriate" to implement the agreement. Under fast-track procedures, Congress votes on the implementing legislation as submitted and can either approve it or reject it as whole. In areas of concern to some members of Congress such as automobiles, however, members might suggest that provisions addressing their concerns be included in the implementing legislation or seek assurances from the executive branch regarding the implementation of the agreement in these areas. As Congress considers what action it might take on the KORUS FTA, the European Union and South Korea have completed their own negotiations of a comprehensive free trade agreement (KOREU FTA). They initialed the agreement on October 15, 2009. Signing and ratifying the KOREU FTA is a complicated process. The FTA must be formally adopted by the EU Council of Ministers, which represents the national governments and is the European Union's main decision-making body. Thereafter, it can be submitted to the European Parliament, which represents the citizens of the EU, for a vote. The KOREU FTA is the first bilateral trade agreement subject to an up or down vote in the European Parliament under the provisions of the Lisbon Treaty, which became effective in 2009. If approved, it means the FTA is provisionally ratified in the European Union and can enter into force. Provisional application is a common practice in the European Union (EU trade agreements with Mexico (2000) and Chile (2003) were also subject to provisional application). Full ratification of the KOREU FTA requires approval by all 27 member states. In South Korea, the process is easier since only the approval of the National Assembly is required for ratification. In many ways, the KOREU FTA is a similar agreement to the pending KORUS FTA. It is expected to facilitate manufacturing trade between the European Union and South Korea by eventually removing most customs duties and addressing regulatory obstacles across various sectors, including autos, consumer electronics, and pharmaceuticals. The possible competitive impact on U.S. manufacturers of a KOREU FTA will likely be debated by Congress when it considers whether or not to ratify the KORUS FTA, which could be in 2011. Likewise, the competitive implications of a KORUS FTA for European manufacturers, particularly for European automakers, will be considered as the European Parliament debates whether to approve the KOREU FTA. It remains to be seen if the KORUS FTA or KOREU FTA will be ratified first, or if either agreement will be approved. Some observers speculate that the auto sections of the FTAs may require some form of side agreement or other arrangement, which have yet to be worked out, before either agreement can be passed by the U.S. Congress or the European Parliament. Stakeholder Perspectives A large number of U.S. and EU industry observers expect gains for their respective industrial sectors upon the implementation of the KORUS FTA and the KOREU FTA. Various economic impact studies are used to support their positive assessments. One U.S. business advocacy group, the U.S.-Korea FTA Business Coalition, which represents a broad-based group of U.S. companies, concludes the KORUS FTA "will give U.S. exporters and investors a competitive edge." Similarly, U.S. business groups such as the Business Roundtable and the National Association of Manufacturers (NAM) are also supportive of the KORUS FTA. A cross-section of U.S. manufacturing sectors, including information technology, aircraft equipment, medical devices, and pharmaceuticals, stand to gain from the KORUS FTA based on assessments by the U.S. International Trade Commission (ITC) and the U.S. Department of Commerce. The ITC, which generates official estimates of the likely impacts of proposed trade agreements, estimates that the reduction of tariff and non-tariff barriers to U.S. manufactured and agricultural goods under the KORUS FTA would increase U.S. goods exports to Korea by $10 billion to $11 billion and boost U.S. gross domestic product (GDP) by nearly $12 billion. The Administration estimates that full implementation of the KORUS FTA could add up to 70,000 jobs in the United States. Europe's business federation, Business Europe, has a positive assessment of the pending KOREU FTA stating "the EU-Korea FTA will bring significant benefits to European firms." One study estimates the KOREU FTA would create up to $24.2 billion (€19 billion) in new trade in goods and services for EU exporters. Almost all EU and member states business confederations and sectoral groups support the agreement. Nevertheless, the business communities in the United States and the European Union are not uniformly in favor of their respective pending bilateral agreements with South Korea. Most prominently, until the December 2010 supplemental agreement between the U.S. and South Korea, trade in automobiles remained a lingering issue. A key stumbling block to approval of the KORUS FTA had been complaints by Ford, Chrysler, and the United Auto Workers (UAW) that it did not do nearly enough to open the South Korean market to U.S. auto sales. Ford changed its position on the KORUS FTA in December 2010 and issued a statement in support of the revised agreement based on the strengthened automotive provisions. GM issued a positive statement on the KORUS FTA in December 2010. The UAW is also supportive of the revised agreement. Views also diverge among European carmakers. Some European car producers are relatively neutral on the KOREU FTA, particularly those that export larger European luxury cars and have created a strong market niche for their automobiles in South Korea (see Appendix A ). European automakers of smaller and middle-sized cars, such as Fiat, are most often in direct competition with South Korean manufacturers like Hyundai and Kia. Thus, they continue to push for what they deem a balanced and symmetric liberalization of the two auto markets. Beyond a possible competitive threat, some European automakers claim their access to the South Korean market might remain hampered by non-tariff barriers. Ivan Hodac, secretary general of the European Automobile Manufacturers' Association (ACEA), claims 30,000 manufacturing jobs could be lost and 10 plants closed across Europe if the KOREU FTA is implemented. The steel sectors in the United States and the European Union are also notable dissenters. U.S.-based steel manufacturers argue the KORUS FTA would weaken U.S. trade remedy laws (i.e., antidumping and countervailing duty). EUROFER, the European Union's steel industry representative, has raised concerns about the KOREU FTA stating, "the result is sectoral winners and losers with potential negative effects for steelmaking in Europe." Initially U.S. and EU labor groups were largely opposed to their respective pending FTAs with South Korea. They viewed the FTAs as bad deals for their workers, possibly threatening U.S. and EU manufacturing jobs because of the asymmetrical commercial relationship, among other reasons. Unlike the positive data presented by the U.S. government and most business groups, research by the labor-oriented Economic Policy Institute claims the U.S. trade deficit with South Korea would increase by about $16.7 billion and cost 159,000 American jobs within seven years after the KORUS FTA takes effect. However, with the modifications announced in December 2010 the UAW issued a statement in support of the KORUS FTA. The UAW stated that "the changes announced to the U.S.-Korea Free Trade Agreement (FTA) today are a dramatic step toward changing from a one-way street to a two-way street for trade between the U.S. and South Korea." Other labor groups like the United Steelworkers and the International Association of Machinists and Aerospace Workers (IAM) remain opposed. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) also remains opposed to the agreement with South Korea, citing major concerns over provisions that the union believes would encourage the offshoring of U.S. jobs. In Europe, the European Metalworkers' Federation (EMF) has expressed similar apprehension explaining the pending KOREU FTA would further worsen the already difficult situation of the European car sector and could result in significant job losses. They see the pending KOREU FTA as unbalanced, which could give South Korean automakers a competitive advantage. European trade unions representing textiles, clothing, and leather workers are also on record against the KOREU FTA. A Possible First Mover Advantage Manufacturers from the United States and the European Union compete to export their products to South Korea. Each side sells many of the same products to South Korean consumers. In 2009, U.S. goods exports to South Korea totaled $28.6 billion, while EU goods exports to South Korea were about the same at $29.8 billion (see Table 1 ). For U.S. manufacturers, South Korea was the sixth-leading goods export destination behind the larger and more commercially significant markets of the European Union, Canada, Mexico, China, and Japan in 2009. For EU manufacturers, South Korea ranked as the 12 th -leading export market, well behind the United States, Switzerland, China, Russia, India, Canada, and Australia, among others, in 2009. Major U.S. merchandise export categories to South Korea are machinery, medical devices, and aircraft and parts, while top EU goods exports to South Korea include machinery, vehicles (cars and trucks), and medical devices. U.S. and EU negotiators paid particular attention to these sectors as they negotiated their respective FTAs with South Korea. Given this, some argue the implementation of a KORUS FTA or a KOREU FTA could provide a competitive advantage (a so-called first mover advantage) by displacing the other's products in the South Korean market. There is concern among some U.S. manufacturers that they could find themselves at a disadvantage if European goods enter the South Korean market duty-free, or if non-tariff barriers are eliminated for EU manufacturers, before U.S. products receive comparable benefits. If the KOREU FTA takes effect first, business groups such as NAM claim U.S. manufacturers could find themselves locked out of the South Korean market. According to NAM, Hundreds of thousands of U.S. jobs depend already on existing exports of manufactured products to Korea. We risk those jobs by not moving forward on the KORUS agreement as quickly as possible—already the EU is close to implementing their own FTA with Korea, which will make their exports far more competitive. We cannot fall behind in crucial markets like Korea. Notwithstanding a possible first mover advantage, it seems U.S. and EU manufacturers are likely to benefit less from their respective FTAs with South Korea when compared with the possible gains for South Korean manufacturers in the larger U.S. and EU markets. This is mostly because South Korea is a relatively smaller market with 48.6 million consumers and a gross domestic product (GDP) of $1.4 trillion. The United States market has nearly 310 million people and a GDP of $14.3 trillion, while the European Union market consists of 492 million people with a GDP of $14.4 trillion. Yet, of the three pending FTAs negotiated by the United States, the one with South Korea is the largest. So far, no data have been released by the U.S. government comparing the possible trade effects on U.S. exporters if the KOREU FTA is implemented before the KORUS FTA. One business advocacy group, the U.S. Chamber of Commerce, funded a study which found the United States could lose 345,017 jobs, $20.3 billion in export sales, and $40.4 billion in U.S. national output nationwide if the EU and Canada FTAs with South Korea are enacted and the KORUS FTA is not implemented. Another estimate produced by the Ways & Means Committee Republican Staff found that the United States could lose $1.1 billion in exports to South Korea if the pending KOREU FTA is fully implemented and the United States fails to implement the KORUS FTA. A 2007 U.S. International Trade Commission (ITC) study on the KORUS FTA concluded the United States likely would import more South Korean products such as motor vehicles and parts, textiles and apparel, and footwear if the agreement is implemented. The same pattern is forecast for Europe. Economic studies indicate South Korea will likely increase its exports of goods to the European Union, especially of automobiles and electronics. South Korean-built cars exported to the European Union could be among the major beneficiaries once the KOREU FTA is implemented, as the European Union would eliminate its existing 10% tariff on South Korean-built cars within three to five years. Other South Korean industrial sectors might also gain market share in the European Union. Comparable export and import patterns also mean the KORUS FTA and KOREU FTA tackle many of the same issues because U.S. and European manufacturers compete directly in various industrial sectors. U.S. and EU consumers also stand to benefit from the two pending FTAs as a broader selection of goods, possibly at lower prices, become available due to increased trade with South Korea. Competing Automobile Manufacturers Motor vehicles are the most controversial manufacturing issue in both agreements because of the industry's importance as a domestic employer and source of innovation, as well as an export sector for all three trading partners. A perceived imbalance in motor vehicle imports and exports has also raised the motor vehicle profile within the FTAs. In 2009, the United States, Germany, and South Korea ranked as the third, fourth, and fifth leading motor vehicle producers, respectively, worldwide (behind Japan and China). Passenger car production by South Korea's four domestic car manufacturers—Hyundai-Kia Motor Group, GM-Daewoo, Ssangyong Motor, and Renault Samsung—was 3.2 million in 2009. The Korea Automobile Manufacturers Association (KAMA) forecasts passenger car production to increase to 3.3 million in 2010, which could allow South Korean carmakers to boost their domestic car sales and their motor vehicle exports to both the United States and European Union as well as to other markets. An advantage for South Korean carmakers is they export two-thirds of their domestically built cars to the much larger U.S. and EU markets, which are more than 10 times larger than the South Korean market. U.S. light vehicle sales totaled 10.4 million units and new passenger car registration in the European Union added up to 14.5 million units in 2009. This compares with the South Korean auto market where U.S. and EU carmakers vie to sell their domestically built cars in a considerably smaller market of 1.2 million passenger cars in 2009. A Comparison of U.S., EU, and South Korean Automotive Trade As reported by the U.S. Commerce Department's Office of Transportation and Machinery, the United States automotive sector posted a trade deficit of $7.9 billion with South Korea in 2009, covering passenger vehicles and light trucks and auto parts. This represented nearly three-quarters of the total U.S trade deficit with South Korea of $10.6 billion. The European Union's trade deficit with South Korea is mainly due to imports of cars and electronics. South Korea's car industry is export-driven. In 2009, South Korea's automakers exported over 60% of its total passenger car production worldwide. Passenger vehicles built in South Korea are exported to the United States and the European Union in large numbers, even though exports were down considerably in 2009 over the previous year largely due to the overall economic downturn in the auto market. As shown in Table 2 , South Korean carmakers exported just over 475,000 passenger vehicles and light trucks to the United States in 2009, down 23% over 2008. Exports of South Korean cars to the European Union totaled 350,000 units in 2009, a drop of 22% from 2008. The passenger car market in South Korea is dominated by its domestic manufacturers. There is a low import penetration rate: passenger car imports (cars made in the United States, the European Union, and other foreign markets and exported to South Korea) accounted for 5.2% of South Korea's total domestic sales in 2009 of 1.2 million cars, compared with 6.4% the previous year. Cars manufactured by GM-Daewoo or Renault Samsung in Korea and sold in Korea are excluded from this market share figure. Foreign carmakers exported nearly 61,000 passenger vehicles to South Korea in 2009, as shown in Table 3 . Of these sales, European luxury vehicles such as BMWs, Mercedes, and Audis comprised over half; six of the top 10 best-selling imported cars by model were European brands, reports the Korea Automobile Importers & Distributors Association (KAIDA, see Appendix A ). Japanese automakers accounted for 28% of all imported domestic passenger vehicles in 2009. U.S. car manufacturers represented the smallest share at 10% (with no American models among the top 10 best sellers among imported cars in 2009). Based on these figures, some U.S. and European car manufacturers argue an unbalanced trade relationship exists. This has become a central issue for some lawmakers, both in the United States and the European Union. They believe auto trade needs to be more fully addressed before the pending KORUS or KOREU FTAs can be ratified. On the other side, South Korea's auto industry, and the South Korean government, argues that while the number of imported cars may seem low, there has been a substantial increase in imports of U.S. and European-built cars over the last decade. Exports of U.S. automobiles to South Korea rose by nearly 400%, from 1,214 to more than 6,100, between 2000 and 2009, while European auto exports grew over 1,000% from 3,176 to 37,826 during the same period (see Table 3 ). Overseas Production by U.S., EU, and South Korean Automakers Foreign automotive transplants, including South Korean transplants, have built major production facilities in the United States and the European Union. Likewise, U.S. and European automakers manufacture cars in overseas markets like South Korea. These cars are not covered by the tariff or non-tariff provisions in either pending FTA since they are all built domestically, but they represent an important component of automotive trade. Trade flows have been impacted by these investments. Presumably, increased production capacity of South Korean manufacturers within the United States and the European Union would displace some imports from South Korea. South Korean Auto Production in the United States South Korean automakers established production facilities in the United States in the mid-2000s. Hyundai started production in 2005 at its Montgomery, AL, plant, where it makes the Sonata and the Santa Fe Sports Utility Vehicle (SUV). It now sources 46% of its U.S. sales with cars built in the United States. A Kia factory opened in West Point, GA, in 2009. Because of these investments, in just five years, South Korea's U.S. transplants doubled their production, reaching 196,000 light vehicles in 2009. Also sales of U.S.-built cars by Hyundai increased 6% year-over-year from 188,351 in 2008 to 200,371 units in 2009. South Korean automotive transplants are major employers in the United States. For instance, Hyundai Motor Manufacturing Alabama (HMMA) directly employs more than 2,700 U.S. workers. Kia Motors Manufacturing Georgia (KMMG) began mass production in November 2009; it now directly provides work for more than 2,000 U.S. workers. At full capacity KMMG will be able to produce 300,000 vehicles annually and employ 2,500 workers. HMMA and KMMG manufacturing plants also support thousands of jobs at supplier companies, thus sustaining an additional 5,500 jobs and some 7,500 jobs, respectively. South Korean Auto Production in the European Union South Korean car manufacturers also make and sell their passenger cars within the European Union. Kia and Hyundai have produced cars in the Slovak Republic and the Czech Republic since 2007 and 2008, respectively. Each auto plant has the capacity to produce 300,000 vehicles and engines. In 2009, passenger car production at the Kia plant totaled 150,000 and at the Hyundai plant production totaled 118,000. South Korean automakers also make cars at European auto assembly facilities located outside the European Union; in nearby Turkey, for example. U.S. and European Joint Ventures with South Korean Automakers U.S. and European automakers also have joint ventures with foreign competitors. GM sold nearly 115,000 cars directly to South Korean consumers through its South Korean subsidiary, GM-Daewoo or GM-DAT, in 2009. The French carmaker Renault sells cars through its subsidiary, Samsung, with a production capacity of 300,000 vehicles a year; its 2009 South Korean sales volume totaled 133,630, the rest being exported. Automotive Tariff and Non-Tariff Barriers Import duties protect the South Korean car market from foreign imports. Less overt are the technical non-tariff barriers, or so-called NTBs; they are increasingly of greater significance because they may impede exports from the United States and the European Union to South Korea. NTBs can take many forms including a complex regulatory regime, environmental and safety standards, import licenses, tax regimes, and bureaucratic arbitrariness. Customs duties and NTBs are covered in the KORUS FTA and the KOREU FTA. U.S., EU, and South Korean Automotive Tariffs Customs duties differ in all three markets and the FTA timelines for their elimination vary. The pending KOREU FTA includes a transition period for the elimination of its automotive tariffs, from three to five years depending on the size of the car. The 2007 KORUS FTA would have eliminated their respective passenger car tariffs more quickly than under the KOREU FTA upon implementation. But the 2010 supplemental agreement changed the original terms of the KORUS FTA. It now puts the U.S. and EU on roughly the same tariff elimination schedule, rather than abolishing them immediately. For instance, South Korea would eliminate its 8% tariff on U.S. passenger cars (including electric cars and plug-in hybrids) within five years following implementation. One exception is the U.S. truck tariff of 25%, which would remain for the first seven years following implementation and would then be phased out completely in year 10. The truck tariff in the KOREU FTA agreement would be eliminated within five years, depending on the size of the truck. It is unlikely tariff reduction by itself will significantly improve export volumes of U.S. or EU carmakers to South Korea, although U.S. and EU carmakers might be able to reduce their prices in the South Korean market of their higher-priced luxury vehicles such as the Lincoln MKX and MKZ, BMW 528, and Mercedes 3000. The case is different for South Korean automakers. They might increase their exports, or perhaps even raise their profit margins, in the much larger U.S. or EU markets. South Korean cars may appear to many to have a competitive advantage, as they are often more affordable than expensive luxury vehicles and SUVs produced by U.S. and European automakers. Fuel efficiency and generous warranties are other factors which contribute to strong sales of cars made by South Korean manufacturers. KORUS FTA Auto Tariffs The KORUS FTA requires South Korea to eliminate its 8% tariff on U.S. passenger cars (including electric cars and plug-in hybrids) over five years following implementation. In return, the United States would remove its tariff of 2.5% on imported passenger vehicles five years after the agreement takes effect (see Appendix B ). KOREU FTA Auto Tariffs EU negotiators rejected South Korea's proposal for an immediate abolition of tariffs on certain types of vehicles, particularly small cars. This was largely in response to concerns by EU automakers who worry Hyundai and Kia cars (e.g., vehicles like the Hyundai Accent or Elantra) could flood into Europe if the European Union car tariff of 10% is abolished. European manufacturers of small cars like Fiat are especially worried; its Bravo and Linea both have engine displacements below 1,500 cc. Instead, the KOREU FTA would eliminate customs duties on cars over three to five years in equal cuts depending on engine displacement size. The European Union small car tariff of 10% for models with engines smaller than 1,500 cc would be eliminated within five years, while its tariffs on medium and larger sized vehicles (with engines larger than 1,500 cc covering cars such as the BMW 740i, Audi A4 2.0 TFSI quattro, or the Mercedes-Benz E300 EL) would be eliminated within three years. South Korea would phase out its 8% tariff on EU car imports over three or five years, depending on engine displacement size. European Union tariffs on auto parts, which range from 3% to 4.5%, depending on the product, would be eliminated immediately, as would South Korea's 8% tariff on imported auto parts from the European Union. KORUS and KOREU FTA Truck Tariffs All three markets maintain high truck tariffs, which are 10% in South Korea, 22% in the European Union, and 25% in the United States as shown in Appendix B . The high truck tariffs apply to pickup trucks, panel vans, and commercial vehicles, while many light trucks such as SUVs and minivans are counted as cars. Under the KORUS FTA, South Korea would eliminate its 10% truck tariff immediately, whereas the 25% U.S. tariff on trucks, which is 10 times higher than the U.S. auto tariff, would remain in place for the first seven years and be phased out completely in year 10. The KOREU FTA stipulates immediate elimination of South Korea's 10% truck tariff on most trucks with some exceptions, whereby tariffs will be eliminated over three or five years. The European Union's 22% truck tariff will be removed over three or five years, depending on the type of vehicle. Tariff Refund Provisions—Duty Drawback and Snapback Another difference between the two FTAs is a duty drawback (DD) mechanism, which is only included in the KOREU FTA. The DD provision allows for reimbursement, or a tariff refund, of customs duties under certain conditions. It permits South Korea to provide tariff refunds to South Korean manufacturers on automobile parts when the final product (e.g., an automobile) is exported to Europe. Under this arrangement, a South Korean car manufacturer can buy auto parts from manufacturers in low-cost countries, such as China, and claim the duties back when the vehicles containing the parts are shipped to the European Union market. European Union and South Korean negotiators agreed to cap the refund if there is a significant rise in imported parts and components starting five years after the KOREU FTA takes effect. So far, there is little research on duty drawback and its consequences. But, some analysts believe South Korean imports of car parts from neighboring low-cost countries like China could increase significantly as a result of the agreement, and could possibly improve the price competitiveness of South Korean exports. For example, Chinese radios could enter the European Union duty-free in South Korean cars using this mechanism, while EU companies will pay a tariff (14%) when importing the same radios from China. ACEA, Europe's automotive industry trade group, opposes the DD provision. But, the European Commission maintains the impact of the DD system should be small since there is currently a low level of foreign content in South Korean products (below 10%). This provision is being watched closely because it could serve as a model for future European FTAs (see Appendix C ). A "snapback" remedy is included in the KORUS FTA, but not in the KOREU FTA. However, the 2010 KORUS FTA agreement added a special motor vehicle safeguard in the event of a surge in South Korean automobile exports to the United States. The United States under its automotive dispute settlement procedure would maintain the right to reimpose pre-existing tariffs on cars if South Korea were to engage in unfair trading practices (the snapback provision does not extend to the 25% U.S. truck tariff). Some within the European Union argue the KOREU FTA should have included a KORUS FTA similar snapback provision. The European Parliament's Committee on International Trade has proposed a clause to accompany the KOREU FTA, which would strengthen the safeguard clause in case of an import surge. It would, among other things, allow industry and the European Parliament to request an investigation (this provision applies not just to autos, but to any industries affected by increased imports) and proposes applying safeguard measures at the regional level in exceptional cases. This matter remains unresolved, as it raises several sticky issues for the European Union, including whether regional emergency safeguard measures (i.e., imposition of emergency tariffs in a single EU member state or group of countries in the event of an import surge) would violate the European Union's single market rules, and possibly threatens to delay ratification of the KOREU FTA for months. Non-Tariff Barriers Even with the final elimination of tariffs if the FTAs are implemented, U.S. and EU carmakers fear their access to the South Korean car market could remain capped because of subtle NTBs, which have been used to protect South Korea's domestic market and limit foreign imports. Often, NTBs can result in a lengthy and costly approval process for non-Korean based producers who export cars to South Korea. While South Korea's safety and environmental standards apply to both domestic and foreign car manufacturers, including U.S. and EU-built cars, South Korean manufacturers are better able to amortize the costs because they sell most of the cars purchased in the domestic market. Anti-import sentiment, used by the South Korean government in the past, is another example of an auto NTB. Some in the United States and the European Union auto sectors remain skeptical South Korea will faithfully implement its NTB obligations in autos, even if the two pending FTAs are ultimately approved and implemented, given its past haphazard enforcement record. Skeptics maintain two U.S.-South Korea bilateral auto agreements, signed in the 1990s, did little to dismantle long-standing auto NTBs and South Korea never respected its side of these agreements. Ford Motor Company has chronicled the history of barriers to auto imports in South Korea, which was included in a statement to USTR on the pending KORUS FTA. Among other things, in their September 2009 statement Ford noted that despite the two agreements, "Korea continues to frequently enact technical requirements that have a disproportionately adverse impact on importers." The South Korean ambassador to the United States, Ambassador Han Duk-soo, argued in a speech to the Detroit Regional Chamber of Commerce in August 2010 that "there was a time when the Korean auto market was protected. But that time is long gone, and the current perception is not based on current realities." Automotive Safety Standards For years, unique South Korean automotive safety and environmental standards have been a major concern for U.S. and European carmakers. Some of the flagged technical import barriers include front tow hooks, headlamp standards, tinted rear-windows, and vehicle emissions changes. Safety and environmental standards have the potential to add costs associated with compliance, thus both the KORUS and KOREU FTAs include provisions to address those standards viewed as unfair by some U.S. and EU automakers. Globally, two main systems regulate motor vehicle safety standards: U.S. and Canadian auto safety standards are based on a self certification system (in the United States it is the Federal Motor Vehicle Safety Standards, or FMVSS, and in Canada there is an analogous regulation called the Canada Motor Vehicle Safety Standard, or CMVSS, which is largely similar to and patterned after the FMVSS). In most of the rest of the world, auto safety standards are based on the main international standardizing body for automotive products, which are set by the United Nations Economic Commission for Europe (UNECE). There is also a third way. A country like South Korea can decide to require compliance with its own standards, making it expensive for foreign-based manufacturers to export cars to the relatively smaller South Korean market, or in some cases effectively shutting foreign producers out of the market altogether. Some in the United States government and industry claim South Korean auto standards are "unique, non-transparent and out of sync with international standards." Yet, at the same time, it is important to recognize the United States adheres to its FMVSS system and distinctively does not recognize UNECE approvals, which are used in most countries. Thus, cars cannot be imported or exported between the United States and most of the rest of the world without appropriate modifications. Both FTAs deal with this issue. KORUS FTA Reflecting differences in standards setting, the United States approach differs from that of the European Union, and most other countries. Distinct from the KOREU FTA, the KORUS FTA permits "low-volume seller exemptions," which under the terms of the December 2010 agreement allow each U.S. automaker to sell up to 25,000 vehicles per year in South Korea built to U.S. safety standards without any additional modification. This is four times the level permitted in the 2007 KORUS FTA, which would have limited each U.S. automaker to 6,500 vehicles per year. Raising the level means U.S. carmakers will be able to build more cars to U.S. safety standards and export these automobiles to the smaller South Korea market without incurring any additional costs that alterations and adjustments to South Korean standards would require. KOREU FTA Under the KOREU FTA, South Korea commits to recognize UNECE regulations for automotive products as equivalent to South Korean domestic standards for core safety once the agreement enters into force. Another 29 standards covering such technical regulations as seat belts, passenger seats, headlamps, and rearview mirrors will be harmonized with UNECE regulations within five years. All other standards not subject to harmonization or equivalence are expected to be applied in a manner which does not limit market access. Any new standards would be based on UNECE standards, and going forward new features and technologies are required not to hinder trade. The European Commission claims the agreement contains strong provisions guaranteeing an almost complete harmonization of technical standards and rules between the two parties of the agreement. For example, safety standards such as crash tests in compliance with European standards will be recognized by South Korea. Others argue the KOREU FTA does not fully acknowledge international standards and South Korea will continue to apply its own unique rules. ACEA maintains EU access to the South Korean car market will continue to remain limited even with the implementation of the KOREU FTA because an approved and tested EU car cannot be sold directly in South Korea without costly modifications. In the safety standards realm, the European Union seems to be trying to win equal, if not better, footing against U.S. automakers in the South Korean market. Common auto norms could help EU car manufacturers develop products, reduce costs, and improve their economies of scale when exporting to South Korea. USTR has committed to a closer examination of these differences to fully understand the possible commercial implications for U.S. manufacturers of autos. Environmental Protection Standards Environmental protection standards are another way a country can impede trade. U.S. and EU-built cars exported to South Korea must adhere to South Korean environmental norms, which include local standards on vehicle emissions. Environmental standards are addressed in both pending FTAs. Each covers measures related to emission standards, such as South Korea's Ultra Low Emission Vehicles requirements and on-board diagnostics, or OBD systems, which monitor the emission control in a car. Despite the provisions in both FTAs, there is concern by U.S. and EU automakers that they will continue to incur significant additional costs to meet South Korean environmental standards. They also worry about the potential consequence of new environmental standards that might be adopted in the future. Other Automotive-Related Non-Tariff Barriers Several other auto-related non-tariff barriers impact automotive trade, including South Korea's tax structure for automobiles, rules of origin, and the negative perception (or anti-import sentiments) on the part of some South Korean consumers about imported vehicles. KORUS FTA and KOREU FTA provisions related to remanufactured goods and the Kaesong Industrial Complex also affect automotive trade. Automotive-Specific Taxes Specific taxes assessed on motor vehicles are seen as another barrier to foreign car sales in South Korea since these taxes play an important role in determining the final price of a vehicle. A special consumption tax, an educational tax, a value-added tax, a registration tax, and a subway bond are among the taxes which apply to automobiles. These taxes are often based on engine size, with higher taxes assessed on vehicles with larger engines (2,000 cc or larger) which tend to be foreign cars built in the United States or the European Union. The 2008 World Trade Organization (WTO) trade policy review on South Korea reported that "the effect of multiple automotive taxes raises the effective rate of protection to above 12%," which is viewed by European and U.S. car industry associations as unfair. Automotive-specific taxes are approached differently in the KORUS and KOREU FTAs. The KORUS FTA specifically addresses South Korea's motor vehicle tax system and includes provisions to reduce aspects of South Korea's Special Consumption and Annual Vehicle Taxes. The KOREU FTA simply affirms any modification to South Korean auto taxes will be made on a "most favored nation" basis with any changes to South Korea's regulatory or tax structure applying to all WTO members. Dispute Settlement Expedited automotive dispute settlement mechanisms are a part of both FTAs, but they vary. Differences include how quickly each panel would reach a decision and the remedies open to the parties involved. A final arbitration ruling under the KOREU FTA would be reduced to 75 days from 120 days; this compares to the 141 days it could take for a final report under the KORUS FTA. Automotive working groups are established by both agreements and would meet at least once a year; their objective is to serve as an early warning system for potential trade barriers related to testing and certification standards and the implementation of future standards and requirements related to autos. U.S. automakers have already raised new NTB concerns about South Korea's Low Carbon Green Growth Act, which some believe might result in more environmentally stringent standards for foreign-built cars. Such concerns may be handled by a working group established under the KORUS FTA. Under the KORUS FTA 2010 supplemental agreement, the U.S. and South Korea agreed to greater transparency with respect to automotive provisions, including a 12-month time period between the time a final regulation is issued and the time auto companies must comply with it. Rules of Origin Rules of origin are used to verify that products are eligible for duty-free status under preferential trading programs, including free trade arrangements. A local content test is required to ensure that a product contains a minimum percentage of domestic value-added in the originating country and is thus eligible to receive a tariff benefit. The levels of permissible foreign content for autos under the KOREU FTA were raised from the current EU standard rule of 40% to 45%. The KORUS FTA requires that 35% of the content in an automobile originate in either the United States or South Korea and allows for three rules of origin methodologies to calculate the level of domestic content. South Korean Anti-Import Sentiments The United States and South Korea have been working to resolve negative perceptions regarding auto imports into South Korea and to eliminate specific South Korean government and industry anti-import activities. Among the ways in which South Korean consumers have been discouraged from purchasing foreign motor vehicles are tax audits when a foreign car is purchased or banning foreign automobiles at company parking lots. A 1998 memorandum of understanding (MOU) between the United States and South Korea was concluded to improve the perception of foreign-produced cars and to address anti-import policies that discourage the purchase of imported motor vehicles. Foreign auto manufacturers like Ford claim South Korea's anti-import bias still exists. Remanufacturing The issue of remanufactured goods also impacts the auto industry, in particular the auto parts sector, as well as other industries. Remanufactured goods are a niche market for U.S. exporters, which extend across the range of manufactured products including auto parts, tires, furniture, laser toner cartridges, computers, cellular phones, medical equipment, electrical equipment, and other devices. The Department of Commerce defines remanufactured goods as those products "that are partially made from components recovered from end-of-life products combined with new components in place of certain worn or damaged products that are no longer useable. The process transforms the recovered and new components into "like-new" goods." The automotive industry is particularly interested in the FTA provisions related to remanufactured goods. This is because worldwide the remanufactured automotive parts industry is estimated to be valued at about $85 to $100 billion, and at about $40 billion in the United States alone in 2009. Remanufactured goods are treated differently under the KORUS and KOREU FTAs. South Korea currently allows imports of remanufactured goods, unlike many countries which limit trade in remanufactured products, with requirements on certain goods, particularly medical devices. The KORUS FTA would permit free trade in these goods, while the KOREU FTA does not cover these products. This could provide U.S. remanufacturers with better market opportunities and greater certainty, predictability, and transparency in their trade with South Korea than would be present between the European Union and South Korea, where the treatment of an originating good would be decided on a case-by-case basis. Kaesong Industrial Complex The Kaesong Industrial Complex (KIC) was established in North Korea in 2002 as a way to provide North Korea with hard currency earnings. Over half the products produced in the KIC are textiles and clothing; metals and machinery together comprise another 20% of the KIC's current production. From the auto industry perspective, more automobile parts manufacturing plants might be established in the KIC over time if it expands as planned. How KIC-produced goods will be treated under the pending KORUS and KOREU FTAs requires clarification. In both instances, a Committee on Outward Processing Zones (OPZ) on the Korean Peninsula would be established. Under the KORUS FTA, the OPZ's purpose is to consider whether the KIC products will receive duty-free treatment, which would be evaluated using various criteria such as environmental standards, labor standards, or management practices prevailing in the KIC or progress on denuclearization of the Korean Peninsula, among others. While the KOREU FTA contains a similar provision on the KIC, there are some differences. The pending KORUS FTA would require legislative approval of the OPZ committee's recommendations by South Korea and the U.S. Congress. The KOREU FTA does not require additional legislative approval of products from the KIC. It also does not specify what criteria would be used to evaluate the inclusion of goods from the KIC. Overview of Other Selected Manufacturing Sectors Beyond automobiles, other manufacturing sectors could also be impacted if the KORUS and KOREU FTAs are implemented. For U.S. manufacturers, South Korea is an important market. In 2009, South Korea ranked as the 10 th -largest market for U.S. manufactured goods by country. Both U.S. and EU manufacturers must pay tariffs of 5% or greater on almost 80% of all industrial products when exporting to South Korea, with most of the tariffs ranging from 5% to 15% (see Table 4 ). The elimination of South Korean tariffs on manufacturing products under the KORUS and KOREU FTAs should provide greater price competitiveness for U.S. and EU exporters of manufactured goods across a range of industries. South Korean manufacturers could benefit as the United States and the European Union reduce or eliminate their industrial tariffs. The two FTAs also address non-tariff barriers, which remain challenging across various manufacturing sectors. This section of the report provides a brief overview of the proposed tariff reductions. It also examines how non-tariff barriers would be addressed in selected manufacturing sectors, namely household appliances, consumer electronics, textiles and apparel, and pharmaceuticals and medical devices. Home Appliances The home appliance, or white goods, sector is a concentrated globalized industry mainly comprised of major U.S., European, and South Korean manufacturers. U.S.-headquartered Whirlpool and GE Consumer and Industrial compete against appliance manufacturers located in Europe (e.g., Electrolux, Bosch and Siemens Hausgeräte) and South Korea (e.g., LG Electronics and Samsung). South Korea's export-oriented appliance manufacturers appear to hold a much larger U.S. and EU market share compared with the rather insignificant share for U.S. and EU companies in the South Korean market. Some members of Congress have expressed concerns about Whirlpool's difficulties in selling U.S.-made refrigerators in South Korea. In its 2007 review of the KORUS FTA, the ITC noted that exports of U.S. appliances to South Korea have been encumbered by an 8% tariff and standards and conformity assessment requirements. Also, in recent years, South Korean appliance manufacturers have located production facilities in North America and the European Union. For instance, LG Electronics operates plants in Mexico to be closer to their U.S. customer base. Samsung is also establishing a manufacturing presence in Europe, through the recent acquisition of the home appliance manufacturer, Amica, which should help it to sell appliances in the European market, estimated at around $50 billion. U.S. and European exporters of household appliances should benefit from the pending FTAs through the immediate elimination of South Korea's 8% tariff on large home appliances (compared to tariffs which are either zero or well below 4% for most large appliances in the United States or European Union). The two pending agreements also focus on non-tariff barriers including standards and conformity assessment procedures, which currently obligate importers to duplicate cumbersome and expensive testing and certification procedures. Also, the technical barriers to trade chapters in the KORUS and KOREU FTAs provide for greater cooperation and transparency in the standards setting process. Whether the KORUS or the KOREU FTAs will provide greater benefits to U.S. or European appliance makers remains to be seen. In both markets, the competitive advantage appears to favor South Korean manufacturers. For example, U.S. exports of household appliances to South Korea totaled $46.7 million, while appliance imports from South Korea were substantially higher at $1.7 billion in 2009 (South Korea was the United States's third-largest source of imports after China and Mexico). Notwithstanding the competitiveness of South Korean appliance makers, higher transportation costs and greater competition from lower-priced Chinese appliance manufacturers are among the factors that also act as restraints on export flows from South Korea to the U.S. and EU markets. Consumer Electronics The U.S. electronics industry is largely supportive of the KORUS FTA, and advocates its implementation through their various industry associations like the Information Technology Industry Council. The European digital technology industry has expressed its reservations about the KOREU FTA. Its concerns center on the largely closed South Korean market for electronics, while highly competitive South Korean companies such as Samsung and LG stand to improve their access to the European market. Their particular concerns are rules of origin and duty drawback. Despite this, Europe's technology industry is not actively lobbying against the KOREU FTA. Tariff elimination is expected to have minimal impact on exports to South Korea since the majority of information technology and electronics products, such as semiconductors, telecommunications equipment, and computer equipment, already receive duty-free access to the South Korean market under the WTO's Information Technology Agreement (ITA). Manufacturers of electronic products not covered by the ITA such as digital cameras and color TVs could increase their exports as South Korea's 8% tariff on these products will be eliminated immediately upon implementation of the KORUS and KOREU FTAs. The impact on TV manufacturers located in the United States is likely to be non-existent since there is none. General Electric stopped manufacturing televisions in the United States in 1984; Zenith ended its U.S. production in 1992; and, more recently, Sony shuttered its last U.S. TV manufacturing facility located in Pennsylvania. South Korean consumer electronics makers stand to gain from the immediate elimination of the small number of existing EU and U.S. tariffs on consumer electronics, with a small number of exceptions for products such as microwave ovens in the case of the European Union. Included in the KOREU FTA is a special annex on non-tariff barriers related to consumer electronics. One provision allows most EU manufactures to sell their products in South Korea based on a manufacturers' declaration of conformity with the relevant standards in South Korea (i.e., the firm selling a product would be responsible for certifying the product meets South Korean standards). That process would not require them to undergo duplicative and expensive testing and certification procedures. This should make it easier and less cumbersome for EU manufacturers to export consumer electronics to South Korea, effectively reducing their costs and cutting back on bureaucratic hurdles. A three-year transition period will apply to some products during which time third party certification will still be required. Some exceptions continue under the KOREU FTA for a limited number of products involving electrical safety because of the potential risks for human health and safety. For these products—numbering just over 50 including switches, power transformers, vacuum cleaners, and dishwashers—third party certification may still be required (covering about 15% of EU exports). Separate provisions on standards, testing, and certification for consumer electronics exports from the United States to South Korea is not a part of the KORUS FTA. Textiles and Apparel Textiles and apparel is another example of a sensitive manufacturing sector in the trade relationship among all three markets. The International Trade Commission points out that experts in the South Korean textile and apparel industry agree that it would benefit substantially under the FTA and that some U.S. domestic production will likely be displaced. Tariffs are in place in the United States and the European Union to protect their respective textile and apparel manufacturers. The average U.S. Most Favored Nation (MFN) tariff on textiles is 8% and the European Union also maintains an MFN applied duty of 6.6% on textiles. The South Korean average applied MFN tariff on textiles is higher than the average U.S. and EU tariffs at 9.1%. Apparel tariffs in the three markets range from 11.5% to 12.6%. Implementation of the two FTAs would result in the abolition of most tariffs on textiles and apparel, the overwhelming majority of which will be implemented immediately upon enforcement. This should provide U.S., EU, and South Korean textile and apparel manufacturers greater access to each others markets, with South Korean textile manufacturers likely to increase their exports to the United States and European Union markets. Textile and apparel trade is governed by complex rules of origin. The KORUS FTA adopts the "yarn forward" rule, which means generally apparel using yarn and fabric from the United States and South Korea qualifies for preferential tariff treatment. A special textile safeguard is included, which allows the United States to impose tariffs on certain goods should injury occur due to import surges. The KOREU FTA will maintain the European Union's standard rules of origin on textiles with only a small number of exceptions. The KORUS FTA provides for the establishment of a Committee on Textile and Apparel Matters to respond to concerns, whereas the KOREU FTA does not include a separate committee or working group on textiles among the six specialized committees and seven working groups that would be established. As discussed earlier, textile and apparel products manufactured in the KIC are significant, but these products are not covered explicitly in the KOREU FTA due to political sensitivity regarding labor issues. Likewise, the proposed KORUS FTA does not seem to provide for duty-free entry into the United States for products made in the KIC, including textiles and apparel. The U.S. textile and apparel industry appears split on their views of the KORUS FTA according to the industry's submission to the Industry Trade Advisory Committee on Textiles and Clothing (ITAC-13). Some U.S. textile and apparel manufacturers are concerned about increased competition from South Korea's large, efficient textile industry, and see little in the way of increased access to the South Korean market from what they believe is an extremely one-sided agreement. Several textile and apparel groups, including the National Textile Association, the National Council of Textile Organizations, and the American Fiber Manufacturers Association maintain the textile chapter in the KORUS FTA will "open up the United States market to a massive one-way flow of South Korean textiles, apparel, and home furnishings in the United States." They argue the KORUS FTA is deficient in three areas (tariff phase-out schedules are nonreciprocal and benefit South Korean producers; rules of origin need to be strengthened for certain components; and customs enforcement must be improved). Also they note that U.S. exports to South Korea are subject to a 10% Valued Added Tax (VAT) with no comparable VAT on imports to the United States from South Korea. On the other side, the American Apparel & Footwear Association has expressed its general support for the KORUS FTA, with the footwear industry strongly supportive of the KORUS FTA. Europe's textile sector is anxious about the likely repercussions of the KOREU FTA because of concerns about more jobs losses. The European Trade Union Federation: Textiles, Clothing, Leather (ETUF: TCL) is strongly opposed to the KOREU FTA citing concerns about the duty drawback provision and rules of origin. EURATEX, the European Apparel and Textile Confederation, seems to be more supportive of the agreement and views it as a means to further develop trade between the two regions. EURATEX signed a cooperation agreement in December 2009 with the Korea Federation of Textile Industries which would, among other things, permit a better exchange of information and a closer monitoring and surveillance of the KOREU FTA, particularly on rules of origin and duty-drawback utilization. Pharmaceuticals and Medical Devices South Korea is one of the most significant markets for pharmaceuticals and medical devices in Asia. It relies heavily on imports from the United States and the European Union, along with Japan, to supply demand. The South Korean pharmaceutical and medical device (P&M) sectors are forecast to grow in the years to come as its population ages. According to one industry report, South Korea's pharmaceutical market was valued at around $9 billion in 2008. Foreign-based pharmaceutical manufacturers account for approximately 30% of the pharmaceutical market in South Korea, with industry experts forecasting that this share could rise in coming years. Similarly, future growth for U.S. and EU medical device companies is expected to come from emerging markets like South Korea. Data from 2009 show South Korea imported $3 billion in pharmaceutical products; the European Union comprised over 50% ($1.5 billion) of these sales and the United States constituted 19% ($586 million). Swiss and Japanese pharmaceutical manufacturers were also a significant presence, selling $261 million and $220 million in South Korea, respectively, in 2009. Given the popularity of foreign-branded drugs, South Korea's pharmaceutical trade deficit grew in the past five years, jumping from $1.3 billion in 2005 to $2.1 billion in 2009. South Korea's medical equipment and supplies market, which is broader than just medical devices, was worth $2.1 billion in 2009 and is predominantly supplied by imports (77%), according to one estimate. A market research study by Espicom found that South Korea will be one of the fastest growing medical device markets in Asia, forecasting a market growth rate of 11.2% between 2009 and 2014. U.S. trade groups, like the Pharmaceutical Research and Manufacturers of America (PhRMA), favor the KORUS FTA because they expect it will facilitate increased trade with the easing of tariff and non-tariff barriers between the United States and South Korea. U.S. industry maintains current South Korean government policies appear to largely favor South Korean manufacturers (e.g., through pricing and reimbursement policies), the regulatory regime often seems non-transparent, and foreign manufacturers complain about unethical business practices. The EU pharmaceutical industry complains about the same policies. Thus, both agreements include chapters (or annexes) on pharmaceuticals and medical devices to remove barriers to trade. Provisions to eliminate tariffs on pharmaceutical products and medical devices are also included, although they are not the major export obstacles for U.S. or EU manufactures. Many of South Korea's tariffs on imports of pharmaceutical products of 8% are to be phased out immediately upon implementation of the pending KORUS and KOREU FTAs; others will be eliminated within three years. Tariffs for medical device exports would also be removed – immediately for most products, phased in over three years for others, and over a longer period of time for a few selected products. For example, South Korea's 8% tariff on medical magnetic resonance imaging apparatus and ultrasonic scanning apparatus would be eliminated in five years under the KOREU FTA and 10 years under the KORUS FTA. If the European Union implements its agreement with South Korea before the United States, EU-made medical devices might be more cost competitive than U.S.-made products. The two pending FTAs tackle NTBs, as they are among the most important barriers to trade in pharmaceutical products and medical devices. In the pending KORUS FTA, among other things, the NTB provisions aim to improve transparency in the reimbursement process; put less complex regulatory policies in place; and, ensure adequate enforcement of pharmaceutical patent rights to specifically protect proprietary data that manufacturers must submit for market approval. Additionally, if ratified, the KORUS FTA would establish a Medicines and Medical Devices Committee, which would meet at least once a year, to promote cooperation and to monitor the implementation of the agreement. The KOREU FTA would also establish a Working Group on Pharmaceutical Products and Medical Devices to help further regulatory cooperation. Appendix A. Best-Selling Car Imports in the South Korean Market It has been 10 years since any U.S. imported car model ranked among the top 10 imported cars in the South Korean market. Only European or Japanese cars ranked as the top 10 best-selling imports in 2009 (see Table A -1 ). A decade ago, Chrysler's Grand Caravan and Grand Cherokee LTD ranked among the top 10 imported models, and in earlier years several Ford models were also among the best-selling imported cars in the South Korean market. Appendix B. Comparison of Automobile Tariff Reductions Appendix C. Agreements between South Korea and Various Partner Countries Beyond their commercial engagement with the United States, the European Union and South Korea are also exploring free trade agreements with other trading partners. For example, the European Union is in the midst of negotiating a new generation of FTAs with several countries including Canada, India, and Singapore. Vietnam is another possible preferential trade agreement partner for the European Union. Also underway are negotiations on a new Partnership and Cooperation Agreement (PCA) between the European Union and China. As shown in Table C -1 , South Korea is also seeking free trade deals with several countries, which include Australia, Canada, India, Japan, and Mexico. The possibility of a free trade arrangement between South Korea and China is also under consideration. South Korea already has FTAs with Chile, Singapore, the European Free Trade Association (EFTA), and the Association of Southeast Asian Nations (ASEAN). Proliferation of FTAs and other preferential arrangements could present challenges for U.S. exporters if they ultimately find themselves disadvantaged in foreign markets.

South Korea has negotiated free trade agreements (FTAs) with the United States and the European Union (EU), but neither agreement has yet been approved. The U.S. Congress must approve the United States and South Korea free trade agreement (KORUS FTA) and the European Parliament must vote on the European Union and South Korea free trade agreement (KOREU FTA) before the FTAs can take effect. If the FTAs are ratified, it is possible there could be a "first mover" advantage for either the United States or the European Union, depending on which FTA is approved first. Some argue that both agreements have shortcomings and should not be approved. This report provides U.S. lawmakers with a comparison of the manufacturing components in the KORUS and KOREU FTAs. Congressional interest in an FTA between the European Union and South Korea mostly centers on those U.S. industries competing with European industrial sectors, especially motor vehicles. The two pending FTAs raise questions about what it could mean for U.S. manufacturers if the United States takes longer, or fails altogether, to implement the KORUS FTA, while the European Union and South Korea possibly move ahead to approve and implement their outstanding FTA. In such a case, the possibility exists that the removal of tariff and non-tariff barriers between the European Union and South Korean markets could result in U.S. manufacturers losing South Korean market share to European competitors. On balance, most U.S. and European manufacturing sectors, with some auto manufacturers in particular among notable dissenters, argue that the pending FTAs will be beneficial and are largely supportive. On the other side, labor unions in the United States and the European Union are considerably more skeptical, claiming that South Korean companies could be the biggest beneficiaries, since they could gain even greater access to the significantly larger U.S. and EU markets. Labor union leaders say the FTA will result in further job losses as their respective manufacturing workforces compete for market share with competitive South Korean manufacturers in their own domestic markets. Various forces will affect how and when each side might move forward on its respective FTA. Congress has a direct role in the approval of the KORUS FTA, but until recently legislative consideration of the agreement had been at a standstill. On December 3, 2010, President Obama announced that cabinet-level negotiations and his discussions with South Korean President Lee Myung-bak produced modifications in the KORUS FTA that he believes addresses his concerns and those of Congress. Some lawmakers argue that the KORUS FTA provides a greater advantage to South Korean manufacturers than to U.S. manufacturers. Others have expressed their support for economic and national security reasons. No specific date has been announced by the European Union on when it expects to approve its FTA with South Korea, but the European Commission (the EU's executive charged with negotiating agreements with other countries, among its areas of responsibility) has indicated that it would like to move forward in 2011. Automotive trade is the primary focus of this report because it is one of the most contentious and high-profile manufacturing issues in the KORUS and KOREU FTA deliberations. Additionally, brief overviews are included of other selected U.S. manufacturing sectors that could be affected by these FTAs, such as home appliances, consumer electronics, and pharmaceuticals and medical devices. Trade in agricultural products and services are not covered by this report.

Corporate Tax Trends Corporate tax revenues are low by historical standards. In the post-World War II era, corporate tax revenue as a share of gross domestic product (GDP) peaked in 1952 at 6.1% and generally declined since (see Figure 1 ). Today, the corporate tax generates revenue equal to approximately 1.3% of GDP, although projections (not shown here) have the corporate tax raising revenue over 2.4% of GDP in several years as the economy recovers and temporary bonus depreciation provisions expire. While corporate tax revenues have fallen, overall federal tax revenues have remained relatively stable, averaging around 17.7% of GDP since 1946 (aside from business cycle fluctuations). Revenues generated from the individual tax have exhibited similar relative stability, averaging around 8.1% of economic output. Two other tax revenue sources, however, have not remained stable. Payroll tax revenue has increased from 1.4% of GDP in 1946 to 6.0% in 2010, while at the same time excise tax revenue has decreased from 3.1% to 0.5% of GDP. Taken together, the corporate tax has also decreased in importance relative to other revenue sources. At its post-WWII peak in 1952, the corporate tax generated 32.1% of all federal tax revenue. In that same year the individual tax accounted for 42.2% of federal revenue, and the payroll tax accounted for 9.7% of revenue. Today, the corporate tax accounts for 8.9% of federal tax revenue, whereas the individual and payroll taxes generate 41.5% and 40.0%, respectively, of federal revenue. Understanding the Decline There are a number of possible explanations for the decline in corporate tax revenues. The amount of revenue collected from any tax depends on the tax rate and the dollar size of what is being taxed, also known as the "tax base." If the corporate tax rate falls, all else equal, so too will revenue. The same relationship holds between revenue and the corporate tax base. A number of factors can impact the tax base, including the number of firms operating in the corporate form and corporate profitability. So the decline in corporate tax revenues may be due to either a reduction in corporate tax rates, a reduction in the corporate tax base, or both. The analysis presented below suggests that both factors have played a role in the decline in revenues generated by the corporate tax. Average Effective Tax Rate A lower average effective corporate tax rate explains a portion of the decline in corporate tax revenue. The effective tax rate is the rate at which income is actually (or effectively) taxed. As Figure 2 shows, this rate has decreased from a post-WWII high of 55.8% in 1951 to 28.4% in 2010. The decrease in the effective rate would have resulted in lower corporate tax revenue if the corporate tax base remained constant. The subsequent sections provide evidence that the tax base has decreased as well. The fall in the average effective tax rate appears to be driven by three primary factors. First, there has been a reduction in the top statutory rate over this time (see Figure 2 ), from a high of around 50% in the 1950s and 1960s to its current rate of 35%. The statutory tax rate is the rate specified in the Internal Revenue Code, and along with special tax credits, deductions, and other tax benefits, determines the effective rate corporations face. As a result, a reduction in the statutory rate naturally reduces the effective rate. Second, aside from two very brief periods, corporations were allowed to claim an investment tax credit equal to a fraction of certain new investments made between 1962 and 1986. The credit rate, particular rules, and eligible investments varied over time, but overall the credit had the effect of reducing the effective corporate tax rate below the statutory rate. Since 2004, corporations (and non-corporate businesses) have been able to claim the Section 199 deductions for certain activities, primarily concentrated in the domestic manufacturing industry. Like the investment tax credit, the Section 199 deduction has the effect of reducing the effective tax rate on corporate income. Third, changes to the rules governing depreciation contributed to the reduced effective tax rates. Depreciation deductions became more valuable following significant changes in 1954, 1962, 1971, and 1981, which allowed for more rapid capital recovery. The Tax Reform Act of 1986 ( P.L. 99-514 ) reversed this trend by bringing tax depreciation closer in line with physical depreciation. Depreciation was once again enhanced temporarily via "bonus depreciation" in 2002 and 2009 in attempts to stimulate the economy. According to research by economists Alan Auerbach and James Poterba, other factors that could explain falling effective corporate tax rates have had relative small effects. Inflation, the foreign tax credit, and other corporate tax credits have at times reduced the effective tax rate, and at other times increased the effective corporate tax rate. The net effect of these other factors has been small relative to effects of accelerated depreciation and the investment tax credit. Although effective rates have generally fallen over time, Figure 2 shows two recent effective tax rate spikes. The average effective corporate tax rate rose above the 35% top statutory rate around 2000, and then again around 2007. In both instances, the economy was in a recession and some businesses were experiencing losses. Businesses are typically allowed to use current losses to reduce, or offset, income paid in the previous two years. This "carrying back" of losses allows businesses to receive a tax refund equal to the reduction in taxes paid in prior years, thus reducing the average effective rate for these firms. When losses are large, such as in a recession, two years may not be long enough to allow firms to fully utilize current losses via carrybacks. As a result, the taxes of struggling corporations are higher than they would be with a longer carryback period (i.e., their tax refunds are smaller). This leads overall average tax rates to rise above the statutory rate. In response, Congress temporarily extended the carryback period from two years to five years in 2002 and 2008 in attempt to stimulate the economy. A Smaller Corporate Sector Lower effective tax rates do not appear to be the only cause of decline in corporate tax revenue. There is evidence that the nonfinancial corporate tax base has shrunk as an increasing share of business income has been generated by partnerships and S corporations. Businesses that choose either one of these forms are, in general, not subject to the corporate income tax system. Rather, the income they earn is distributed directly to the individual business owners, and taxed according to the individual income tax system. Partnerships and S corporations are commonly referred to as "pass-throughs" because of this feature. Figure 3 shows that in 1980, C corporations generated 78% of all business income in the United States. By 2007, however, they were responsible for only 44% of all business income. Over the same time period, partnerships' share of income rose from 3% to 28%, and S corporations' share rose from 1% to nearly 17%. The shift in the distribution of business income from the corporate sector to the noncorporate sector has resulted in a smaller corporate tax base, and explains a portion of the drop in corporate tax revenues. At the same time that there was a change in the distribution of business income, there was also a change in the distribution of businesses themselves. C corporations accounted for 17% of all businesses in 1980, but only 6% of all businesses by 2007 (see Figure 4 ). S corporations, however, increased in popularity, especially after 1986, when the Tax Reform Act of 1986 set the highest individual tax rate at 28% and the highest corporate tax rate at 34%. This gave businesses an incentive to organize as S corporations. Legislation eventually increased the S corporation shareholder limit from 35 to 100, which made the S corporation form more attractive and practical. By 2007, S corporations represented 12% of businesses, up from 4% in 1980. Reduced Corporate Profitability A reduction in the profitability of those firms comprising the corporate sector has compounded the effect on the tax base from a shrinking corporate sector. Although profitability can be summarized a number of different ways, a popular measure used by economists is the ratio of profit to net assets (also known as net worth). The net asset component accounts for the size and amount of productive resources in the corporate sector. The profit component measures the aggregate return to those resources. When combined, the profit to asset ratio summarizes how well the corporate sector is using its available resources to generate profits, adjusting for the amount of resources available. Since peaking in 1966, corporate profitability has fallen over two and a half times as shown in Figure 5 . Economists Alan Auerbach and James Poterba, using the same general measure of profitability used here, determined that falling profitability has been "substantially more important than changes in the average tax rate in accounting for the reduction in corporate taxes." This naturally leads to the question: Why has nonfinancial corporate profitability fallen over time? There are several potential explanations for the decline in profits. First, it is possible that there has been a shift within the corporate sector from less volatile industries to more volatile industries. This could increase the fraction of corporations experiencing losses, which would lower overall profits. Second, there may have been a shift in the age of corporations from older to younger. Younger firms are generally less profitable than older firms in the initial years, which would drive down overall profits relative to assets. Third, American corporations could be shifting profits out of the United States and into lower-tax countries, which would lower profits reported domestically. An increasing collection of research has documented evidence of profit-shifting among multinational corporations, and that such behavior is significant. And fourth, the profit measure used here is based on income reported for tax purposes (as opposed to for financial accounting purposes). Firms have an incentive to reduce their income for tax purposes, so as to lower their tax liability. Economists have, in fact, documented growing differences in what corporations report to the IRS as income, and what they report to shareholders. Conclusion and Implications for Tax Reform Corporate tax revenues have been declining for the last six decades. The analysis in this report points to three primary factors responsible for the decline. First, the average effective corporate tax rate has decreased over time, mostly due to reductions in the statutory rate and changes affecting the tax treatment of investment and capital recovery (depreciation). Second, an increasing fraction of business activity is being carried out by partnerships and S corporations rather than C corporations. These pass-though business structures are not subject to the corporate income tax. This has led to an erosion of the corporate tax base. And third, corporate sector profitability has fallen over time, leading to a further erosion of the corporate tax base. Understanding why corporate tax revenues have fallen could be relevant as the tax reform debate continues. Generally, the corporate reform discussion has focused on reducing statutory rates and achieving revenue neutrality through broadening the tax base by eliminating various deductions, exemptions, and credits, among other things, such as shifting to a territorial tax system. The fact that the effective tax rate is usually below the statutory tax rate (see Figure 2 ) suggests that a revenue-neutral reduction of the top statutory corporate tax rate may be possible. How much rates could be reduced in a revenue-neutral manner, however, depends on how much room there is to broaden the base. Existing research indicates reducing the top corporate rate from 35% to 25% would require repeal of all corporate tax expenditures, changes to tax preferences available to noncorporate businesses, and other reforms to business taxation. As the corporate rate is reduced, and tax reforms to the noncorporate sector are enacted, some business activity may return to the corporate sector, naturally broadening the base. Other business tax reforms may include changes to the taxation of American multinationals operating overseas. To the degree that these reforms reduced profit shifting to low-tax countries, the domestic corporate tax base may expand. Appendix. Calculation of Average Effective Tax Rates This section provides a brief overview of the mathematics behind the calculation of the average effective tax rates. Table A-1 presents the source of the data for each variable used in the calculation as well as a brief description. Superscripts used in the equation identify the level of government, F for federal and SL for state and local, and the subscript t is an index for the year. The equation for the average effective tax corporate tax rate calculation (AECTR) may be written as follows: where,

Corporate tax revenues have declined over the last six decades. In the post-World War II era, corporate tax revenue as a percentage of gross domestic product (GDP) peaked in 1952 at 6.1%. Today, the corporate tax generates revenue equal to approximately 1.3% of GDP. The corporate tax has also decreased in importance relative to other revenue sources. At its post-WWII peak in 1952, the corporate tax generated 32.1% of all federal tax revenue. In that same year the individual tax accounted for 42.2% of federal revenue, and the payroll tax accounted for 9.7% of revenue. Today, the corporate tax accounts for 8.9% of federal tax revenue, whereas the individual and payroll taxes generate 41.5% and 40.0%, respectively, of federal revenue. This report discusses the three main factors for the decline in corporate tax revenue. First, the average effective corporate tax rate has decreased over time, mostly as a result of reductions in the statutory rate and changes affecting the tax treatment of investment and capital recovery (depreciation). Second, an increasing fraction of business activity is being carried out by partnerships and S corporations, which are not subject to the corporate income tax. This has led to an erosion of the corporate tax base. And third, corporate sector profitability has fallen over time, leading to a further erosion of the corporate tax base. Understanding the decline in corporate tax revenue could be helpful in preserving any tax reforms enacted, or structuring a reform to obtain a desired revenue effect, such as revenue neutrality or enhancement. The House Committee on Ways and Means and the Senate Committee on Finance have held hearings on tax reform throughout the first session of the 112th Congress. The President, in his 2011 State of the Union address, called for corporate tax reform that did not add to the deficit. Generally, the corporate tax reform discussion has focused on reducing statutory rates and achieving revenue neutrality through broadening the tax base by eliminating various deductions, exemptions, and credits, among other things.

Frequently Asked Questions What is the Sustainable Growth Rate (SGR), and why has it required repeated congressional attention? Established as part of the Balanced Budget Act of 1997 ( P.L. 105-33 ), the Sustainable Growth Rate (SGR) is the statutory method for determining the annual updates to the Medicare physician fee schedule (MPFS). In essence, if actual expenditures are within a "sustainable" expenditure target, payment updates are calculated according to a predetermined formula. If, however, the actual experience exceeds the sustainable target, future updates are reduced to bring spending back in line with the target over time. In the first few years of the SGR system, the actual expenditures did not exceed the targets and the updates to the physician fee schedule were close to the Medicare economic index (MEI, a price index of inputs required to produce physician services). Beginning in 2002, the actual expenditure exceeded allowed targets, and the discrepancy has grown with each year. However, with the exception of 2002, when a 4.8% decrease was applied, Congress has enacted a series of laws to override the reductions. How many SGR override bills have there been? From 2003 through April 2014, 17 laws have been passed that override the SGR-mandated reductions in the MPFS (see Table 1 ). These laws have provided short-term "patches" of as long as two years (Medicare Modernization Act, MMA, P.L. 108-173 , from 2003 through 2004) and as short as one month (the Temporary Extension Act, P.L. 111-144 , from March 1-31, 2010, and the Physician Payment and Therapy Relief Act of 2010, P.L. 111-286 , from December 1-31, 2010). What have been the MPFS payment level increases, if any, under the SGR overrides? The SGR-override bills passed into law generally have either kept payments at the current level (by providing for a 0% change) or increased payment levels from 0.2% to 2.2% (see Table 1 ). Why are MPFS payment levels projected to fall when overrides expire? When actual spending exceeds target spending under the SGR calculation, current statute requires that the overage be recouped to bring actual spending back in line with target spending. Under the SGR system, this additional spending would be recouped by reductions to payment rates in subsequent years. As CBO explains, if the SGR system were allowed to function as established, "over the long run the cumulative cost would be close to zero, because allowing the SGR formula to be implemented would lead to recapturing the additional spending that occurred during the period when the SGR was overridden." The statutory language that established the SGR system also included a limit (7% decrease) on how much payment levels could change from year to year, to temper any potential disruptive impacts. (Following such a course was described as a "clawback" approach.) The aggregate effect of several years of overrides meant that the cumulative overage continued to grow, leading to an alternate ("cliff") approach. With each override, Medicare physician expenditures continued to grow faster than the target level, as set forth under the law. With the aforementioned limit on how much payment levels could change from year to year, the length of time required to recoup the overage grew with each override (specifically, the period required to recoup the overage and not incur a cumulative cost began to exceed 10 years). Beginning with the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ) and with each override act since, the legislation has specified that the payment rate update in the year that the override expires "shall be calculated as if that freeze (or increase) had not been enacted." As CBO notes, "Unlike clawback legislation, which limits future rate reductions to no more than 7 percent in any given year, cliff provisions can result in a very large rate reduction in the year following a short-term rate adjustment." In recent years, CMS actuaries have estimated "cliff" reductions of 27.4% (for January 1, 2012), 26.5% (for January 1, 2013), and 20.1% (for January 1, 2014). Each of these was averted by congressional action. Have any of the previous patches expired prior to the passage of a subsequent piece of legislation that provided the next override? This has happened three times: the Temporary Extension Act ( P.L. 111-144 ) was signed into law on March 2, 2010, after the prior override expired on February 28, 2010; the Continuing Extension Act ( P.L. 111-157 ) was signed into law on April 15, after the prior override expired on March 31, 2010; and the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act ( P.L. 111-192 ) was signed into law on June 25, 2010, after the prior override expired on May 31, 2010. Medicare is prohibited from paying electronic claims earlier than the 14 th day after the date of receipt and from paying non-electronic claims earlier than the 29 th day after the date of receipt. Thus, the first two instances required no additional action by Congress; however, the third instance required a provision that made the SGR payment override retroactive to June 1, 2010. Why hasn't this problem been addressed permanently? There are two primary reasons why this problem persists: (1) although a number of proposals to replace the SGR system have been proposed, there has been no consensus nor broad support for any long-run alternative until recently (see below), and (2) the cost of any permanent change has been daunting because the CBO baseline must assume current law, which in recent years has estimated that a reduction in payment rates under the MPFS would occur for several subsequent years. In addition to the impact on federal outlays, any change in the payment update formula would also have implications for beneficiaries; because Part B beneficiary premiums must cover about 25% of Part B program costs, any overall increase in spending results in a proportional increase in premiums. The lack of a viable alternative payment model has hampered attempts to repeal and replace the SGR system. Repealing the SGR system would require the adoption of an additional method for determining how Medicare physician payments would be modified from year to year. Given that the SGR was created to replace another system that failed to constrain the rate of growth in Medicare physician expenditures (Medicare volume performance standard, or MVPS), attempts to create an update methodology that would successfully contain Medicare growth have so far been unproven. While the SGR methodology determines the change in the Medicare physician payments from year to year, it does not determine the basis for those payments. While the current MPFS is a fee-for-service based payment system (i.e., doctors are paid for each service they provide), an "SGR-type" methodology also could be applied to payments based on alternate payment systems, including bundled payments for episodes of care, capitation payments, performance- or incentive-based payments, or some other payment system. Given the acknowledged shortcoming of fee-for-service based payment, which rewards the volume of care provided while being indifferent to the quality of care, most efforts to repeal the SGR system have been closely tied to Medicare physician payment reform. However, there are few (if any) comprehensive alternative payment models that have proven successful at providing incentives for high-quality care while tempering the growth rate of health care expenditures. For many years, the cost of SGR repeal has contributed to the lack of progress in repealing and replacing the status quo. For example, in 2007, CBO testified that, depending on the replacement method for determining year-to-year changes in the payment rates, the 10-year impact on direct federal spending could range from $177.4 billion (for a 10-year freeze of the payment level), to $262.1 billion (for an automatic increase tied to the Medicare Economic Index [MEI], an index similar to the CPI but based on medical care inputs), to $330.5 billion (for an automatic increase based on MEI together with a hold-harmless provision to protect beneficiaries from higher premiums as a result of the higher level of Medicare physician spending). In recent years, CBO scores for SGR repeal have been lower (see next question). How have recent CBO scores for an SGR repeal changed and why? Repealing or fixing the SGR could be costly from a federal budgetary perspective, although recent CBO estimates of replacement proposals have fluctuated. (See Table 2 .) In summary, CBO scores for a 10-year freeze of MPFS payment levels were lower in 2013 and 2014 compared with 2012 estimates, but 2015 estimates have been increasing, even when adjusted for the additional year in the estimate window. On February 5, 2013, CBO released a report stating that its estimate of the cost of overriding the SGR with a 10-year freeze in payments had fallen to $138.0 billion compared with its July 2012 estimate of $273.3 billion. The cost of "holding payment rates through 2023 at the levels they are [in 2013] would raise outlays for Medicare (net of premiums paid by beneficiaries) by $14 billion in 2014 and about $138 billion (or about 2 percent) between 2014 and 2023." CBO provided the following reasoning for the reduced cost: The estimated cost of holding payment rates constant is much lower relative to this baseline than was the case under previous CBO baselines, primarily because of lower spending for physicians' services in recent years. Under the sustainable growth rate, future payment updates depend on the difference between spending in prior years and spending targets established in law. Actual spending has been lower than projected—and lower than the spending targets inherent in the sustainable growth rate—for the past three years. Because actual spending has been lower than spending targets, CBO now estimates that payment rates will increase beginning in 2015. Those higher payment rates narrow the difference between growth under current law and a freeze at current levels, thereby reducing the estimated cost of restricting the payment rates. CBO's May 2013 baseline projections raised the estimate slightly to $139.1 billion for a 10-year freeze. In December 2013, CBO issued another score indicating that a 10-year freeze in MPFS payment levels would add $116.5 billion over 10 years. A November 2014 document showed a score of $118.9 for a 10-year freeze. On February 3, 2015, CBO released a document showing that the cost of an 11–year freeze (2015-2025) in MPFS payment levels would add $137.4 billion to direct spending; with 1% increases in the payment level each year through 2025, the score would increase to $191.8 billion. On March 12, 2015, the CBO released a score of the President's FY2016 budget, which included a score of $141.9 billion for an 11-year freeze of MPFS payments. What SGR bills were introduced in the 113th Congress and how do they differ? Each of the three committees of jurisdiction passed bills in 2013 that would repeal the SGR system for determining Medicare physician payment updates. On July 22, 2013, the Energy and Commerce Committee passed H.R. 2810 , the Medicare Patient Access and Quality Improvement Act of 2013, by a 51-0 vote. On December 12, 2013, the Senate Finance Committee passed S. 1871 , the SGR Repeal and Medicare Beneficiary Access Improvement Act of 2013, by unanimous voice vote, and the Ways and Means Committee passed H.R. 2810 , the Medicare Patient Access and Quality Improvement Act of 2013. While there are differences among the three bills, they share several overarching concepts. First, each of the bills would provide an initial period of payment stability: the Energy and Commerce bill would increase MPFS payments by 0.5% each year from 2014 to 2018, the Senate Finance Committee bill would freeze the payments (0% increase) for 10 years from 2014 to 2023, and the Ways and Means bill would increase payments by 0.5% in 2015 and 2016. Second, they each establish the development of new payment systems while maintaining fee-for-service payment in a manner similar to the existing system. Third, they each create incentives for physicians to transition to the new payment systems over time, generally by establishing different rates of increase over time for the new payment systems compared to fee-for-service. While these bills are generally non-specific about the details of the new payment systems, the bills establish criteria for the adoption and dissemination of such models, with attention to the ability of the new payment system to achieve broad provider participation, attract covered beneficiaries, and reduce spending while maintaining quality of care or improving quality of care without increasing spending. The bills also vary in which non-SGR provisions are included; S. 1871 includes several health care and human service program extenders (including provisions in Medicare, Medicaid, and CHIP). These are provisions that extend current policies beyond current expiration dates. H.R. 2810 as reported by the Energy and Commerce Committee includes provisions that would modify evidentiary rules and practices regarding medical malpractice claims. None of these bills include budgetary offsets. On February 6, 2014, H.R. 4015 and S. 2000 , the SGR Repeal and Medicare Provider Payment Modernization Act of 2014, were introduced in the House and Senate, respectively. H.R. 4015 and S. 2000 proposed five years of 0.5% payment increases for the Medicare physician fee schedule before freezing payments at that level for five additional years. Changes to the payment level in subsequent years would be determined by many factors, including participation in alternative payment models (APM) and provider performance in the newly created Merit-Based Incentive Payment System (MIPS) for those who choose to remain in the fee-for-service payment system. MIPS would subsume some of the current physician payment incentives (e.g., the meaningful use criteria for electronic health records and the value-based payment modifier), while others would be sunset (e.g., certain quality reporting incentives). As an incentive for providers to choose to participate in alternate payment models, payment rate increases would be greater for APMs (1.0% per year beginning in 2024) than for the FFS/MIPS system (0.5% per year beginning in 2024). On March 11, 2014, the Medicare SGR Repeal and Beneficiary Access Improvement Act of 2014 ( S. 2110 ) was introduced in the Senate. Title I of S. 2110 is identical to S. 2000 , while Title II includes provisions that would extend various Medicare, Medicaid, and other human services programs. H.R. 4015 was passed by the House on March 14, 2014, and includes an offset through an amendment introduced by then-Chairman Camp. How does CBO score the SGR bills introduced in the 113th Congress? The CBO scores for recent bills reflect a range of costs, with Title I of S. 1871 (dealing with the SGR) adding $111.5 billion to direct federal spending from 2014 to 2023, while H.R. 2810 as considered by the Ways and Means Committee would add $121 billion. CBO initially scored H.R. 2810 as reported by the Energy and Commerce Committee as adding $175 billion over the same period, but revised the figure to $146 billion, reflecting subsequently enacted legislation as well as modifications specified in the physician fee schedule final rule for 2014. CBO has scored S. 2000 and H.R. 4015 (as introduced) as adding $138.4 billion to direct spending from 2014 to 2024 (11 years, rather than the typical 10). S. 2110 , which includes many health care program extenders, would increase direct federal spending by $180.2 billion over 11 years. On February 3, 2015, CBO updated the estimate of H.R. 4015 and S. 2000 as introduced on February 6, 2014. The new estimate, reflecting an 11-year (2015-2025) window 1 year later than the prior score, increased to $174.5 billion. What are the offsets included in the doc fix bills? Only H.R. 4015 , as passed by the House on March 14, 2014, includes an offset through an amendment introduced by then-Chairman Camp. This proposed offset would delay the penalty for the individual mandate under the ACA for five years. The CBO scored the amended version of H.R. 4015 as reducing direct federal spending by $31.1 billion over the 11 years from 2014 to 2024, as the delay of the individual mandate penalty would reduce spending by $169.5 billion, more than offsetting the direct cost of the SGR repeal and replace provisions ($138.4 billion). Who or what "paid for" the prior doc fix bills? There is no clear answer to this question, largely because (1) not all doc fix bills have been offset, and (2) every doc fix bill has contained additional provisions that added to direct federal spending. In some cases, the amount of the SGR override was a small percentage of the overall bill (e.g., MMA, which created the Part D benefit). Aren't health program extenders typically part of the doc fix bills? In recent years, the doc fix bills have included provisions that have extended expiring health care programs. For instance, S. 2110 contains several health care program extenders, as does S. 1871 , which was reported by the Finance Committee. However, S. 2000 , H.R. 2810 , and H.R. 4015 do not include any provisions extending health care programs about to expire. The override bill that was eventually passed (the Protecting Access to Medicare Act of 2014; P.L. 113-93 ) included some health program extenders. When does the current doc fix patch expire? The Pathway for SGR Reform Act of 2013 ( P.L. 113-67 ), Division B of the Continuing Resolution Act ( H.J.Res. 59 ), provided for a 0.5% increase in MPFS payments for January 1, 2014, through March 31, 2014. The Protecting Access to Medicare Act of 2014 (PAMA; P.L. 113-93 ) extended this override, at the existing payment level, through March 31, 2015. What action has the 114th Congress taken regarding the SGR? On January 21 and 22, 2015, the Health Subcommittee of the Energy and Commerce Committee held a two-day hearing entitled, "A Permanent Solution to the SGR: The Time Is Now." While committee members and witnesses were unanimous in their stated desire to find a permanent replacement for the SGR, there was no consensus on whether the cost should be fully, partially, or not at all offset. On March 13, 2015, the chairs and ranking Members of the House Ways and Means and the Energy and Commerce Committees released a "Bipartisan Joint Committee Statement on the Sustainable Growth Rate" that included the following: Last year, the Ways and Means and Energy and Commerce Committees came together, on a bipartisan basis, to propose a permanent alternative to the broken SGR system. We are now engaging in active discussions on a bipartisan basis—following up on the work done by leadership—to try to achieve an effective permanent resolution to the SGR problem, strengthen Medicare for our seniors, and extend the popular Children's Health Insurance Program. Should Congress not come to agreement on a bill that the President signs into law (whether it be the outcome of the current negotiations or a separate bill altogether), another temporary patch would be required if Congress wants to override the reduction in the MPFS set to occur on April 1, 2015.

This report responds to frequently asked questions about the Sustainable Growth Rate (SGR) system for updating Medicare physician fee schedule payments (MPFS) and the recent legislative efforts to repeal and replace the SGR. Frequently asked questions address the background of the SGR, the need for congressional overrides (also referred to as "doc fixes"), and current legislative activity. For additional information, see CRS Report R40907, Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System , by [author name scrubbed].

Most Recent Developments On the night of June 10-11, clashes between ethnic Kyrgyz and Uzbeks broke out in Kyrgyzstan's southern city of Osh (population over 200,000), and intensified and spread to Jalal-Abad (population about 75,000) on June 12, and then to other smaller towns and villages. Large sections of the two cities reportedly had been burned by ethnic-based mobs. By some estimates, up to 1,000 or more people may have been killed and many more wounded. Over 100,000 ethnic Uzbeks reportedly have fled across the border to Uzbekistan. Factors contributing to the violence may have included ethnic Kyrgyz beliefs that ethnic Uzbeks are economically better off or control coveted resources, and ethnic Uzbek beliefs that they are being discriminated against by the politically and ethnically dominant Kyrgyz. These prejudices have been exacerbated in recent months, as Kyrgyzstan's economy has continued to deteriorate in the wake of the April 2010 coup against Kurmanbek Bakiyev. The coup against Bakiyev, a southerner, was viewed by many southern Kyrgyz as a effort by northern Kyrgyz interests to reassert their dominance. In turn, many southern ethnic Uzbeks appeared to support the interim government that ousted Bakiyev because it promised more democracy. Some officials in the interim government have argued that the violence was led by elements of the former Bakiyev government seeking to regain power. On June 12, interim leader Roza Otunbayev called for Russia to send "peacekeepers" to help restore order in the south. Russia declined pending an emergency meeting of security officials of the Collective Security Treaty Organization (CSTO; members include Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan). Otunbayeva also ordered the mobilization of military reservists on June 12. Meeting on June 14, the CSTO reportedly decided to send equipment to Kyrgyz security forces. President Medvedev stated that he might call for convening a summit of CSTO heads of state if the situation continued to deteriorate in Kyrgyzstan, perhaps to consider the issue of sending "peacekeepers." The clashing ethnic groups created barricades and roadblocks in Osh, Jalal-Abad, and elsewhere that prevented food and urgent medical supplies from reaching local populations. The World Health Organization, International Committee of the Red Cross, Red Crescent, and others are sending medical and humanitarian aid to Osh. Russia, Turkey, and China sent aircraft to Osh to evacuate their nationals. On June 12, Uzbekistan decided to admit refugees fleeing the violence in Kyrgyzstan, and international aid agencies assisted in setting up almost three dozen refugee camps. On June 14, Uzbekistan reportedly closed its borders to further refugees until international aid agencies provide more relief to care for them. U.N. High Commissioner for Human Rights, Navi Pillay, has called on Uzbekistan and Tajikistan not to close their borders to refugees seeking to enter from Kyrgyzstan. On June 14, the U.N. Security Council discussed the unrest in Kyrgyzstan at a closed-door meeting. On June 13, Russia sent a battalion of paratroopers—buttressing troops it already had sent after the coup—to defend its Kant airbase near Bishkek. The State Department has indicated that no U.S. troops are currently planned for defending the U.S. transit center facilities or for other purposes. On June 14, the U.S. Embassy in Bishkek expressed deep concern about the violence in the south, called for the restoration of the rule of law, and announced that the United States would send more medical and humanitarian assistance to help remedy the results of the violence in the south. State Department spokesman Philip Crowley also stated that Secretary of State Clinton had spoken with officials in the interim Kyrgyz government, the UN, the Organization for Security and Cooperation in Europe (OSCE), and Russia "as we seek a coordinated international response to the ongoing violence" in Kyrgyzstan. The U.S. transit center dispatched a plane load of tents, cots and medical supplies to Osh. Background Kyrgyzstan is a small and poor Central Asian country that gained independence in 1991 with the breakup of the Soviet Union. The United States has been interested in helping Kyrgyzstan to enhance its sovereignty and territorial integrity, increase democratic participation and civil society, bolster economic reform and development, strengthen human rights, prevent weapons proliferation, and more effectively combat transnational terrorism and trafficking in persons and narcotics. The United States has pursued these interests throughout Central Asia, with special strategic attention to oil-rich Kazakhstan and somewhat less to Kyrgyzstan. The significance of Kyrgyzstan to the United States increased after the September 11, 2001, terrorist attacks on the United States. Kyrgyzstan offered to host U.S. forces at an airbase at the Manas international airport outside of the capital, Bishkek, and it opened in December 2001. The U.S. military repaired and later upgraded the air field for aerial refueling, airlift and airdrop, medical evacuation, and support for U.S. and coalition personnel and cargo transiting in and out of Afghanistan. In 2010, the Manas Transit Center hosted about 1,100 U.S., Spanish, and French troops and a fleet of KC-135 refueling tankers. The Coup and Its Aftermath According to most observers, the proximate causes of the April 2010 coup include massive utility price increases that went into effect on January 1, 2010, during the height of winter weather, and increasing popular perceptions that President Kurmanbek Bakiyev's administration was rife with corruption and nepotism. The latter appeared to include Bakiyev's appointment of his son Maksim in late 2009 as head of a new Central Agency for Development, Investment and Innovation. It was widely assumed that Maksim was being groomed to later assume the presidency. Appearing to fuel this popular discontent, Russia launched a media campaign in Kyrgyzstan against Bakiyev (see below). On March 10, 2010, demonstrators held massive rallies in the town of Naryn, calling on the government to withdraw its decision on price increases and the privatization of energy companies. This demonstration appeared to exacerbate security concerns in the government about other protests planned by the opposition and triggered added efforts to suppress media freedom. Several internet websites, including opposition websites, were closed down, rebroadcasts by RFE/RL and the BBC were suspended, and two opposition newspapers were closed down. At an opposition party bloc meeting in Bishkek on March 17, participants accused the president of usurpation of power, political repression, corrupt privatizations, and unjustified increases in prices for public utilities. They elected Roza Otunbayeva, the head of the Social Democratic Party faction in the legislature, as the leader of the opposition bloc and announced that nationwide rallies would be held to demand reforms. President Bakiyev had presumed that a planned annual meeting of the Assembly of Peoples of Kyrgyzstan (a consultative conclave composed of representatives of ethnic groups) on March 23 would result in an affirmation of his policies, but many participants harshly criticized his rule. He complained afterward that the participants from rural and mountainous areas who were critical were uninformed, and that legislators should visit the areas to educate the voters. He claimed that the assembly had endorsed his plans to change the constitution to reorganize the government to elevate the status of the assembly as part of a new "consultative democracy." Elections would be abolished and the "egoism" of human rights would be replaced by "public morals," he stated. These proposals appeared similar to those taken in Turkmenistan by the late authoritarian President Saparamurad Niyazov. Bakiyev also had moved the Border Service and Emergencies Ministry headquarters to Osh and was planning on moving the Defense Ministry offices there, claiming that more security was needed in the south. Other observers viewed the moves as a means of shifting some economic power and authority to the south of the country, where Bakiyev's family and clans, who have long been excluded from power in Bishkek, reside. Problems of democratization and human rights in Kyrgyzstan were highlighted during a visit by U.N. Secretary-General Ban Ki-moon on April 3, 2010. He stated in a speech to the Kyrgyz legislature that "the protection of human rights is a bedrock principle if a country is to prosper.... Recent events have been troubling, including the past few days.... All human rights must be protected, including free speech and freedom of the media." He also reported that during a meeting with President Bakiyev, he "urged the president to orient his policies to promote the democratic achievements of Kyrgyzstan, including its free press." Some observers viewed this visit as further fueling popular discontent against Bakiyev. Bakiyev's Ouster Faced with the rising discontent, Kyrgyz Prime Minister Daniyar Usenov ordered the government on April 5 to pay half the power bills of rural households. However, the next day a reported 1,000 or more protesters stormed government offices in the western city of Talas. Security forces flown from Bishkek retook the building in the evening, but were forced out by protesters. Responding to the violence in Talas, government security forces on April 6 reportedly accused the head of the Social Democratic Party and former presidential candidate Almazbek Atambayev of fomenting the unrest and detained him. Other opposition leaders also were detained on April 6-7, including Omurbek Tekebayev, head of the Ata Meken Party; Isa Omurkulov, a member of the legislature from the Social Democratic Party; Temir Sariyev, the head of the Ak-Shumkar Party; and others. On April 7, unrest spread to the Naryn, Chui, Talas, and Issyk-Kul regions, where regional and district government buildings were overrun by protesters. Even some district administrations in southwestern Jalal-Abad Region, President Bakiyev's home region, were occupied by protesters. In Bishkek, police and about 400 protesters violently clashed on the morning of April 7 outside the headquarters of the Social Democratic Party in Bishkek. Prime Minister Usenov declared a nationwide state of emergency. Protesters then gathered and soon overwhelmed the police, taking control of two armored vehicles and automatic weapons. The protesters, now numbering between 3,000-5,000, surrounded the presidential offices. They asked President Bakiyev and Prime Minister Usenov to come out and talk to them, and after the two leaders refused, the protesters stormed the building. After tear gas, rubber bullets, and stun grenades failed to disperse the protesters, police reportedly opened fire with live ammunition, killing and wounding dozens. Police released detained opposition leaders in the hopes of reducing tensions. Later that day, demonstrators led by Tekebayev occupied the legislative building, other protesters seized the state television and radio building, and the Defense Department and attorney general's offices were in flames. Protesters marched on a prison holding former defense minister Ismail Isakov, who had just been sentenced to eight years in prison on corruption charges, and the prison released him. Late on April 7, Temir Sariyev and Roza Otunbayeva held talks with Prime Minister Usenov at the government building. Otunbayeva announced early on April 8 that Usenov had tendered his resignation, that his cabinet ministers had been dismissed, that the sitting legislature had been dissolved because it had been illegitimately elected, and that an interim government had taken over the powers of the prime minister, president, and legislature. Otunbayeva announced that her government included First Deputy Prime Minister Almaz Atambayev, in charge of economic issues; Deputy Minister Temir Sariyev, in charge of finances and loans; Deputy Minister Omurbek Tekebayev, in charge of constitutional reform and planning for the future of the country; and Deputy Minister Azimbek Beknazarov, in charge of public prosecution, courts and the financial police. She stated that the interim government would rule until presidential elections are held in six months. As one of her first acts as prime minister, she announced that the prices paid for water, electricity, and heat would be rolled back to last year's prices. She also announced on April 8 that "we will hundred percent comply with all international agreements of the republic"; that the existing constitution would remain in place until a new one was drafted and approved by the citizenry; and that the status of the Manas Transit Center would not be immediately affected. However, she indicated that possible corruption involving commercial contracts with the airbase and the airbase leasing arrangements would be investigated. In addition, Ismail Isakov was reappointed defense minister to consolidate the interim government's control over the armed forces. Bolot Sherniyazov was named the acting interior minister and Keneshbek Duishebayevhe was named acting chairman of the State National Security Service to assure the loyalty of these forces to the interim government. Sherniyazov immediately authorized the use of force against looters who had run rampant in Bishkek and elsewhere during the coup. New Deputy Prime Minister Atambayev stated that the government would soon draft changes to the constitution, the electoral code, and the law on peaceful assembly. Baytemir Ibrayev, who had been appointed as the interim prosecutor-general, issued a warrant for the arrest of Usenov and several relatives of Bakiyev on charges of corruption or involvement in the deaths of protesters. Former President Bakiyev had legal immunity from prosecution as a past head of state, but Otunbayeva called for him to cease his alleged efforts to foment a counter-coup or civil war and to leave the country. Security forces loyal to the interim government surrounded Bakiyev's forces in the town of Jalal-Abad on April 15 as negotiations were held on his surrender. That evening, the OSCE chairperson-in-office, Foreign Minister Kanat Saudabayev, issued a statement that "as a result of joint efforts of Kazakhstan's President Nursultan Nazarbayev, U.S. President Barack Obama and Russia's President Dmitriy Medvedev, as well as active mediation by the OSCE, along with the United Nations and the European Union, an agreement was reached with the Interim Government of Kyrgyzstan and President Kurmanbek Bakiyev on his departure from the country." Bakiyev flew first to Kazakhstan with a few members of his family on April 15, where he signed a resignation letter, and then flew to Belarus late on April 19. On April 21 he repudiated the resignation letter on the grounds that the Kyrgyz interim government had broken an alleged pledge not to prosecute members of Bakiyev's family. On May 3, the interim government released a list of former officials and others wanted in connection with the shooting of civilians on April 7 or for corruption or other crimes. Rewards were offered for information leading to their capture. Individuals on the list included Usenov, three of Bakiyev's brothers, Bakiyev's son Maksim, and several deputy prime ministers and ministers. On May 4, Otunbayeva signed a decree stripping Bakiyev of his presidential immunity, opening the way to his arrest and prosecution. The interim government explained that by killing civilians, Bakiyev had violated the tenets of presidential immunity. Bakiyev has maintained that his guards opened fire only after protesters started shooting into his offices. On May 19, the interim government proclaimed that Otunbayev would serve as interim president until a presidential election in December 2011, and that she will be ineligible to run in this election. Pro-Bakiyev demonstrators occupied government offices in Batken, Jalal-abad, and Osh on May 13-14, but after clashes that resulted in at least one death and dozens of injuries, the interim leadership re-established control. Renewed clashes took place in Jalal-abad on May 19 that reportedly resulted in two deaths and dozens of injuries. Implications for Kyrgyzstan The coup resulted in relatively large-scale casualties and much property damage, compared to the 2005 coup that brought Bakiyev to power. The health ministry reported that 85 people had been killed and over 1,000 injured. There was extensive damage to government buildings and commercial establishments in Bishkek and elsewhere that will take some time to repair. Some observers argue that the coup was primarily a spontaneous uprising by mostly unemployed or underemployed youth whose discontent had reached a tipping point. The periodical Eurasia Insight has suggested that the events precipitating the uprising included the late March meeting held by Bakiyev, which showed his weakness, and many observers have asserted that heavy criticism of Bakiyev by Moscow fueled anti-regime sentiments. Other observers assert that political party opposition leaders planned the takeover, and that it was then carried out by youth groups. There are parallels between the coup in 2005 and the more recent coup. Both arguably were revolts against increasingly authoritarian regimes rife with corruption and nepotism. However, differences between the two coups include a higher level of casualties during the more recent coup, since government security forces opened fire on many demonstrators. The 2005 coup was led by disaffected elites, according to some observers, while the more recent coup was more a grass-roots effort and was more chaotic in execution. Just as the opposition leaders were not in control of the uprising, they are having difficulty in restoring peace, these observers argue. Analyst Monika Shepherd argues that in the face of the global economic downturn—which heavily impacted Kyrgyzstan because of the decline of remittances from migrant workers in Russia and Kazakhstan—Bakiyev did not meet with opposition leaders or otherwise reach out to the population but instead increasingly used repression to quell discontent. The disruption of the coup is likely to add to Kyrgyzstan's economic problems. Reportedly, some investors have been concerned about the interim government's nationalization of businesses and other assets in which Maksim Bakiyev had shares, and some investors have canceled pending projects. Uzbekistan and Kazakhstan delayed reopening borders they closed at the time of the coup, leading some observers to accuse the countries of bias against the interim government. Kazakhstan reopened the border to cargo traffic on May 6 and announced plans to reopen for all traffic on May 11. Some observers voice the hope that the coup has reversed Kyrgyzstan's deepening authoritarianism under Bakiyev and has put the country back on the path of democratization. Polish analyst Tomasz Sikorski has warned that most of the interim leadership is composed of individuals who also participated in the 2005 coup, and who subsequently failed to advance democracy and the rule of law in Kyrgyzstan. Even the hopeful observers acknowledge, however, that the country faces a difficult task in coming months of ensuring peace while it also approves constitutional changes and laws, holds a constitutional referendum, and holds presidential and legislative elections. To buttress efforts to restore civil peace, Atambayev was named the head of an interim commission on April 26 composed of the leaders of the security, police, and armed forces. That same day, the interim government released a draft constitution for discussion that proposes the creation of a parliamentary system of government perhaps modeled after that of the United Kingdom, in which the head of government (prime minister) comes from the main party in parliament and the head of state (president) has nominal powers. A 75-member constitutional commission, headed by deputy prime minister Tekebayev, finalized a draft constitution in May which is scheduled for a referendum on June 27, 2010. Otunbayeva praised the draft's call for setting up a parliamentary system, stating that "the experience of our country during the years of independence shows that a strong presidency inevitably leads to family authoritarianism.... We should not allow any of this to happen ever again." Legislative elections are scheduled for October 10, 2010. Under a decree of the interim government, Otunbayeva serves as interim president but is ineligible to run during a presidential election planned for December 2011. The aftermath of the coup highlighted ongoing ethnic tensions in the country between some Kyrgyz ultranationalists and minority ethnic groups, including Uzbeks, Russians, and Meskhetian Turks. In one incident, ethnic Kyrgyz stormed the village of Mayevka, near Bishkek, on April 19, looting and seizing land from ethnic Meskhetians and Russians, and leading to five deaths. Police were able to evict the squatters a few days later. To some degree, north-south tensions in Kyrgyzstan are related to ethnic tensions, since most of the ethnic Uzbeks in the country reside in the southern provinces of Jalal-Abad and Osh. Some ethnic Uzbeks feel excluded from participation in the central government in Bishkek in the north. Similarly, some ethnic Kyrgyz families and clans in the south feel excluded. The coup might exacerbate north-south tensions if it is felt that northerners led the overthrow of Bakiyev, a southerner. Some supporters of Bakiyev have called for the new constitution to set up a federal government where the north and south have "equal powers." Tekebayev reportedly has rejected federalism on the grounds that it could contribute to separatism. Others in the southern provinces of Jalal-Abad and Osh have called for secession and the formation of the Democratic Republic of Southern Kyrgyzstan. Perhaps belying this sense of exclusion, several of the leaders of the interim government, including Otunbayeva, Tekebayev and Beknazarov, are southerners. International Response During the violence on April 7, the OSCE representative on freedom of the media, Dunja Mijatovic, called for the Bakiyev government to cease censorship and allow journalists to report on the situation in the country. U.N. Secretary-General Ban Ki-moon stated on April 7 that he was "shocked" over the deadly clashes in Kyrgyzstan just days after his visit and appealed for concerned parties to show restraint. The next day, he announced that he would send a special envoy to Kyrgyzstan, Slovak diplomat Jan Kubis. The OSCE chairperson-in-office has appointed Zhanybek Karibzhanov as a special envoy to Kyrgyzstan. In addition, Adil Akhmetov, a member of the Kazakh delegation to the OSCE Parliamentary Assembly, was appointed a Special Envoy to Kyrgyzstan by Assembly President Joao Soares. It was agreed that the envoys would coordinate their efforts. EU foreign affairs chief Catherine Ashton stated on April 8 that "I welcome the early signs of stabilization in Kyrgyzstan and an end to the confrontation.... The EU stands ready to provide urgent humanitarian assistance if necessary." On 29 April, the OSCE Permanent Council allocated OSCE contingency funds of about $15 million to help address Kyrgyzstan's budget deficit in dealing with post-coup needs. On May 5, the European Bank for Reconstruction and Development and the interim government discussed setting up a group of officials and experts from international financial institutions to coordinate assistance to enhance political and economic stability in Kyrgyzstan. Implications for Russia and Other Eurasian States During the coup, Russia urged restraint between Kyrgyz authorities and the opposition and called on them to resolve their disputes through democratic means instead of violence. Indicating a bias against Bakiyev, President Medvedev reportedly stated on April 7 that "this situation is Kyrgyzstan's internal affair but the form in which the protests erupted testifies to the utmost degree of discontent that the actions of the authorities produced among the rank-and-file people." After the coup, Prime Minister Putin publicly denied that Russia had any direct role in the coup, but he moved quickly to recognize the new interim government and to offer humanitarian assistance. Otunbayeva and Tekebayev praised Putin for quickly offering humanitarian assistance to Kyrgyzstan. On April 11, Atambayev visited Moscow and reported that Kyrgyzstan had been offered a multimillion dollar grant of humanitarian aid. Some Western and Russian media and Russian analysts have asserted that Russia largely orchestrated the coup because of dissatisfaction that Bakiyev had not closed the Manas Transit Center as promised. In contrast, the coup in Kyrgyzstan in 2005 was attributed by some officials in Russia and Central Asia to influence by the United States through pro-democracy assistance to non-governmental organizations. The United States denied any direct influence. According to this Russian triumphalist view, however, Bakiyev's ouster represents the removal of a regional leader who had been backed by the United States. They point to what they claim were successful Russian machinations in Kyrgyzstan to warn other regional leaders, particularly President Mikheil Saakashvili of Georgia, that they must pursue pro-Russian policies. Months before the coup, Prime Minister Putin had indicated that $1.7 billion of a pledged $2 billion in loans to Kyrgyzstan (proffered the same day that Bakiyev had announced that the airbase would be closed) would not be forthcoming. According to one article in the Kyrgyz press, Prime Minister Putin allegedly raised concerns with Kyrgyz Prime Minister Usenov that "talk is reaching me of family business in Kyrgyzstan at state level. What is going on? How should this be understood?... I wish to remind you also that one of the conditions for receiving the loan was the withdrawal of the U.S. military base from Kyrgyzstan." Russian websites launched a number of anti-Bakiyev articles in March 2010, causing the Kyrgyz government to block the websites. The Russian embassy in Bishkek denounced the efforts to block the websites. According to one Kyrgyz analyst, immediately after Bakiyev had agreed in June 2009 to permit the U.S. Manas Transit Center to stay in place, Russia began to increase contacts with Kyrgyz opposition leaders. According to one U.S. analyst, Russian umbrage increased after reports in March 2010 that the United States might help fund and build an anti-terrorism training center in Batken in southern Kyrgyzstan (the United States already had helped Kyrgyzstan open a special forces training camp in Tokmok, near Bishkek, in October 2009), and Russia stepped up its contacts with Kyrgyz opposition leaders. In another move viewed by many in Kyrgyrstan as retaliation against Bakiyev, Russia had announced in late March 2010 that it would greatly increase customs duties on gasoline and other petroleum products exported to members of the Commonwealth of Independent States that did not belong to a customs union (members of the customs union include Russia, Belarus, and Kazakhstan). The increased duties disrupted supplies to Kyrgyzstan in early April, causing increased prices. The customs duties also may have directly reduced profits gained by Kyrgyz firms linked to Bakiyev that purchased fuel from Russia to sell to the Manas Transit Center. On April 8, a Russian official reportedly renewed the call for Kyrgyzstan to close the Manas Transit Center (see below). On March 29, 2010, Nikolay Bordyuzha, the secretary general of the Collective Security Treaty Organization (CSTO; a Russia-led military cooperation group that also includes Armenia, Belarus, and the Central Asian states, except Turkmenistan), visited Kyrgyzstan and stated that "there are no grounds to speak about any kind of chill in Russian-Kyrgyz relations.... The Russian and Kyrgyz presidents have a busy schedule working [together]." Bakiyev reported that Bordyuzha contacted him during the uprising, but he did not mention whether Bordyuzha had offered the CSTO's assistance in quelling it. Bordyuzha led a CSTO delegation to Bishkek on April 9 to assess the situation and make a report to the CSTO Collective Security Council. The chief of the Russian general staff, Nikolai Makarov, reported that President Medvedev had ordered that two paratroop companies comprised of 150 officers and men be deployed to Russia's Kant airbase east of Bishkek, to a naval communication station in Chu Region, and to a naval test range at Issyk-Kul "to protect the families of [the Russian] military there, if need be." The Russian government stressed that the paratroopers were carrying only small arms. Further troops reportedly were deployed on April 11. On April 30, the Russian Defense Ministry announced that 150 more troops would be deployed to relieve troops sent earlier. Tekebayev travelled to Moscow on April 14, where he met with Deputy Prime Minister Igor Sechin and Prime Minister Putin, who pledged their support for the interim government. Russia subsequently announced that Kyrgyzstan would be offered $50 million in assistance, 25,000 tons of petroleum products, and seeds for planting. State Secretary and Deputy Foreign Minister Grigory Karasin visited Kyrgyzstan on April 25-26 to affirm Russia's support for the interim government. He also praised the interim government efforts to protect Russian citizens residing in the country and their property from ethnic attacks. Official media in all the other Central Asian states paid scant attention to the turmoil in Kyrgyzstan, in what seemed like a replay of reactions to the 2005 coup, which Central Asian presidents feared could have contagion effects. One analyst has pointed out that other Central Asian presidents were particularly alarmed that their common practices of nepotism and the designation of children as successors were apparent factors in the popular uprising against Bakiyev. Kazakhstan closed its borders after numbers of Kyrgyz reportedly attempted to cross the border to find refuge in Kazakhstan. On April 9, however, it indicated that it would soon reopen the borders and pledged humanitarian assistance to Kyrgyzstan. Uzbekistan also closed its borders. The border closures exacerbate already problematic inter-regional trade and economic cooperation and could affect the land transport of U.S. and NATO supplies to Afghanistan (see below). Georgian officials raised concerns about Russia's reputed involvement in the coup, but visiting Kyrgyz officials reportedly stated that the coup was "a result of the accumulated discontent of the Kyrgyz people with actions of the former authorities, in particular the difficult social and economic situation, nepotism and corruption." Implications for China China is concerned that the coup could lead to a more democratic Kyrgyzstan that would inspire Chinese democrats and embolden some ethnic Uighurs (a Turkic people) who advocate separatism in China's Xinjiang region bordering Kyrgyzstan. Groups such as the East Turkestan Independence Movement (ETIM; designated by the United States as a terrorist group) have bases in Central Asia. China may also be concerned that peaceful Uighurs within a democratic Kyrgyzstan might become more politically active in advocating for their kin in Xinjiang. There was some looting and destruction of Chinese businesses in Kyrgyzstan during the coup that might be classified as hate crimes. China is also concerned that instability in Kyrgyzstan could result in increased cross-border smuggling and other crime. More widely, instability in Kyrgyzstan could spread to other Central Asian countries, harming regional trade relations with China. China has stressed that its paramount concern is that law and order be reestablished in Kyrgyzstan and that "good neighborly relations" between the two states continue, including cooperation in combating terrorists. The latter includes work within the Shanghai Cooperation Organization (SCO; formed in by China, Russia, and most of the Central Asian states), headquartered in Bishkek. Matching in some respects Russian concerns about the CSTO, the coup reportedly raised questions in China about the effectiveness of the SCO's emergency consultation provisions. Implications for U.S. Interests The U.S. embassy in Bishkek on April 7 issued a statement raising deep concerns about the unrest in some Kyrgyz cities and calling on all parties concerned to solve their conflict within the framework of the rule of law. White House National Security Council spokesman Mike Hammer similarly stated that the United States was closely following the situation and felt concerned about reports of violence and looting, and urged all parties to refrain from violence and exercise restraint. After the announcement that an interim government had been formed, U.S. Embassy Chargé d'Affaires Larry Memmott met with Otunbayeva on April 8, reportedly to urge nonviolence and a quick restoration of order and democracy. Secretary of State Hillary Clinton called Otunbayeva on April 10, and Michael McFaul, the Special Assistant to the President for National Security Affairs and Senior Director for Russian Affairs, reported that he also had talked to Otunbayeva. On April 12, President Obama raised concerns about Kyrgyzstan with visiting Kazakh President Nursultan Nazarbayev. At the time of the coup, Maksim Bakiyev, Foreign Minister Kadyrbek Sarbayev, and other Kyrgyz officials were arriving in the United States for meetings, including with Administration officials as part of bilateral dialogues with Central Asian countries launched last year. The bilateral dialogue was "postponed," according to the State Department, although a brief meeting was held between Assistant Secretary of State Robert Blake and Sarbayev. The United States and Kyrgyzstan had held talks on building a $5.5 million counter-terrorism training center in the Batken region of Kyrgyzstan. Russia had objected, since Kyrgyzstan earlier had balked (including because Uzbekistan had strongly objected) at permitting Russia to establish another airbase there. The status of plans for the counter-terrorism training center is now uncertain. Unlike Russia, the United States hesitated to immediately recognize the interim government. McFaul stated on April 8 that "the people that are allegedly running Kyrgyzstan—and I emphasize that word because it's not clear who is in charge right now—these are all people that we've had contact with for many years.... This is not some anti-American coup. That we know for sure and this was not a 'sponsored by the Russians' coup." Instead of competition between Russia and the United States over influence in Kyrgyzstan, McFaul suggested, President Medvedev had "pulled the President aside" during their meeting in Prague on April 8 to discuss developments in Kyrgyzstan and possible cooperative actions, including the involvement of the OSCE in facilitating peace. In the wake of the coup, the United States provided more than $200,000 worth of medical supplies to help treat the wounded. On April 14, Assistant Secretary of State Robert Blake traveled to Bishkek and met with Otunbayeva, further signaling U.S. support for the interim government. According to some observers, the visit helped convince Bakiyev to leave the country and formally resign his office. Assistant Secretary Blake stated in a press conference that "the United States believes that the provisional government and the people of Kyrgyzstan have a unique and historic opportunity to create a democracy that could be a model for Central Asia and the wider region. I offered [the interim government] the full support of the United States to provide technical and other assistance to help achieve that goal." Further support for Kyrgyzstan was evidenced by a visit by Michael McFaul on May 4-6. He announced that "U.S. President Barack Obama's administration is ready to provide the necessary assistance in building a democratic society in Kyrgyzstan and maintaining stability in this country." In line with a request reportedly made by the interim government to Assistant Secretary Blake, McFaul announced that $15 million in lease payments for the Manas Transit Center would be delivered posthaste to the interim government. He also called for an open investigation of whether the transit center was damaging the environment and denied that the United States was complicit in corruption involving fuel contracts. He further stressed the U.S. commitment to democratization and human rights in Kyrgyzstan during a talk at the American University of Central Asia. Some oppositionists and other observers argue that the United States de-emphasized its concerns over human rights and democratization problems in Kyrgyzstan in order to maintain good relations with the Bakiyev government and retain leasing rights for the transit center. They also allege that the U.S. embassy in Bishkek eschewed many contacts with opposition politicians as part of this policy. The U.S. State Department and other observers, however, disagree that the United States de-emphasized concerns over human rights and democratization. These observers also argue that, while some Kyrgyz politicians decried such an alleged de-emphasis, the politicians did not equally criticize Russia or China for not emphasizing human rights and democratization in their relations with Bakiyev. Also, Russia is not being asked by these politicians to close its airbase at Kant as a result, while the United States is being asked to close its "transit center," they aver. McFaul stressed during his May 2010 visit that he was holding extensive meetings with civil society representatives, as he had during a previous visit in July 2009. He also underlined that the State Department Human Rights Report had criticized the Bakiyev government and that U.S. assistance for democratization had been increased. The U.S. ambassador to Kyrgyzstan likewise claimed that she often had met with opposition politicians at the embassy and had always raised human rights concerns during meetings with government officials. Reporting on the meeting between Presidents Obama and Medvedev in Prague on April 8, McFaul asserted that Russia had changed its view of the Manas Transit Center from that it held in February 2009, when it offered $2 billion in aid to Kyrgyzstan as an implicit quid pro quo for closing the airbase. Instead, the two Presidents had held "an entirely different conversation today. We have interest in stability. We want to make, we want to monitor that the troops stay where they are." In response to a question about an alleged statement by a Russian official that Moscow would urge that Kyrgyzstan close the "transit center," McFaul stated that "I was standing next to the two Presidents discussing Kyrgyzstan and the notion that we need to close the ... Manas 'Transit Center' was not discussed. That [alleged statement] just simply seems spurious to me." At a hearing held by the House Subcommittee on National Security in April 2010, several witnesses called for boosted U.S. foreign assistance for Kyrgyzstan as a means of reversing perceptions by the Kyrgyz interim government and many Kyrgyz citizens that the United States had eased its backing for democracy and human rights in order to maintain good relations with Bakiyev. Analyst Alexander Cooley urged that the United States boost post-coup assistance to Kyrgyzstan above Russia's $50 million pledge. He also called for assisting the interim government in investigating Bakiyev government corruption in regard to transit center operations. Similarly, analyst Eugene Huskey urged more U.S. aid for hydroelectric projects. Diplomat Baktybek Abdrisaev called for the United States to launch highly visible aid projects to demonstrate that the transit center is not the only U.S. concern, such as boosting support for the American University in Central Asia, other educational institutions, and exchange programs. While some observers have viewed Russia as orchestrating the coup and winning influence as a result, Russian analyst Tatyana Stanovaya has argued that members of Kyrgyzstan's interim government are widely known by U.S. officials, that most members of the interim government have been pro-Western, and that U.S. officials have countered Russian actions by quickly offering assistance and visiting Kyrgyzstan. The U.S. Transit Center and Northern Distribution Network The Manas Transit Center near Bishkek (see Figure A-1 ) plays a vital role in the U.S. surge in Afghanistan. Most U.S. troops enter and leave Afghanistan through the transit center. U.S. and French KC-135 tankers based there provide refueling services for U.S. and NATO aircraft flying missions in Afghanistan. In addition, the transit center plays a vital role as part of the Northern Distribution Network (NDN), a number of rail, road, and air routes transiting the Caspian region to deliver supplies for U.S. and NATO operations in Afghanistan. Some weapons and classified cargoes are sent via air routes to the transit center, and thence to Afghanistan. In addition, some supplies are sent by land through Kazakhstan to the transit center, where they are then flown to Afghanistan, although this is not a major NDN land route. In March 2010, about 50,000 troops passed through Manas, en route to or out of Afghanistan, according to the Air Force, a substantial increase over the average number of troops transiting per month in 2009. Pentagon spokesman Bryan Whitman reported on April 8 that "currently there are limited operations at the Manas airfield," but that the transit center hoped to "be able to resume full operations soon." He also stated that in the meantime, alternative transit routes would be used. According to a U.S. Central Command spokesman, troop flights through the transit center were again temporarily interrupted on April 9, but resupply and refueling missions continued. Troop flights were renewed by April 12. The transit center leasing arrangement comes up for annual renewal in July 2010 (automatic unless one or both parties lodge objections). Initially after the coup, some officials in the interim government stated or implied that the conditions of the lease would be examined. Otunbayeva warned on April 8 that questions of corruption involving commercial supplies for the transit center would be one matter of investigation. On April 12, she stated that she realized that 2010 was a seminal year for U.S. operations in Afghanistan and that President Obama planned on drawing down troops thereafter, and implied that ultimately she hoped there were no bases in the country. On April 13, Otunbayeva announced that the lease on the transit center would be "automatically" renewed for one year. Some observers warn that the status of the transit center is likely to become a campaign issue in the run-up to the planned October 10, 2010, presidential and legislative elections. For instance, the chairman of the Kyrgyz Communist Party, Ishak Masaliev, and the head of the Zharyk Kyrgyzstan Party, Rasul Umbetaliyev, likely would campaign on an anti-base platform if they run for president. In congressional testimony in April 2010, analyst Eugene Huskey warned that a party bloc might emerge before the presidential election that would campaign on anti-corruption and opposition to the continued operation of the transit center. At the same hearing, diplomat Baktybek Abdrisaev argued that Kyrgyz policymakers would not demand the closure of the transit center as long as terrorism continues to threaten Afghanistan, since the operations of the transit center benefit Kyrgyzstan's national security. Controversy surrounds the matter of jet fuel purchases by the transit center during Bakiyev's rule. According to the New York Times , the primary source of aviation grade kerosene used at the [transit center] is an oil refinery in the Siberian city of Omsk, owned by the oil division of Gazprom, the Russian energy giant. Red Star, a company with offices in London and Bishkek, contracted with [the Defense Logistic Agency's Defense Energy Support Center] to buy the fuel and move it across several Central Asian countries to Manas. Chuck Squires, a former American Army lieutenant colonel, was hired to handle the contract.... Some of Red Star's business had been assumed by another company, the Mina Corporation Limited.... the trading companies made money selling cheap Russian jet fuel at world prices to the American base. Until April 1, when the Russian government abruptly imposed a steep tariff on refined products for Kyrgyzstan, these exports were tariff-free under a customs agreement. Within Kyrgyzstan, sales to the base were exempt from the usual 20 percent sales tax. ITAR-TASS reported on April 30 that Kyrgyz companies held contracts with Red Star and Mina, including Manas Fuel Services, Kyrgyz Aviation, Central Asia Fuel, Aviation Fuel Service, Aircraft Petrol Limited, and Central Asia Trade Group, all of which were controlled by Maksim Bakiyev. Some observers have alleged that U.S. defense or intelligence payments may have been made in effect to the Bakiyev family in return for permission for transit center operations, as they supposedly were made previously to the Akayev family, and reflect acquiescence to corruption and disregard for democratization. The United States has denied any such quid pro quo and has pledged to cooperate with the Kyrgyz investigation of fuel supply arrangements and an investigation by the House Subcommittee on National Security. During his April 15 visit to Bishkek, Assistant Secretary of State Blake reportedly stated that fuel contracts are always awarded in competitive and fully transparent tenders, and that if any irregularities are uncovered in the way they were secured or awarded, they might be subject to rebidding. Appendix. Transitional Government Leaders Roza Otunbayeva, head of the legislative faction of the Social Democratic Party. She was a former deputy prime minister, foreign minister, ambassador to the United Kingdom and the United States, and U.N. emissary. Temir Sariyev, the leader of the Ak-Shumkar party. He ran as an opposition candidate in the 2009 presidential election. Omurbek Tekebayev, head of the Ata Meken Party. He was a former speaker of the legislature. His party is a member of the United People's Movement opposition bloc of parties. Almazbek Atambayev, head of the Social Democratic Party. He served as prime minister under President Bakiyev in March-November 2007. He resigned and accused the Bakiyev government of corruption and nepotism. He was the main opposition candidate in the 2009 presidential election. His party is a member of the United People's Movement opposition bloc of parties. Azimbek Beknazarov, leader of the People's Revolutionary Movement. He was a former prosecutor-general. His party is a member of the United People's Movement opposition bloc of parties.

Kyrgyzstan is a small and poor country in Central Asia that gained independence in 1991 with the breakup of the Soviet Union (see Figure A-1). It has developed a notable but fragile civil society. Progress in democratization has been set back by problematic elections (one of which helped precipitate a coup in 2005 that brought Kurmanbek Bakiyev to power), contention over constitutions, and corruption. The April 2010 coup appears to have been triggered by popular discontent over rising utility prices and government repression. After two days of popular unrest in the capital of Bishkek and other cities, opposition politicians ousted the Bakiyev administration on April 8 and declared an interim government pending a new presidential election in six months. Roza Otunbayeva, a former foreign minister and ambassador to the United States, was declared the acting prime minister. A referendum on a new constitution establishing a parliamentary form of government is scheduled to be held on June 27, 2010, to be followed by parliamentary elections on October 10, 2010, and a presidential election in December 2011. On the night of June 10-11, 2010, ethnic-based violence escalated in the city of Osh in southern Kyrgyzstan, and over the next few days intensified and spread to other localities. The violence may have resulted in up to a thousand or more deaths and injuries and up to 100,000 or more displaced persons, most of them ethnic Uzbeks who have fled to neighboring Uzbekistan. The United States has been interested in helping Kyrgyzstan to enhance its sovereignty and territorial integrity, increase democratic participation and civil society, bolster economic reform and development, strengthen human rights, prevent weapons proliferation, and more effectively combat transnational terrorism and trafficking in persons and narcotics. The significance of Kyrgyzstan to the United States increased after the September 11, 2001, terrorist attacks on the United States. The Kyrgyz government permitted the United States to establish a military base at the Manas international airport outside Bishkek that trans-ships personnel, equipment, and supplies to support U.S. and NATO operations in Afghanistan. The former Bakiyev government had renegotiated a lease on the airbase in June 2009 (it was renamed the Manas Transit Center), in recognition that ongoing instability in Afghanistan jeopardized regional security. Otunbayeva has declared that the interim government will uphold Kyrgyzstan's existing foreign policy, including the presence of the transit center, although some changes to the lease may be sought in the future. She also has launched an investigation of corrupt dealings by the previous government on fuel contracts and other services for the transit center. Cumulative U.S. budgeted assistance to Kyrgyzstan for FY1992-FY2008 was $953.5 million (FREEDOM Support Act and agency funds). Kyrgyzstan ranks third in such aid per capita among the Soviet successor states, indicative of U.S. government and congressional support in the early 1990s for its apparent progress in making reforms and more recently to support anti-terrorism, border protection, and operations in Afghanistan. As Congress and the Administration consider how to assist democratic and economic transformation in Kyrgyzstan, several possible programs have been suggested, including those to buttress civil rights, bolster political institutions and the rule of law, and encourage private sector economic growth. (See also CRS Report RL33458, Central Asia: Regional Developments and Implications for U.S. Interests, by [author name scrubbed].)

European Union Enlargement The European Union (EU) is an economic and political partnership that represents a unique form of cooperation among 28 member states today. The EU has long viewed the enlargement process as an historic opportunity to further the integration of the continent by peaceful means. Analysts contend that the carefully managed process of enlargement is one of the EU's most powerful policy tools and has helped transform former dictatorships such as Spain and many of the former communist states of Central and Eastern Europe into stable democracies and free market economies. The EU maintains that the enlargement door remains open to any European country, including Turkey and those of the Western Balkans, able to fulfill the EU's political and economic criteria for membership. Croatia is the newest member state, joining the EU on July 1, 2013. At the same time, many observers assess that EU enlargement may soon be reaching its limits, both geographically and in terms of public enthusiasm for further expansion. Some suggest that the EU's financial troubles could impede the EU's remaining enlargement agenda if EU leaders remain preoccupied with internal EU issues. Others point out that the EU's economic woes and increased uncertainty about the future direction of the EU itself might make joining the Union less attractive for some current and potential EU candidates. Evolution of the European Union The EU is the latest stage in a process of European integration aimed at promoting political reconciliation and economic prosperity throughout the European continent. It has been built over several decades through a series of binding treaties. Origins After World War II, leaders in Western Europe were anxious to secure long-term peace and stability in Europe and to create a favorable environment for economic growth and recovery. In 1952, six states—Belgium, the Federal Republic of Germany, France, Italy, Luxembourg, and the Netherlands—established the European Coal and Steel Community (ECSC), a single market in these two industrial sectors controlled by an independent supranational authority. In embarking on this integration project, its founders hoped that the ECSC would help control the raw materials of war and promote economic interdependence, thus making another conflict in Europe unthinkable. In 1957, the six ECSC member states signed two new treaties in Rome: the first established the European Economic Community (EEC) to develop common economic policies and merge the separate national markets into a single market in which goods, people, capital, and services could move freely; the second created a European Atomic Energy Community (EURATOM) to ensure the use of nuclear energy for peaceful purposes. These two treaties, commonly referred to as the "Treaties of Rome," came into force in 1958. In 1967, the ECSC, the EEC, and EURATOM collectively became known as the European Community (EC). The EC first added new members in 1973, with the entry of the United Kingdom, Ireland, and Denmark. Greece joined in 1981, followed by Spain and Portugal in 1986. The Single European Act modified the EC treaties in 1987 to facilitate the creation of the single market, introduced institutional reforms, and increased the powers of the fledgling European Parliament. At the beginning of 1993, the near completion of the single market brought about the mostly free movement of goods, people, capital, and services within the EC. Birth of the EU On November 1, 1993, the Treaty on European Union (also known as the Maastricht Treaty) went into effect, establishing the modern-day European Union and encompassing the EC. The Maastricht Treaty established an EU consisting of three pillars: an expanded and strengthened EC; a common foreign and security policy; and common internal security measures. The Maastricht Treaty also contained provisions that resulted in the creation of an Economic and Monetary Union (EMU), including a common European currency (the euro). The European Union was intended as a significant step on the path toward not only greater economic integration but also closer political cooperation. On January 1, 1995, Austria, Finland, and Sweden joined the EU, bringing membership to 15 member states. In June 1997, EU leaders met to review the Maastricht Treaty and consider the future course of European integration. The resulting Amsterdam Treaty, which took effect in 1999, enhanced the legislative powers of the European Parliament, sought to strengthen the EU's foreign policy, and aimed to further integrate internal security policies. In December 2000, EU leaders concluded the Nice Treaty to pave the way for further EU enlargement, primarily to Europe's east. Entering into force in 2003, the Nice Treaty set out internal, institutional reforms to enable the Union to accept new members and still be able to operate effectively. In particular, it extended the majority voting system in the EU's Council of Ministers (representing the member states) to a number of additional policy areas that had previously required unanimity, and restructured the European Commission (the EU's executive). From 15 to 28 Since the end of the Cold War, the EU had worked with the former communist countries of Central and Eastern Europe to reform their political systems and economies in order to meet the EU's membership criteria. The EU viewed enlargement to Europe's east as fulfilling a historic pledge to further the integration of the continent by peaceful means, overcome decades of artificial division, and help make Europe "whole and free." Cyprus and Malta had also expressed interest in joining the EU. In March 1998, the EU began accession negotiations with Cyprus, the Czech Republic, Estonia, Hungary, Poland, and Slovenia. In December 1999, the EU decided to open negotiations with six others: Bulgaria, Latvia, Lithuania, Malta, Romania, and Slovakia. In December 2001, the EU announced that 10 of these countries—Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia—would likely be able to conclude accession talks by the end of 2002. Negotiations in 2002 with these 10 candidates on remaining issues such as agriculture and regional assistance proved challenging because they raised budgetary and burden-sharing issues. A deal was finally reached, however, and the EU concluded accession talks with all 10 at its December 2002 summit. The accession treaty was signed with the 10 countries on April 16, 2003, and they acceded to the EU on May 1, 2004. In December 2004, the EU completed accession negotiations with Bulgaria and Romania, despite some continued EU concerns about the status of judicial reforms and anti-corruption efforts in both countries. Bulgaria and Romania formally joined the EU on January 1, 2007. Croatia acceded on July 1, 2013, bringing the Union to 28 member states. The Union's borders now stretch from the Baltics to the Black Sea, and the EU has a total population of over 500 million. Further EU Institutional Reforms and Enlargement Although the Nice Treaty had sought to introduce institutional reforms to allow an enlarged Union to function better and more effectively, critics asserted that the treaty established an even more complex and less efficient decision-making process. Certain provisions in the Nice Treaty also effectively (although not explicitly) limited the size of the EU to 27 member states. In light of the criticisms of the Nice Treaty and with a view to potential enlargement beyond 27 members, the EU embarked on a new institutional reform effort in 2002. This process culminated on December 1, 2009, when the Lisbon Treaty came into force. The Lisbon Treaty evolved from the proposed EU constitutional treaty, which was rejected in French and Dutch national referendums in 2005, in part because of public concerns about continued EU enlargement. The Lisbon Treaty aims to further streamline the EU's governing institutions and decision-making processes, and in doing so eliminates the technical hurdle to enlarging the EU beyond 27 member states. The new treaty also seeks to give the EU a stronger and more coherent voice and identity on the world stage, and attempts to increase democracy and transparency within the EU, in part by granting more powers to the European Parliament. Process of Enlargement According to the Maastricht Treaty, any European country may apply for EU membership if it meets a set of core political and economic criteria, known as the "Copenhagen criteria." These criteria for EU membership require candidates to achieve "stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities; a functioning market economy, as well as the capacity to cope with competitive pressure and market forces within the Union; the ability to take on the obligations of membership, including adherence to the aims of political, economic, and monetary union." In addition, the EU must be able to absorb new members, so the EU can decide when it is ready to accept a new member. When a country submits an application to join the EU, it triggers a complex technical process and a sequence of evaluation procedures. At the same time, EU enlargement is very much a political process; most all steps on the path to accession require the unanimous agreement of the existing member states. As such, a prospective EU candidate's relationship or conflicts with individual member states may significantly influence a country's EU accession prospects and timeline. Following the submission of a given country's application, the European Commission first issues a formal opinion on the aspirant country, after which the Council of Ministers decides whether to accept the application. Following a positive unanimous decision by all 28 member states in the Council of Ministers to accept a given country's application, that country becomes an official EU candidate. Accession negotiations, a long and complex process in which the candidate country must adopt and implement a massive body of EU treaties, laws, and regulations, may then begin. The Commission and the Council of Ministers (acting unanimously) must also approve the actual opening of accession negotiations and a negotiating framework, which establishes the general guidelines for the enlargement talks. The EU's nearly 144,000 pages of rules and regulations are known as the acquis communautaire . The acquis is divided into 35 subject-related "chapters" that range from free movement of goods to agriculture to competition. Accession negotiations on each chapter begin with a screening process to see to what extent the applicant meets the requirements of each chapter; detailed negotiations take place at the ministerial level to establish the terms under which applicants will adopt and implement the rules in each chapter. The European Commission proposes common negotiating positions for the EU on each chapter, and conducts the negotiations on behalf of the EU. Enlargement policy and accession negotiations are directed and led by the EU Commissioner for Enlargement and European Neighborhood Policy, currently Stefan Füle. In all areas of the acquis , the candidate country must bring its institutions, management capacity, and administrative and judicial systems up to EU standards, both at national and regional levels. During negotiations, applicants may request transition periods for complying with certain EU rules. All candidate countries receive financial assistance from the EU, mainly to aid in the accession process. Chapters of the acquis can only be opened and closed with the unanimous approval of all 28 existing EU member states acting in the Council of Ministers. Periodically, the Commission issues "progress" reports to the Council of Ministers and the European Parliament assessing the achievements in the candidate countries. Once the Commission concludes negotiations on all 35 chapters with an applicant state, the agreements reached are incorporated into a draft accession treaty, which must be approved by the Council of Ministers and the European Parliament. After the accession treaty is signed by the EU and the candidate country, it must then be ratified by each EU member state and the candidate country; this process can take up to two years. Current EU Candidates Currently, five countries are considered by the EU as official candidates for membership: Iceland, Macedonia, Montenegro, Serbia, and Turkey. All are at different stages of the accession process, and face various issues and challenges on the road to EU membership. Iceland Iceland has close and extensive ties with the EU. Iceland and the EU have a free trade agreement dating back to 1972, and Iceland has been a member of the European Economic Area (EEA) since 1994. Through the EEA, Iceland participates in the EU's single market, and a significant number of EU laws already apply in Iceland. Iceland also belongs to the Schengen area, which enables Icelanders to work and travel freely throughout the EU, and participates in a number of EU agencies and programs in areas such as enterprise, the environment, education, and research. In July 2009, the former pro-European socialist-green coalition government submitted Iceland's application for EU membership in the wake of the 2008 financial crisis that led to the collapse of Iceland's banking system and the devaluation of its national currency. Despite divisions among Iceland's political parties and doubts among many Icelandic citizens about the benefits of EU accession, the government believed that membership would bolster Iceland's ability to recover from economic recession. The EU named Iceland as an official candidate in June 2010, and began accession negotiations with Iceland in July 2010. Given Iceland's existing integration with the EU, many observers expected accession talks to proceed quickly. As of the end of 2012, talks had been opened on 27 of the 35 negotiating chapters, and 11 had been provisionally closed. Iceland's accession negotiations, however, have been on hold since May 2013, following the election of a new center-right coalition government largely opposed to EU membership. The EU continues to consider Iceland an official candidate country, but at present, Iceland's future EU prospects appear doubtful. Upon assuming office, the new Icelandic government announced that it would hold a public referendum on whether Iceland should resume EU accession negotiations. In February 2013, a government-commissioned report on Iceland's relations with the EU was presented to the Icelandic parliament, but no date has been set for the referendum. Opinion polls suggest a strong "no" camp exists in Iceland on EU membership, especially as Iceland's economy continues to improve. Even if Iceland were to resume accession negotiations at some point in the future, several challenges would remain. These include resolving differences with the EU on fisheries and whaling policies, and settling an ongoing dispute over fully repaying the British and Dutch governments for debts incurred when Iceland's online bank—Icesave—failed in 2008. Macedonia Macedonia is one of the six countries that made up the former Yugoslavia. Within a decade of gaining independence, Macedonia concluded a Stabilization and Association Agreement (SAA) with the EU in 2001 to govern relations. It applied for EU membership in March 2004. The EU named Macedonia as an official EU candidate in December 2005. The European Commission has recommended opening membership talks with Macedonia since 2009. According to the Commission, Macedonia is sufficiently fulfilling the political and economic criteria for membership, although EU officials have expressed some concerns about the country's democratic progress following its political crisis in late 2012-early 2013 and the government's treatment of journalists and the media. The EU continues to urge Macedonia to complete necessary reforms aimed at improving the rule of law, protecting freedom of expression, promoting the independence of the judiciary, and strengthening anti-corruption efforts. Some EU officials also remain concerned about inter-ethnic tensions in Macedonia, especially with respect to its Albanian minority. Macedonia has not yet secured a start date for accession negotiations. For years, this has been due largely to a long-running disagreement with Greece over the country's official name. Macedonia maintains the right to be recognized internationally by its constitutional name, the Republic of Macedonia, but Greece asserts that it implies territorial claims to the northernmost Greek province of the same name. Presently, the EU refers to Macedonia in official documents as the Former Yugoslav Republic of Macedonia (FYROM), a provisional name coined in 1993 to enable Macedonia to join the United Nations. As a result of the name dispute, Greece continues to block the opening of EU accession talks with Macedonia. Bulgaria has also raised concerns about Macedonia's readiness for EU membership amid growing tensions between the two countries. In light of Macedonia's recent political difficulties and what some view as deteriorating democratic standards in the country, several other EU member states now appear reluctant to support opening accession negotiations as well, at least in the short term. Given the ongoing stalemate in Macedonia's accession bid, the European Commission launched a High Level Accession Dialogue (HLAD) with Macedonia in March 2012 in order to help maintain momentum for political and economic reforms in the country. EU officials contend that the HLAD has contributed to progress in most priority areas, including the elimination of court backlogs and the fight against corruption. However, the Commission and a number of outside experts warn that as long as Macedonia's formal accession process remains stalled, it could put the sustainability of the country's reform efforts at risk. Montenegro After ending its union with Serbia and gaining independence in June 2006, Montenegro and the EU began talks on a Stabilization and Association Agreement. The SAA was signed in October 2007. Macedonia applied for EU membership in December 2008 and was granted candidate status in December 2010. In October 2011, the European Commission assessed that Montenegro had achieved the necessary degree of compliance with the political and economic criteria for accession talks to begin. The EU opened accession negotiations with Montenegro in June 2012. As of December 2013, seven negotiating chapters had been opened, and two of these provisionally closed. EU officials acknowledge Montenegro's solid progress toward meeting EU standards, but they also assert that more work is needed. Key challenges facing Montenegro include improving the rule of law, fighting corruption and organized crime, enhancing the independence of the judiciary, guaranteeing freedom of expression, strengthening administrative capacity, and improving the business environment. Serbia Until relatively recently, Serbian-EU relations were difficult and Serbia's path toward eventual EU membership faced several obstacles. Most EU member states and EU officials viewed Serbia as bearing the bulk of responsibility for the violent dissolution of the former Yugoslavia in the 1990s and for the 1999 conflict over its former province of Kosovo. Many in the EU considered Serbia as being slow to implement necessary political and economic reforms, largely uncooperative in tracking down Serbian war crimes suspects indicted by the International Criminal Tribunal for the former Yugoslavia, and resistant to normalizing relations with Kosovo (which declared independence from Serbia in 2008, but which is not recognized by Serbia). Over the last few years, however, Serbia has made considerable progress in modernizing its political and economic system. As part of EU efforts to boost pro-Western political forces in the country, the EU concluded a Stabilization and Association Agreement with Serbia in April 2008. In December 2009, Serbia submitted its formal application for EU membership. In the summer of 2011, Serbia's accession prospects improved significantly following the arrest and extradition of two high-profile war crimes suspects wanted by the International Criminal Tribunal for the former Yugoslavia. In October 2011, the European Commission recommended EU candidate status for Serbia, provided that it continued to work on improving relations with Kosovo in EU-brokered talks. In February 2012, Serbia concluded two accords with Kosovo aimed at addressing some key EU concerns; Serbia agreed to conditions under which Kosovo may participate in Western Balkans regional institutions, and on the technical parameters for jointly managing its border with Kosovo. In light of these accords, the EU named Serbia as an official candidate in March 2012. Talks between Serbia and Kosovo continued under EU auspices. In December 2012, EU leaders agreed to assess the possibility of opening negotiations with Serbia in spring 2013, following a Commission report on Serbia's progress toward meeting all EU membership criteria, and especially on whether Serbia had done enough to enhance its relations with Kosovo. In April 2013, Serbia and Kosovo reached a landmark agreement on normalizing relations, aimed in particular at resolving the situation in Northern Kosovo, which is mostly ethnic Serbian and over which Belgrade has exercised de facto control. In June 2013, the EU announced it would open accession negotiations with Serbia by January 2014 at the latest. EU governments wanted some additional time to assess progress on the implementation of the Serbia-Kosovo agreement before fixing a firm start date for launching the accession talks. In December 2013, EU member states endorsed opening accession talks with Serbia, and the first negotiating session took place in late January 2014. In doing so, the EU noted that "Serbia has achieved the necessary degree of compliance with the membership criteria, and notably the key priority of taking steps towards a visible and sustainable improvement of relations with Kososvo." The EU also urged Serbia to continue its efforts toward improving the rule of law, reforming the judiciary, fighting corruption and organized crime, protecting minority rights and media freedoms, and enhancing its business environment. At the same time, Serbia will not be ready to join the EU for many years (Serbian officials suggest that it would likely not be until 2020 at the earliest), and some experts assert that ultimately, the EU may not admit Serbia as a member until Kosovo's independence status is fully resolved. Turkey11 Turkey has a long-standing bid for EU membership, but the relationship between Turkey and the European project has been characterized historically by a series of ups and downs. Although EU member states have always supported a close association with Turkey, divisions continue to exist among member states over whether Turkey should be allowed to join the Union given concerns about its political system, human rights record, economy, and large Muslim population. The status of Turkey's membership application is a frequent source of tension between Turkey and the EU. Turkish EU aspirations date back to the 1960s. Turkey and the European Economic Community concluded an association agreement (known as the Ankara Agreement) in 1963, which was aimed at developing closer economic ties. The Ankara Agreement was supplemented by an Additional Protocol, signed in 1970, preparing the way for a customs union. Nevertheless, Turkey's 1987 application for full membership in the European Community was essentially rejected. In 1995, the customs union between the EU and Turkey entered into force, allowing most goods to cross the border in both directions without customs restrictions. In 1997, the EU declared Turkey eligible to become a member of the Union. In 1999, the EU finally recognized Turkey as an official candidate country; at the same time, the EU asserted that Turkey still needed to comply fully with the political and economic criteria for membership before accession talks could begin. In 2001, the EU adopted its first "Accession Partnership" with Turkey, setting out the political and economic priorities Turkey needed to address in order to adopt and implement EU standards and legislation. Ankara had hoped that the EU would set a firm date for starting negotiations at its December 2002 summit, but was disappointed; several EU members argued that although Turkey had undertaken significant reforms—such as abolishing the death penalty and increasing civilian control of the military—it still did not fully meet the membership criteria. Some member states also remained concerned about Turkey's stance toward Cyprus, which has been divided since 1974 between the internationally recognized Republic of Cyprus administered by the Greek Cypriot government in the island's south, and the Turkish Republic of Northern Cyprus, controlled by Turkish Cypriots. Turkish troops remain stationed in northern Cyprus, and Turkey does not recognize the Republic of Cyprus under the Greek Cypriot government. In December 2004, the EU asserted that Turkey had made sufficient progress on legislative, judicial, and economic reforms to allow accession talks to begin in October 2005, provided that Turkey met two conditions by that time: bringing into force several additional pieces of reform legislation; and agreeing to extend Turkey's existing agreements with the EU and its customs union to the new EU member states, including Cyprus. Turkey met both of these requirements by July 2005. In pledging to extend its EU agreements and the customs union, however, Turkey asserted that it was not granting diplomatic recognition to the Greek Cypriot government. After some contentious debate among EU members over issues related to Turkey's lack of formal recognition of Cyprus and whether a "privileged partnership" short of full membership for Turkey should be retained as a future option, the EU opened accession talks with Turkey in October 2005. The EU asserted that the "shared objective of the negotiations is accession," but that it will be an "open-ended process, the outcome of which cannot be guaranteed beforehand." In other words, Turkey is still not ensured eventual full EU membership. Detailed negotiations between the EU and Turkey on the acquis began in 2006. Since then, the EU has opened talks on 14 chapters of the acquis (one of these was provisionally closed in June 2006), but progress has been slow and complicated in part by Cyprus-related issues. According to the EU, Turkey's continued refusal to open its ports and airports to ships and planes from the Greek Cypriot part of the island, as required by the 1970 Additional Protocol and the customs union, is a major stumbling block. In December 2006, the EU decided to delay the opening of eight chapters dealing with areas affecting the customs union pending Turkey's compliance with applying the Additional Protocol to Cyprus. Although negotiations on other chapters would be allowed to continue or be opened when ready, the EU asserted that no further chapters would be provisionally closed without resolution of the issues related to the Additional Protocol. Cyprus and France also maintain holds on opening several other chapters of the acquis . Given the various difficulties with Turkey's membership negotiations, in May 2012, the European Commission launched a "positive agenda" with Turkey to reinvigorate EU-Turkish relations and to inject new momentum into Turkey's accession process. Areas covered by the "positive agenda" included, among others: alignment of Turkish legislation with the EU acquis ; political reforms and fundamental rights; visas; energy; and counterterrorism. The European Commission asserted that this "positive agenda" was intended to complement and support, not replace, Turkey's accession process. Observers note, however, that except for the negotiations establishing a road map for visa-free travel for Turks throughout the EU within three years, it is unclear whether the "positive agenda" has been successful or if it is still in operation in practice. At the start of 2013, hopes were high that Turkey's EU accession process would be given a boost by the opening of negotiations on at least one new chapter of the acquis (no new chapters had been opened since 2010). The new French government of President François Hollande had announced that it was favorably disposed to rejuvenating Turkey's accession process and was prepared to lift its hold on opening the regional policy chapter of the acquis . In June 2013, EU leaders agreed to officially open the regional policy chapter, but delayed starting the actual talks because of what they viewed as Turkey's harsh crackdown on anti-government protests (the so-called Gezi park protests) that erupted in late May-early June. In November 2013, following the release of the Commission's annual progress report on Turkey, formal negotiations began on the regional policy chapter, although little progress has been achieved to date. A recent scandal inside the government of Turkish Prime Minister Recep Tayyip Erdogan resulted in the replacement of Turkey's Minister for EU Affairs, who was Turkey's chief accession negotiator. Among most observers, there is little doubt that the EU accession process has been a major motivation behind Turkey's internal march toward reform and democratization. It has been a positive factor in helping transform Turkey's political and military institutions, its leadership, and its political culture, both at the national and, in some respects, the local government level. The accession process has also benefitted Turkey's economy. Many credit Turkey's customs union with the EU as being instrumental in Turkey's recent economic boom and its increasing economic competitiveness. As a candidate country, Turkey also receives almost $1 billion annually from the EU to help it meet EU standards and implement political and economic reforms. Some analysts assert that the EU accession process has also helped forge closer relations between Europe and Turkey. Economic ties between the EU and Turkey, despite the problems within the Eurozone, have expanded over the past several years with nearly half of Turkey's exports flowing to Europe. Turkey's strong and growing economy offers a large and important market for European goods and services, and is expected to do so for a long time. Turkish businesses are flourishing in parts of Europe, and Turkey has become a magnet for foreign direct investment, with much of that flowing from Europe. Turkey's role as an important energy hub and transit region for European energy supply diversification continues to grow, as was seen recently with the decision to construct the Trans-Adriatic Pipeline (TAP), which will bring natural gas from Azerbaijan across Turkey, via the Trans-Anatolian Pipeline (TANAP), into Italy and parts of Europe. Geopolitically, continuing instability in Europe's southern neighborhood of North Africa and the Middle East, including the ongoing civil war in Syria, suggests that a closer "strategic dialogue" with Turkey on foreign policy issues could become a more regular and important feature of the Turkey-EU relationship. These examples reinforce the belief among many that the EU and Turkey need each other for a multitude of reasons. Nevertheless, experts contend that the slow pace of Turkey's progress toward EU membership suits some EU governments and many EU citizens who question whether Turkey should join the EU. Those of this view remain wary about the implications of Turkey's accession on the Union's institutions and finances given Turkey's size (with nearly 80 million people, Turkey would rival Germany as the largest EU country in terms of population), and the comparatively large portion of Turks considered poor in economic terms. Despite Turkey's improving economy, some in the EU still fear an influx of Turkish laborers, who would have the right to live and work in existing EU member states should Turkey accede to the Union. Many EU leaders and publics also worry that Turkey's predominantly Muslim culture would fundamentally alter the character, policies, and identity of the Union. In addition, EU concerns persist about the status of Turkish political reforms, the observance of fundamental rights such as freedom of expression and assembly, the independence of its judiciary, women's rights, the degree of media freedoms, and the extent to which religious and ethnic minorities are protected. Thus, European support for Turkey, never really that strong among the average citizenry, now seems even more ambivalent. Analysts predict that at best, Turkish membership in the EU is at least another decade away. Moreover, they note that it is highly unlikely that Turkey would be able to join the EU without a political settlement on the divided island of Cyprus. A number of observers point out that some Turkish policy makers and citizens are also increasingly questioning the value of and need for Turkish accession. For many Turks, EU membership seems to have lost its appeal; one recent public opinion poll in 2013 found that only 44% of Turkish respondents believed that Turkey should join the EU (in comparison to 73% in 2004). Turkey's economy continues to expand, despite a slowdown in growth over the last two years, and Ankara has been seeking to reposition and strengthen itself in its own neighborhood between secular Europe and the Islamist emergence in the Middle East. Many Turks seem to feel "being European" or gaining membership in the Union is no longer needed in order to secure Turkey's status or to have an otherwise normal partnership with Europe. Some commentators suggest that a revitalized "positive agenda" may ultimately provide a way for both Turkey and the EU to back away from full EU membership for Turkey, while allowing for the development of stronger Turkish-EU ties. Turkish officials, however, continue to assert that EU membership remains a priority for Turkey. And many experts contend that neither Turkey nor the EU, at present, appears prepared to end Turkey's accession process. Prospects for Future Rounds of EU Enlargement As noted previously, the EU asserts that the enlargement door remains open to any European country that is able to meet and implement the political and economic criteria for membership. The remaining Western Balkan states of Albania, Bosnia-Herzegovina, and Kosovo are all officially recognized by the EU as potential candidates, but their accession prospects and timetables vary (see the text box on the next page for more information); most analysts believe that it will likely be many more years before any of these countries are ready to join the EU. Nevertheless, the EU hopes that the possibility of membership will help accelerate reforms and promote greater stability in these and other states interested in eventual EU accession. Some countries of "wider Europe," usually considered to include Ukraine, Moldova, and the southern Caucasus (Georgia, Armenia, and Azerbaijan), have also expressed long-term EU aspirations. In contrast to the Western Balkans, the EU has not formally recognized a membership perspective for any of the countries of "wider Europe," but Georgia and Moldova, in particular, harbor hopes of joining the EU one day, and successive Ukrainian governments have supported EU membership to varying degrees. In November 2013, Georgia and Moldova initialed respective Association Agreements (AA) with the EU; an AA sets out the broad framework for cooperation between the EU and a partner country, and seeks to promote European political values and deeper economic ties. Many view the conclusion of an AA as a necessary first step on the path to eventual EU accession (however, AAs do not represent an EU membership commitment). Although the current Ukrainian government of Viktor Yanukovych has formally supported EU integration for Ukraine and had been expected to sign its AA in November 2013, Yanukovych declined to do so because of intense Russian opposition. This decision sparked massive pro-EU and anti-government protests in Ukraine, some of which have since turned violent, and led to a serious political crisis. On the other hand, "enlargement fatigue" has become a serious issue in Europe. Despite Croatia's recent accession and the EU's membership commitment to the other Western Balkan countries, experts assert that a number of European leaders and many EU citizens remain cautious about further EU enlargement. This is especially true with respect to Turkey or the countries of "wider Europe." EU officials increasingly stress that the process of enlargement must take into account the Union's "integration capacity." In other words, acceding countries must be ready and able to fully assume the obligations of EU membership, and additional EU enlargement must not endanger the ability of the EU's institutions to function effectively or render EU financing arrangements unsustainable. Apprehensions about continued EU enlargement seem to be driven by several issues. Some EU policy makers and European publics have long worried that the addition of nations with weak economies and low incomes could lead to an influx of low-cost or unwanted migrant labor. Such fears prompted the EU to allow the "old" member states to institute some temporary restrictions (of up to seven years) on labor migration from those countries that joined the EU in 2004 and 2007. Although EU members that chose not to impose any transitional restrictions (such as the UK and Ireland) did see an increase in workers from Central and Eastern Europe, most studies since 2004 suggest that the proportion of EU citizens moving from east to west following enlargement has been relatively small and that such migrants have not displaced local workers or significantly driven down local wages. Nevertheless, such concerns persist, especially when considering the accession of big, relatively less affluent countries such as Turkey or possibly Ukraine in the longer term. Similar to those allowed following the 2004 and 2007 enlargement rounds, EU member states may impose temporary labor migration restrictions on Croatian nationals following Croatia's 2013 accession. The addition of large countries like Turkey or Ukraine could also have substantial financial consequences for the Union's budget and regional assistance programs, as well as implications for the functioning of certain EU institutions. Some key EU member states may fear that an ever-expanding Union could ultimately weaken their ability to set the tone and agenda in EU institutions and to drive EU policies. Moreover, doubts persist about the ability of some potential EU aspirants to implement EU standards, especially in areas related to the rule of law, fundamental rights, and anti-corruption measures. Another broad European concern with respect to ongoing enlargement is with the overall identity of Europe, what the Union stands for, and where "Europe" ends. The Union's struggle with these issues has been highlighted by the possible admission of Turkey with an Islamic culture perceived by many Europeans to be vastly different and not compatible with Europe. Similarly, some in the EU question whether countries like Ukraine or those of the southern Caucasus should be considered as part of "Europe," or whether their geography, history, and culture make them distinct. Many experts believe that enlargement may soon be reaching its limits and that the EU is unlikely to include the countries of "wider Europe" for the foreseeable future. Moreover, commentators suggest that the EU's recent economic problems and sovereign debt crisis—which have hit the countries of the Eurozone particularly hard—could potentially slow future rounds of EU enlargement. They note that EU leaders are grappling not only with trying to remedy the Eurozone's financial troubles, but also with uncertainty about the future direction of the EU itself. As a result, they may be less inclined to robustly push forward the enlargement agenda. Conversely, the EU's economic difficulties might make joining the Union—and ultimately the common currency—less attractive for some current and potential EU candidates. For decades, many countries aspired to join the EU largely for the economic benefits that membership would bring. Now, aspirants such as Turkey—with a dynamic economy—may not view the benefits of membership as outweighing the potential constraints on its sovereignty and national fiscal and monetary policies. U.S. Perspectives The United States has strongly supported the European integration project since its inception in the 1950s. Successive U.S. Administrations and many Members of Congress have long backed EU enlargement, believing that it serves U.S. interests by advancing democracy and economic prosperity, and thereby creating strong European political allies and trading partners. Following the collapse of communism in 1989, U.S. and EU officials worked in close cooperation to promote democratic transitions and market-oriented reforms, with both sides of the Atlantic routinely asserting that the countries of Central and Eastern Europe would be warmly welcomed into Euro-Atlantic institutions such as the EU, as well as NATO, but only if they met the necessary political and economic criteria. Some analysts suggest that U.S. policy makers have also been keen to promote EU enlargement because they have viewed it as a way to decrease U.S.-EU tensions given that many of the newer members are often regarded as more pro-American. Moreover, many U.S. officials hoped that with the EU's enlargement to the east and the transformation of the continent nearly complete, the EU would turn its attention outward and be a more capable partner for the United States in tackling a range of global challenges. U.S. business and commercial interests have also generally favored EU enlargement, believing that it would provide access to a larger, more integrated European market, and that it would help further reforms of the EU's regulatory regime and common agricultural policy, frequent sources of U.S.-EU trade conflicts. Over the years, the only significant U.S. criticism of the EU's enlargement process has been that the Union was moving too slowly, especially with respect to Turkey. Successive U.S. Administrations and many Members of Congress have long advocated EU membership for Turkey, viewing it as a vital, strategic ally that should be anchored firmly to Europe. At times, Washington has played an active, albeit small, role in Turkey's EU accession path; in 1999, for example, the Clinton Administration reportedly lobbied Ankara to accept the EU's offer to recognize Turkey as an official EU candidate, despite Ankara's unhappiness that the EU had not set out a timetable for accession talks. Periodically, however, U.S. pressure to promote Turkey's EU accession prospects has generated tensions with the EU. The United States continues to support Turkey's EU membership bid, as well as the EU aspirations of the Western Balkans. In the midst of the recent protests and violence in Ukraine, U.S. officials and some Members of Congress have stressed U.S. backing for those in Ukraine who see the country's future as being aligned with Europe. At the same time, U.S. policy makers realize that EU enlargement moves at its own pace, and that EU accession for Turkey and other countries is still many years away. Some U.S. officials remain concerned that "enlargement fatigue," as well as the EU's financial crisis, could hinder additional EU expansion. Other commentators argue that EU enlargement could have some negative implications for U.S. interests. Even with EU institutional reforms, some assert that EU decision-making remains cumbersome and that enlargement has done little to make the EU a more coherent actor on the world stage. For example, they contend that the addition of the Central and Eastern European countries has created more divisions on certain issues, such as EU policy toward Russia, and that the EU is largely still preoccupied with its own internal problems. On the other hand, some pundits worry that despite the EU's current financial difficulties, a larger EU—with an economic output roughly equivalent to that of the United States and growing political clout—could ultimately rival U.S. power and prestige in the longer term.

The European Union (EU) has long viewed the enlargement process as an extraordinary opportunity to promote political stability and economic prosperity in Europe. Since 2004, EU membership has grown from 15 to 28 countries, bringing in most states of Central and Eastern Europe and fulfilling an historic pledge to further the integration of the continent by peaceful means. Croatia is the EU's newest member, acceding to the EU on July 1, 2013. Analysts contend that the carefully managed process of enlargement is one of the EU's most powerful policy tools, and that, over the years, it has helped transform many European states into functioning democracies and more affluent countries. The EU maintains that the enlargement door remains open to any European country that fulfills the EU's political and economic criteria for membership. At the same time, EU enlargement is also very much a political process; most all significant steps on the long path to accession require the unanimous agreement of the existing 28 member states. As such, a prospective EU candidate's relationship or conflicts with individual member states may also influence a country's EU accession prospects and timeline. Currently, five countries are recognized by the EU as official candidates for membership: Iceland, Macedonia, Montenegro, Serbia, and Turkey. All are at different stages of the accession process. While Montenegro and Serbia have only recently begun accession negotiations, Turkey's accession talks have been underway since 2005. Macedonia's accession negotiations have not yet started largely because of an ongoing dispute with Greece over the country's official name. And EU accession talks with Iceland, although relatively advanced, have been on hold since May 2013, when a new Icelandic government largely opposed to EU membership took office. The EU also considers the remaining Western Balkan states of Albania, Bosnia-Herzegovina, and Kosovo as potential EU candidates, but most experts assess that it will likely be many years before any of these countries are ready to join the EU. Despite the EU's professed commitment to enlargement, some EU policy makers and many EU citizens are cautious about additional expansion, especially to Turkey or countries farther east, such as Georgia or Ukraine, in the longer term. Worries about continued EU enlargement range from fears of unwanted migrant labor to the implications of an ever-expanding Union on the EU's institutions, finances, and overall identity. Such qualms are particularly apparent towards Turkey, given its large size, predominantly Muslim culture, and comparatively less prosperous economy. Successive U.S. Administrations and many Members of Congress have long backed EU enlargement, believing that it serves U.S. interests by advancing democracy and economic prosperity throughout the European continent. Over the years, the only significant U.S. criticism of the EU's enlargement process has been that the Union was moving too slowly, especially with respect to Turkey. Some U.S. officials are concerned that "enlargement fatigue" as well as the EU's economic and financial troubles, which have hit the countries that use the EU's common currency (the euro) particularly hard, could potentially slow future rounds of EU enlargement. The status of EU enlargement and its implications for both the EU itself and U.S.-EU relations may be of interest to the 113th Congress. For additional information, see also CRS Report RS21372, The European Union: Questions and Answers, by [author name scrubbed]; and CRS Report RS22517, European Union Enlargement: A Status Report on Turkey's Accession Negotiations, by [author name scrubbed].

Background Historically, the federal government has assumed primary responsibility for the management and testing for foreign animal diseases like bovine spongiform encephalopathy or BSE, commonly known as "mad cow disease." States and veterinarians have played a role in animal disease testing but usually with significant federal oversight. Following the first confirmed case of BSE in the United States, the U.S. Department of Agriculture (USDA) announced an enhanced BSE sampling and surveillance program designed to test more cattle in the targeted high-risk population with the assistance of designated state and university diagnostic laboratories across the country. The USDA's enhanced surveillance plan also obtains a random sample of normal, but older animals at slaughter. USDA implemented the new program in June 2004, and uses USDA-approved "rapid" immunologic test kits. Rapid tests are designed to determine the presence of abnormal BSE-related proteins in sampled brain tissue within a few hours—a dramatic difference from the international "gold standard" test for BSE: the immunohistochemistry test, which can take up to two weeks. Since the implementation of the new testing program, a BSE-infected U.S.-born cow was identified in Texas in June 2005 and in Alabama in March 2006. In July 2006, the USDA announced that it would soon end enhanced testing and transition to an ongoing program that tests approximately 40,000 cattle yearly. Some countries, like Japan, saw USDA's proposed sampling as inadequate and insisted that the United States test all of its cattle for the fatal disease at slaughter before it would allow the beef to enter its borders. Japan placed a ban on U.S. beef after the first case of BSE was diagnosed in Washington state in December of 2003, but announced in October 2004 that it would allow some U.S. beef to enter the country under an interim trade program. The Japanese did not finalize a decision to permit U.S. imports until December 2005; however, U.S. imports were again halted by the Japanese on January 20, 2006, when vertebral column bones (backbone is a prohibited material there) were found in several boxes of veal shipped by a New York processor. U.S. beef imports, which once accounted for 25% to 30% of Japanese beef consumption, resumed July 27, 2006. Responding to and anticipating concerns of foreign governments and domestic consumers about potential contamination of the U.S. beef supply, Creekstone Farms Premium Beef—a private specialty producer and processor of Black Angus Beef—sought approval from the USDA to conduct voluntary BSE rapid testing for all the cattle it processes under a "marketing" program. On April 8, 2004, the USDA rejected Creekstone's request stating that the test had been licensed only for animal health "surveillance" purposes and "the test as proposed by Creekstone would have implied a consumer safety aspect that is not scientifically warranted." In a June 1, 2004, letter to Creekstone, the USDA also stated that "allowing a company to use a BSE test in a private marketing program is inconsistent with USDA's mandate to ... maintain domestic and international confidence in U.S. cattle and beef products." On March 23, 2006, Creekstone filed a lawsuit against the USDA seeking, among other things, an injunction enjoining USDA from implementing or enforcing any prohibition on Creekstone acquiring or using USDA-approved BSE rapid test kits for purposes of routinely screening for BSE-infected cattle. Creekstone filed a motion for summary judgment on July 15, 2006. The USDA responded and filed its own motion for summary judgment on September 22, 2006. In addition to responding to Creekstone's claims, the USDA argued that the case should be dismissed as moot because Japan has reopened its markets to U.S. beef imports. The USDA's rejection of Creekstone's request to privately test all of its cattle for BSE with rapid test kits ignited a significant amount of debate among lawmakers and segments of the beef industry and ultimately resulted in the lawsuit discussed herein. At issue is whether the USDA's decision to reject Creekstone's request to test all of its animals for BSE was a valid agency action. This report analyzes the legal authority of the USDA to regulate the voluntary testing of 100% of a private company's animals with rapid test kits and the USDA's rejection of Creekstone's application to test for BSE all of the cattle it processes. This analysis examines some of the legal arguments that have or might be presented in the Creekstone lawsuit. USDA Authority The USDA cites the Viruses, Serums, Toxins, Antitoxins, and Analogous Products Act (21 U.S.C. §§151-159) (hereinafter VSTA) and its applicable regulations as the source of authority for its regulation of animal testing and, more particularly, the licensing of rapid test kits. The VSTA was originally enacted in 1913 primarily in response to substantial losses being suffered by American hog raisers from the unregulated manufacture and distribution of anti-hog cholera serum. The stated purpose of the VSTA in 1913 was to prevent: the introduction into the United States of dangerous and worthless viruses, serums and analogous products for use in the treatment of domestic animals, some of which products may be the means of introducing disease not now known in the United States, and also for the purpose of controlling the use, by preventing the interstate shipment, of similar dangerous and worthless products that may be manufactured within the United States. The USDA found this legislation necessary "in order to protect the farmer and stock raiser from improperly made and prepared serums, toxins, and viruses." Congress amended the VSTA in the Food Security Act of 1985 ( P.L. 99-198 , Tit. XVII, §1768) to (1) authorize the USDA to license and regulate intra state movement of biological products, (2) broaden the Secretary's authority to issue regulations "to carry out the Act," (3) grant the agency enhanced enforcement powers, and (4) recognize a congressional finding that federal regulation was "necessary to prevent and eliminate burdens on commerce and to effectively regulate such commerce." The legislative history supporting the 1985 VSTA amendments reflects a congressional understanding of the need for "national uniform standards" in the preparation and sale of biological products. Except as permitted in the act, the VSTA makes it unlawful for any person to prepare, sell, barter, or exchange anywhere in the U.S., or to ship or deliver in or from the U.S., any dangerous or harmful virus, serum, toxin, or analogous product intended for use in the treatment of domestic animals. The VSTA further requires that a person who prepares, sells, barters, exchanges, or ships any virus, serum, toxin, or analogous product do so in compliance with USDA regulations through an establishment holding an unsuspended and unrevoked USDA license. The VSTA authorizes the Secretary to issue, suspend, and revoke licenses for the maintenance of establishments that prepare viruses, serums, toxins, or analogous products for use in the treatment of domestic animals. Pursuant to 21 U.S.C. §152, the VSTA also prohibits the importation of any virus, serum, toxin, or analogous product except under a permit from the Secretary of Agriculture. The Secretary of Agriculture is also authorized to make and promulgate rules and regulations as may be necessary to prevent the preparation, sale, barter, exchange, or shipment of a dangerous virus, serum, toxin, or analogous product for use in the treatment of domestic animals or otherwise to carry out the VSTA. Pursuant to this authority, the USDA, through the Animal and Plant Health Protection Service (APHIS), has promulgated a comprehensive set of regulations governing the licensing of viruses, serums, toxins, or analogous products (See 9 C.F.R. subchapter E, pts. 101 to 124). Regulations for the VSTA broadly categorize viruses, serums, toxins, or analogous products as "biological products" at any stage of production intended for use in the treatment of animals and which act primarily through the direct stimulation, supplementation, enhancement, or modulation of the immune system or immune response. A "biological product" includes but is not limited to: vaccines, bacterins, allergens, antibodies, antitoxins, toxoids, immunostimulants, certain cytokines, antigenic or immunizing components of live organisms, and diagnostic components , that are of natural or synthetic origin, or that are derived from synthesizing or altering various substances or components of substances such as microorganisms, genes or genetic sequences, carbohydrates, proteins, antigens, allergens, or antibodies. (italics added) "Treatment" under the regulations means the prevention, diagnosis, management, or cure of diseases of animals. "Prepare" or "preparation" is generally referred to as the manufacture or production of a biological product and has been defined as the steps and procedures used in the processing, testing, packaging, labeling, and storing of a biological product. With respect to licensing, the regulations require every person who "prepares" biological products subject to the VSTA to have a valid U.S. Veterinary Biologics Establishment License and at least one valid U.S. Veterinary Biological Product License. A USDA permit is also required for every person importing a biological product. Although the VSTA explicitly addresses the preparation, sale, barter, exchange and shipment only, USDA regulations (discussed below) authorize "use" and "distribution" restrictions in the public interest or for the protection of animals. Analysis The USDA's rejection of Creekstone's request to privately test all of its cattle for BSE with rapid test kits has sparked a considerable amount of controversy. At issue is whether the USDA's decision to reject Creekstone's request to test all of its animals for BSE was a valid agency action. As such, we first examine how a rapid test kit might fall within APHIS's regulatory purview. Next, we address APHIS's purported authority over private companies intending to conduct voluntary rapid tests for BSE. Finally, we discuss the validity of the USDA's decision in the Creekstone case. Rapid Test Kits In response to the need for an increase in BSE testing, the USDA and some private beef producers have developed plans to use BSE rapid test kits. In order for APHIS to regulate the proposed rapid test kits, however, it must be demonstrated that such tests fall within the regulatory purview of the federal agency—that is, "biological products" intended for use in the treatment of animals and that act primarily through the direct stimulation, supplementation, enhancement, or modulation of the immune system. The USDA has reportedly licensed at least four different companies' rapid test kits. According to the lawsuit, Creekstone entered into discussions to purchase the rapid screening test produced by Bio-Rad, Inc. The Bio-Rad rapid test kit is an enzyme-linked immunosorbent assay (ELISA) designed for the rapid detection of the prion protein specific to BSE. The USDA argues that the rapid test kits may be regulated because they are "diagnostic" tests (a type of "biological product") intended for use in "diagnosis" (a type of "treatment") of disease in cattle that act primarily through the direct stimulation, supplementation, enhancement, or modulation of the immune system. In addition, the USDA also argues that a rapid test kit, as a test prepared and intended to detect an animal disease, is an "analogous product." "Analogous products" are considered "biological products" when, for example, the item in question at any stage of production or distribution is intended for use in the treatment of animals through the detection or measurement of antigens, antibodies, nucleic acids, or immunity. The USDA's regulation and oversight of rapid test kits seems consistent with its overarching mission under the VSTA (and other laws) to protect U.S. public and agricultural health by assuring that biologics used in the treatment of animals are pure, safe, potent, and efficacious. Creekstone contends in its lawsuit that the BSE rapid test kits are not viruses, serums, toxins, or analogous products subject to regulation by the USDA. Creekstone argues that the BSE test kits are not used in the "treatment" of any animal because they are applied to tissue removed from dead cattle and do not act through the stimulation, supplementation, enhancement, or modulation of the immune system of any animal. Because Creekstone questions the USDA's authority over the rapid test kits, the court will likely have to examine the chemical reactions and scientific mechanisms used by the rapid test kits in relation to the specifications listed in regulation and the VSTA. Although an analysis of the scientific testing procedures used by each rapid test kit is beyond the scope of this report, it still appears feasible to conclude that a rapid test kit is at least a biological product intended for use in the treatment of domestic animals. Private Testing As mentioned above, the USDA has reportedly only licensed rapid test kits for "surveillance" purposes. This limitation has restricted the ability of private entities to obtain kits. At the center of the debate is a proposal from Creekstone to privately test for BSE 100% of the cattle it processes. The tests, however, would be for reportedly "marketing" purposes rather than the USDA approved, "surveillance" purpose. The USDA claimed that Creekstone's proposal had an implied consumer safety aspect that was not scientifically warranted and denied Creekstone's request to use rapid test kits. We could not determine exactly which licenses or permits a private company intending to "use" BSE rapid test kits would need pursuant to federal regulations (see Creekstone discussion). The authority under which APHIS can regulate the actual "use" of a biological product seems to be less clearly defined than its authority over the actual preparation of a biological product. In determining whether an agency action is valid, a reviewing court examines the bounds of authority granted to the agency by Congress. In Chevron v. Natural Resources Defense Council , the Supreme Court established a two part test to assess the validity of an agency's interpretation of an authorizing statute. First, the court will look to the statute itself and determine whether Congress has directly spoken to the question at issue. If it has so spoken and the intent of Congress is clear, both the court and the agency must give effect to the expressed intent of Congress. In instances where congressional intent is not clear and the statutory language is ambiguous, the courts will likely defer to any reasonable agency interpretation, even if another interpretation is more plausible. Generally, as long as the agency stays within Congress's delegation of authority, it is free to make policy choices in interpreting a statute, and such interpretations are entitled to deference. Here, it must be demonstrated that APHIS's "use" and "distribution" restrictions are within the bounds of Congress's delegated authority in the VSTA. The extensive reach of APHIS's authority seems to stem from the VSTA's broad grant of authority to the USDA to "make and promulgate from time to time such rules and regulations as may be necessary to prevent the preparation, sale, barter, exchange, or shipment..." of any biological product in order to carry out the VSTA. The VSTA also provides APHIS with broad authority to "issue, suspend, and revoke licenses for the maintenance of establishments ..." that "prepare" biological products intended for use in the treatment of animals. Creating a regulatory and licensing scheme governing the safety, efficacy, purity, and potency of biological products seems to be within this broad congressionally delegated authority. The VSTA and its legislative history do not appear to explicitly address who may "use" a biological product, the extent to which APHIS can deny a license, or the type of restrictions that can be placed on the licenses. Indeed, with only ten short provisions, it could be argued that Congress intended that the VSTA be implemented through a comprehensive regulatory scheme. The USDA regulates the use and distribution of a biological product in 9 C.F.R. §102.5(d), a provision pertaining to the Biological Product License. It states Where the Administrator determines that the protection of domestic animals or the public health, interest, or safety, or both, necessitates restrictions on the use of a product, the product shall be subject to such additional restrictions as are prescribed on the license. Such restrictions may include, but are not limited to, limits on the distribution of the product or provisions that the biological product is restricted to use by veterinarians, or under the supervision of veterinarians, or both. On March 17, 2004, the USDA, through APHIS's Veterinary Services, issued Notice No. 04-08 and invoked this purported power. It placed use and distribution restrictions on Veterinary Biological Product Licenses and Importation Permits for diagnostic test kits (including rapid tests) intended as an aid in the diagnosis of BSE. According to the Notice, such diagnostic test kits can only be sold and used by laboratories approved by state and federal (USDA) animal health officials. Moreover, it requires that potency testing, distribution, and use of the BSE test kits be under the supervision or control of APHIS's Veterinary Services. In light of the lack of explicit language on "use" restrictions in the VSTA, we discuss arguments that would seem to suggest that §102.5(d) is supported by the VSTA and congressional intent, as well as arguments against such support. Arguments for the Inclusion The USDA asserts that the VSTA provides the authority for the Department to ensure that veterinary diagnostic test kits are safe and accurate. Although the legislative history for the VSTA has been recognized as "extremely sparse" by some courts, the authority for APHIS to regulate the design, manufacture, importation, distribution, selling, testing, and labeling of biological products still appears broad. The authority in the VSTA to issue licenses and implement regulations for such things as the "sale," "exchange," and "shipment" of biologics could arguably capture a restriction on "use" or "distribution." Indeed, a restriction on the "sale" of the rapid test kits is exactly what APHIS has done with Notice No. 04-08. By placing a "sale" restriction on the license for test kits, APHIS is also apparently controlling who can use such test kits (although the regulations allow a restriction on use) and acting within its authority to issue regulations and licenses. Every regulated biological product may be prepared only by a licensed establishment, which must have a Biological Product License for the products it intends to prepare. USDA has reportedly licensed the BSE rapid test kits for "surveillance" purposes only and as mentioned above, restricts the sale and use of such kits to only those laboratories approved by state and federal (USDA) animal health officials. Arguably, using rapid test kits for purposes other than surveillance purposes (i.e., a food safety or a marketing reason) may provide results outside the federally accepted performance parameters for the test. For example, APHIS could argue that the tests which it approved for BSE surveillance were not evaluated to determine if they were reliable enough to support a claim that every individual animal that tests negative is actually negative. Overseeing the performance of a diagnostic test kit to try to ensure that it produces adequate and accurate test results every time for the stated purpose may be compatible with APHIS's regulation of the purity, potency, and efficacy of a biological product. The fact that the USDA intends to keep BSE testing within a federal and state regulatory scheme seems consistent with the congressional recognition in 1985 that a "uniform national standard" would better serve livestock owners, veterinarians, and the American public. For example, it arguably could be quite difficult to impose a "uniform national standard" if private parties were allowed to conduct BSE testing. A private company's economic interests, for one, might significantly influence a company's compliance with federal regulatory protocol. Along the lines of maintaining a uniform standard, some courts have determined that where safety, efficacy, purity, and potency of biological products are concerned, APHIS, through its comprehensive regulations, has preempted the field. While these cases generally address the preemption of state common law tort claims, they arguably demonstrate the breadth of APHIS's oversight in the field of animal biologics. It is this expansive field of authority that makes it plausible to argue that a regulation over the actual "use" of a rapid test kit would not be manifestly contrary to the VSTA. The restriction on "use" and "distribution" also seems consistent with APHIS's overarching mission under the VSTA to protect U.S. public and agricultural health by assuring that biologics used in the treatment of animals are pure, safe, potent, and efficacious. For instance, a rapid test kit may be "efficacious" for a program in which thousands of targeted cattle are tested to determine nationwide prevalence, but not "efficacious" to support the certification of thousands of specific, individual animals as BSE-free because the tests could have some false-negative or false-positive results. The restriction on "use" and "distribution" could also be buttressed by the USDA's objective to preserve domestic and international market confidence in U.S. agricultural commodities. For example, with respect to the testing of Chronic Wasting Disease, the BSE analogue in deer and elk, APHIS has argued that such testing must be performed exclusively by federal and state regulatory agency laboratories in order better maintain international credibility of the U.S. animal health system. Arguments Against the Inclusion While the VSTA and APHIS's overall mission broadly support its regulation of the "use" of a biological product, it appears the VSTA, its regulations and some legislative history place much more emphasis on the manufacture of a biological product, rather than its intended "use." Indeed, Creekstone alleges in its lawsuit that the VSTA only authorizes the licensing of establishments that manufacture biological products and not the products themselves. With respect to the VSTA regulations in subchapter E of title 9 of the C.F.R., we located only one subpart of one section (§102.5(d)), which restricts the actual "use" of a biological product (except maybe for import permits). The regulatory control that APHIS is attempting to accomplish with this one subpart of the licensing regulation could be called into question when viewed comparatively to the developed legal and regulatory framework utilized by the Food and Drug Administration (FDA) and two other agencies in the Department of Health and Human Services (DHHS) to oversee similar activities. The FDA not only regulates human drugs and biological products, but also participates with the Centers for Medicare & Medicaid Services (CMS) and the Centers for Disease Control and Prevention (CDC) to oversee the actual use of certain tests in laboratories through an elaborate set of certifications and accreditations. The FDA is authorized to conduct these activities pursuant to the Clinical Laboratory Improvement Amendments of 1988 (CLIA) (42 U.S.C. §263a). Some may find that the regulatory control that APHIS is attempting to accomplish with §102.5(d) is similar to that of the CLIA, but uses what appears to be a much less developed legal and regulatory framework. Accordingly, there may be some doubt as to the expansiveness of the USDA's authority to implement a restriction on "use" like §102.5(d) and the extent to which Congress intended APHIS to regulate who actually "uses" a biological product. Aside from the legislative history supporting the 1985 Amendments to the VSTA, there appears to be some support in the early legislative history and language of the VSTA that it was actually intended to regulate the manufacture of biological products. VSTA regulations, for example, may be promulgated to prevent the preparation and sale of worthless, contaminated, dangerous, or harmful biological products. From this language, it may be reasonable to challenge, as Creekstone has done in its lawsuit, the extent to which the USDA can regulate the "use" of properly made and licensed biological products. Moreover, during a 1914 Agriculture hearing, Dr. A. M. Farrington, Assistant Chief of the USDA's Bureau of Animal Industry, stated that with the recent production of hog cholera serums, it was "necessary to supervise the manufacture of these products so that only serums of good quality shall be produced for sale to farmers." He went on to further note that the VSTA was intended to "protect the farmer and stock raiser from improperly made and prepared serums, toxins, and viruses." Indeed, the abundant use of the word "prepare" (as defined in the regulations) in the VSTA and regulations would seem to reiterate Dr. Farrington's observations. The use of the word "prepare" in licensing requirements and regulations may limit the authority of the USDA over private companies wishing to "use" rapid test kits. The regulations make clear that establishments qualified to "prepare" biological products must have a valid establishment license and at least one valid biological product license for every biologic to be "prepared" in the licensed establishment. According to APHIS regulations, "prepare" means the manufacture or production of a biological product and includes the steps and procedures used in the processing, testing, packaging, labeling, and storing of a biological product. Aside from the imposition of §102.5(d) on the Biological Product License and Importation Permit, it could be argued that a private company wishing to "use" a rapid test kit would be bound only to the extent it can be shown that it is actually selling, bartering, exchanging, shipping or more broadly, "preparing" a regulated rapid test kit. Here however, except for perhaps storing the rapid test kits, it may be difficult to demonstrate that a private company is actually "preparing" a biological product as contemplated by the regulations. Summary The USDA appears to have broad regulatory authority when it comes to the purity, safety, potency, and efficacy of biological products or more generally, their preparation, manufacture, and sale. Indeed, the overall mission of APHIS, the VSTA and its legislative history, and some case law all could be argued to support the USDA's extensive authority over the production of biological products and could be more broadly interpreted to support USDA's oversight over the actual "use" of the rapid test kits. In the alternative, given that the VSTA and its legislative history do not appear to explicitly address restrictions on the actual "use" or "distribution" of a biological product, a court might find that the VSTA is ambiguous and could give deference to a reasonable APHIS interpretation. Accordingly, an argument could be made that the "use" and "distribution" restrictions on BSE rapid test kits are apparently within the bounds of Congress's broad delegations of authority to the USDA to issue licenses and promulgate regulations. Nonetheless, the arguments discussed above also seem to suggest that APHIS may not have the proper legal framework in place to support its restrictions on the "use" and "distribution" of biological products. In addition, it could be argued that the main thrust of the VSTA and its regulations appears more applicable to the preparation, manufacture, and production of biological products rather than restricting their actual "use." However, if it can be shown that the VSTA does not explicitly make clear Congress' intention with respect to restrictions on "use" and "distribution," (i.e., the statute is ambiguous) these arguments may not withstand the deference usually accorded an agency's reasonable interpretation of the authorizing statute. The Creekstone Case On March 23, 2006, Creekstone filed a lawsuit in the District Court for the District of Columbia against the USDA questioning the Department's authority to (1) regulate rapid test kits; (2) issue regulations that affect the distribution and use of effective rapid test kits; and (3) deny Creekstone the authority to use USDA-approved BSE rapid test kits. Creekstone is seeking, among other things, an injunction enjoining USDA from implementing or enforcing any prohibition on Creekstone acquiring or using USDA-approved BSE rapid test kits for purposes of routinely screening for BSE cattle that Creekstone processes. Should the reviewing court find the USDA's regulation of rapid test kits incompatible with the VSTA, then Creekstone would likely be granted some or all of the relief it requests. If APHIS is found to have the authority to regulate who actually uses the rapid test kits, the next inquiry a reviewing court is likely to address is whether the agency's discharge of that authority was reasonable. Such a question falls within the province of traditional "arbitrary and capricious review" under 5 U.S.C. §706(2)(A). Generally, the scope of review under the arbitrary and capricious standard is narrow, and a court is unlikely to substitute its judgment for that of an agency. Nonetheless, an agency must articulate a satisfactory explanation for its action, including a rational connection between the facts found and the choice made. Normally, an agency rule would be arbitrary and capricious if the agency (1) has relied on factors which Congress has not intended it to consider, (2) entirely failed to consider an important aspect of the problem, (3) offered an explanation for its decision that runs counter to the evidence before the agency, or (4) is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. With respect to the Creekstone case, a reviewing court would likely attempt to determine whether APHIS's decision to deny Creekstone a license to privately test for BSE was arbitrary and capricious in light of the evidence presented and congressional intent. Although we could not confirm exactly which license Creekstone applied for pursuant to federal regulations, we believe Creekstone was attempting to become a "laboratory approved by State and Federal animal health officials" as per Notice 04-08. As mentioned above, courts generally provide an agency implementing an authorized regulation a considerable amount of deference; thus, it may be difficult for Creekstone to overcome APHIS's denial, provided it was based on a rational and satisfactory explanation. Aside from a brief press release on April 9, 2004 that articulates its general rationale for the denial, the USDA has not made public any detailed explanation. Accordingly, we only provide a brief analysis on conclusions that can be drawn from this press release and other supporting data. APHIS seems primarily concerned with the implied consumer safety aspect that 100% testing may produce. It has determined, based on the findings of an international panel of experts, that there is no scientific justification for 100% testing because the disease does not appear in younger animals. APHIS also seems concerned with the implied safety aspect since it believes that no test has been shown to be reliable enough to support use as a food safety test. It has also claimed that the chances of a "false positive" for BSE could have "devastating" effects on the U.S. economy and international trade. For example, during the USDA's increase in BSE testing, early reports of two "inconclusives" (i.e., USDA parlance for a rapid test that is not negative for BSE) apparently had a negative impact on cattle markets and consumer confidence. Relatedly, for Chronic Wasting Disease, the BSE analogue in deer and elk, APHIS has argued that testing must be performed exclusively by federal and state regulatory agency laboratories. It buttressed its decision with the claim that the international credibility of the U.S. animal health system was largely predicated on having an established set of government labs. Arguments centered on APHIS's role in providing a safe and reliable food supply both domestically and internationally are consistent with the USDA's overall mission and expertise. Reliance on some of these findings noted above, however, may prove inconsistent with the congressional intent for the VSTA. For instance, the legislative history of the VSTA may not support claimed USDA authority to "maintain domestic and international confidence in U.S. cattle and beef products." Moreover, the USDA's claim that 100% rapid tests would have an implied food safety impact may also be inconsistent with the purposes of the VSTA, which seems more concerned with protecting the "farmer and stock raiser" and livestock from improperly made biological products. APHIS has also stated that it does not "consider the testing of bovines at slaughter [for BSE] to be ... meaningful in the context of either human or animal health." The lack of an animal health element in APHIS's reasoning for its rejection of the Creekstone permit would seem to make reliance on the VSTA questionable. In its response, the USDA now argues that its policy against private testing does promote animal health. Evidence that demonstrates the APHIS decision contrary to the facts or other USDA practices may also be an issue in court. For example, APHIS has consistently argued that the testing of all animals is not scientifically justified. However, in 2002 and 2003, the USDA reportedly tested over 2,000 head of cattle younger than 30-months old for BSE. There have also been some reported cases of cattle under the age of 30 months testing positive for BSE in Europe and Japan. Creekstone has argued that the testing of younger animals would actually provide a useful negotiating advantage with foreign countries like Japan by disproving the theory that it is necessary to test all animals. Evidence might also be introduced showing the extent to which APHIS even considered alternatives or the need for business innovation to keep up with consumer demand. Creekstone may also try to demonstrate that its "marketing" BSE test program enhances the "surveillance" aspect of the USDA's program and does not have "implied consumer safety aspects." For example, depending on the scientific evidence presented, it may be plausible to argue that the testing of animals under a "marketing" program does not necessarily entail "treatment" as USDA regulations contemplate or require the same level of scrutiny. Also, with respect to marketing, the USDA apparently certifies many food items for quality assurances that arguably have little to do with food safety (e.g., National Organic Program, Meat Grading and Certification, Beef Export Verification Program, and the Non-Hormone Treated Cattle Program). Summary The questions raised by the Creekstone lawsuit appear to be ones of first impression. The lack of precedent, coupled with the VSTA's sparse legislative history and USDA's inconsistent statements, may make it difficult for the USDA to support some of its claims. Nonetheless, courts generally defer to agency decisions that are rationally supported by the evidence. As such, provided APHIS can demonstrate that each of its reasons for keeping BSE testing within the exclusive purview of federal and state laboratories is rationally justified, a court may uphold APHIS's decision.

The positive identification of bovine spongiform encephalopathy or BSE, commonly known as "mad cow disease," in a Washington State cow in December of 2003 sparked a number of reactions from the federal government, the meat industry, and close to forty countries world-wide. The U.S. Department of Agriculture (USDA), for example, launched an extensive BSE sampling and surveillance program designed to test more high-risk cattle with the assistance of designated state and university diagnostic laboratories across the country. USDA implemented the new program in June of 2004, and uses USDA-approved "rapid" immunologic test kits. Most countries, however, quickly banned the importation of United States beef following the announcement. In an effort to meet new consumer demand, some private slaughterers propose to test 100% of their cattle using USDA approved "rapid test" kits. For example, Creekstone Farms Premium Beef, a private specialty producer and processor of Black Angus Beef, sought approval from the USDA to conduct voluntary BSE rapid testing for all the cattle it processes in order to promote sales, especially exports. The USDA, however, rejected Creekstone's request primarily because the test had only been licensed for animal health "surveillance" purposes and "the test as proposed by Creekstone would have implied a consumer safety aspect that is not scientifically warranted." The USDA's rejection of Creekstone's request to privately test all of its cattle for BSE ignited a significant amount of debate and resulted in the filing of a lawsuit by Creekstone on March 23, 2006, against the USDA. At issue is whether the USDA's decision to reject Creekstone's request to test all of its animals for BSE was a valid agency action. This report examines the legal authority of the USDA's Animal and Plant Health Protection Service to regulate all testing for BSE, particularly the voluntary testing of 100% of a private company's animals with rapid test kits and the USDA's recent rejection of Creekstone's application to test all of the cattle it processes for BSE. This analysis encompasses some of the legal arguments that have or might be presented in the Creekstone lawsuit. This report does not discuss the possible role that the Food and Drug Administration may play in the regulation of BSE testing and surveillance. For information on the USDA and legislative activities relating to BSE, see CRS Report RL32199, Bovine Spongiform Encephalopathy (BSE, or "Mad Cow Disease"): Current and Proposed Safeguards, by [author name scrubbed] and [author name scrubbed]. This report will be updated as warranted.

Introduction In the wake of press reports that the National Security Agency (NSA) was conducting a secret Terrorist Surveillance Program (TSP), a national debate emerged about whether the program was subject to the Foreign Intelligence Surveillance Act (FISA), whether the Administration needed additional authority to continue the program, and how and whether Congress should oversee the program. The TSP involved surveillance without a warrant or court order under FISA of international communications of persons within the United States, where one party to the communication is believed to be a member of al Qaeda, affiliated with al Qaeda, a member of an organization affiliated with al Qaeda, or working in support of al Qaeda. The Bush Administration asserted constitutional and statutory support for its program. The Terrorist Surveillance Act of 2006 was introduced by Senator Mitch McConnell, for himself and Senator William H. Frist, on Friday, September 22, 2006, as a free-standing bill, S. 3931 . On the same day, Senator McConnell, for himself and Senator Frist, introduced S. 3929 , the Terrorist Tracking, Identification and Prosecution Act of 2006, Title II of which is the Terrorist Surveillance Act of 2006. These were among a series of bills introduced in the 109 th Congress addressing the authorization, review, and oversight of electronic surveillance programs designed to acquire foreign intelligence or to provide information to assist in detecting and preventing international terrorist threats to the United States. Three related bills have been introduced to date in the 110 th Congress: H.R. 11 , S. 187 , and S. 139 . The Foreign Intelligence Surveillance Act, P.L. 95-511 , Title I, October 25, 1978, 92 Stat. 1796, codified at 50 U.S.C. § 1801 et seq. , as amended, provides a statutory framework for the use of electronic surveillance, physical searches, pen registers, and trap and trace devices to acquire foreign intelligence information. It also provides statutory authority for the production of tangible things for an investigation to obtain foreign intelligence information not concerning a U.S. person or to protect against international terrorism or clandestine intelligence activities. While describing electronic surveillance under FISA as a valuable tool in combating terrorism, the Bush Administration argued that it lacked the speed and agility to deal with such terrorists or terrorist groups. In a January 17, 2007, letter to Chairman Leahy and Senator Specter of the Senate Judiciary Committee, Attorney General Gonzales advised them that, on January 10, 2007, a Foreign Intelligence Surveillance Court (FISC) judge "issued orders authorizing the Government to target for collection international communications into or out of the United States where there is probable cause to believe that one of the communicants is a member or agent of al Qaeda or an associated terrorist organization." The Attorney General stated that, in light of these orders, which "will allow the necessary speed and agility," all surveillance previously occurring under the TSP will now be conducted subject to the approval of the FISC. He indicated further that, under these circumstances, the President has determined not to reauthorize the TSP when the current authorization expires. The Attorney General also noted that the Intelligence Committees had been briefed on the highly classified details of the FISC orders and advised Chairman Leahy and Senator Specter that he had directed the Acting Assistant Attorney General for the Office of Legal Counsel and the Assistant Attorney General for National Security to provide them a classified briefing on the details of the orders. The NSA program has been challenged on legal and constitutional grounds. On August 17, 2006, in one such lawsuit, American Civil Liberties Union v. National Security Agency , Case No. 06-CV-10204 (E.D. Mich. August 17, 2006), U.S. District Court Judge Anna Diggs Taylor held the program unconstitutional on the ground that it violated the Administrative Procedures Act, the Separation of Powers doctrine, the First and Fourth Amendments of the U.S. Constitution, the Foreign Intelligence Surveillance Act (FISA), and Title III of the Omnibus Crime Control and Safe Streets Act (Title III), and permanently enjoined the Terrorist Surveillance Program. The decision has been appealed to the U.S. Court of Appeals for the Sixth Circuit. On October 4, 2006, the Sixth Circuit stayed Judge Taylor's August 17, 2006, judgment and permanent injunction pending appeal, American Civil Liberties Union v. National Security Agency , Docket Nos. 06-2140 and 06-2095 (6 th Cir. Oct. 4, 2006). The docket sheets for both Nos. 06-2140 and 06-2095 indicate that a letter from the attorneys for the appellants was filed on January 18, 2007, notifying the court "concerning a letter from the Attorney General's Office regarding orders issued by the Foreign Intelligence Surveillance Court." S. 3931 and Title II of S. 3929 would create a new Title VII of the Foreign Intelligence Surveillance Act of 1978, as amended (FISA), 50 U.S.C. § 1801 et seq. , to address electronic surveillance programs. In addition, the measures would amend other provisions of FISA dealing with electronic surveillance without a warrant pursuant to an Attorney General certification, applications for a Foreign Intelligence Surveillance Court orders authorizing electronic surveillance for foreign intelligence purposes, the contents of such orders, emergency electronic surveillance under FISA, limitations on liability for those who aid the federal government in connection with electronic surveillance to obtain foreign intelligence information, and applicable congressional oversight. The bills would repeal the current wartime authorities for electronic surveillance without a warrant following a congressional declaration of war. Changes would be made to the FISA definitions of "electronic surveillance" and "agent of a foreign power," among others. Other provisions would modify the criminal provisions of FISA and the exclusivity clause 18 U.S.C. § 2511(2)(f). Still other provisions amend FISA to address those who engage in the development or proliferation of weapons of mass destruction and to accommodate the international movements of targets of electronic surveillance under FISA. This report will discuss the substantive provisions of the Terrorist Surveillance Act of 2006 and their impact on existing law. Summary of Changes to Existing Law New Title VII of the Foreign Intelligence Surveillance Act (FISA)—Electronic Surveillance Programs Foreign Intelligence Surveillance Court (FISC) Jurisdiction Sec. 3 of S. 3931 , Sec. 203 of S. 3929 , creates a new Title VII in FISA, which deals with electronic surveillance programs. "Electronic surveillance program" is defined under the new Section 701 of FISA to mean "a program to engage in electronic surveillance": (A) that has as a significant purpose the gathering of foreign intelligence information or protecting against international terrorism; (B) where it is not feasible to name every person, address, or location to be subjected to electronic surveillance; (C) where effective gathering of foreign intelligence information requires the flexibility to begin electronic surveillance immediately after learning of suspect activity; and (D) where effective gathering of foreign intelligence information requires an extended period of electronic surveillance. Under Sec. 4 of S. 3931 , Sec. 204 of S. 3929 , a new Section 702(a) of FISA would vest jurisdiction in the FISC to review, authorize, and reauthorize such electronic surveillance programs to obtain foreign intelligence information or to protect against international terrorism. Under this subsection, an initial authorization of an electronic surveillance program may be for up to 90 days, while a reauthorization may be for a period of time not longer than the FISC determines to be reasonable. If the FISC denies an application for authorization or reauthorization of an electronic surveillance program, the Attorney General may submit an unlimited number of new applications seeking approval of the program or, in the alternative, may appeal the decision of the FISC to the Foreign Intelligence Surveillance Court of Review (FIS Court of Review). If, at any time, the Attorney General determines that the known facts and circumstances relating to any target within the United States who is being surveilled under Title VII of FISA satisfy the criteria for an application for electronic surveillance of that target under Section 104 of Title I of FISA, 50 U.S.C. § 1804, then the Attorney General would be required to discontinue the surveillance of that target under the electronic surveillance program authorized under Title VII of FISA, unless certain conditions are met. The Attorney General could continue surveillance under Title VII only if, as soon as he determines practicable after he makes the determination to continue the surveillance of the target under Title VII, he makes an application under Section 104 of FISA for an FISC order authorizing electronic surveillance of the target under Section 105 of FISA, 50 U.S.C. § 1805. New Section 702(a)(4) of FISA, Sec. 4(a) of S. 3931 , Sec. 204(a) of  S. 3929 . Mandatory transfer of certain cases The bills also authorize the transfer from any other court of cases involving a challenge to the legality of classified communications intelligence activity relating to a foreign threat, including an electronic surveillance program, or cases in which the legality of any such activity or program is at issue. Such a transfer would be triggered by the filing by the Attorney General of an affidavit under oath that the case should be transferred to the FIS Court of Review, because further proceedings in the originating court would harm the national security of the United States. Under the proposed language in new Section 702(b)(1) of FISA, Sec. 4(a) of S. 3931 , Sec. 204(a) of S. 3929 , when such an affidavit is filed, originating court must transfer the case. While the implication of the Attorney General's affidavit may be that the transfer from the originating court would be to the FIS Court of Review, this is not clear from the language of proposed subsection 702(b)(1), which states "the originating court shall transfer the case of the Foreign Intelligence Surveillance for further proceedings under this subsection." As written, it appears that some words may be missing from this clause. This uncertainty is increased by the language in proposed subsection 702(b)(2) of FISA, entitled "Procedures for Review." In this subsection, the FISC, rather than the FIS Court of Review, is given jurisdiction as appropriate to determine standing and to determine the legality of the program to the extent necessary for resolution of the underlying case. If the FISC determines, in the context of a criminal proceeding, that the U.S. Constitution would require disclosure of national security information, any such disclosure would be governed by the Classified Information Procedures Act, 18 U.S.C. App. 3, or, if applicable, 18 U.S.C. § 2339B(f). Under proposed subsection 702(b)(3), entitled, "Appeal, Certiorari, and Effects of Decisions," any decision of the FISC under proposed subsections 702(b)(1) and (2) would be subject to review by the FIS Court of Review under section 103(b) of FISA, 50 U.S.C. § 103(b). Under new subsection 702(b)(3), the United States may seek review of decisions by the FIS Court of Review on certiorari to the U.S. Supreme Court. Otherwise, the decision of the FISC would be binding in all other courts. Under new subsection 702(b)(4), the FISC or the originating court may dismiss a challenge to the legality of an electronic surveillance program for any reason provided for under law. All litigation privileges are preserved under new subsection 702(b)(5). Applications for approval of electronic surveillance programs Under Sec. 5 of S. 3931 , Sec. 205 of S. 3929 , a new Section 703 of FISA is created, which sets out the requirements for applications for approval of electronic surveillance programs, including resubmission of applications or applications for reauthorization of such programs. Subsection 703(b) authorizes the FISC to require the Attorney General to furnish such other information as may be necessary for the court to make a determination under new section 704. Approval of electronic surveillance programs by the FISC Sec. 6 of S. 3931 , Sec. 206 of S. 3929 , creates a new subsection 704 addressing the necessary findings for and contents of an ex parte FISC order approving an electronic surveillance program as requested or as modified. In part, the court must find that approval of the electronic surveillance program in the application is consistent with the U.S. Constitution. New subsection 704(b) of FISA identifies the factors which the FISC may consider in assessing the constitutionality of the program. Subsection 704(c) of FISA sets out the contents of an order approving such a program. Congressional oversight of electronic surveillance programs authorized under new Title VII of FISA Under Sec. 7 of S. 3931 , Sec. 207 of S. 3929 , new Sec. 705 of FISA addresses congressional oversight. The Attorney General is directed to submit a classified report at least every 180 days to the House Permanent Select Committee on Intelligence and the Senate Select Committee on Intelligence (the "congressional intelligence committees," as defined in new Sec. 701(2) of FISA) on the activities during the previous 180 day period under any electronic surveillance program authorized under new Title VII of FISA. Under subsection 705(c), "Nothing in this title shall be construed to limit the authority or responsibility of any committee of either House of Congress to obtain such information as such committee may need to carry out its respective functions and duties." Clarification of the Foreign Intelligence Surveillance Act of 1978 Sec. 8 of S. 3931 , Sec. 208 of S. 3929 , makes a series of amendments to FISA. Repeal of wartime authorities under FISA Sec. 8(a) of S. 3931 , Sec. 208(a) of S. 3929 , repeals Sections 111, 309, and 404 of FISA, 50 U.S.C. §§ 1811, 1829, and 1844, which respectively permit the President, through the Attorney General, to authorize electronic surveillance, physical searches, and the use of pen register or trap and trace devices, without a court order to obtain foreign intelligence information for up to 15 calendar days following a declaration of war by Congress. Clarifying amendments to 18 U.S.C. §§2511(2)(e) and (f) and to criminal provisions in Section 109 of FISA In general, 18 U.S.C. § 2511 prohibits the interception of wire, oral, or electronic communications unless the interception falls within one of a series of specific exceptions. Current 18 U.S.C. §§ 2511(2)(e) and (2)(f) set out two of these exceptions. Amendment to 18 U.S.C. § 2511(2)(e) Current 18 U.S.C. § 2511(2)(e) provides, "Notwithstanding any other provision of this title or section 705 or 706 of the Communications Act of 1934, it shall not be unlawful for an officer, employee, or agent of the United States in the normal course of his official duty to conduct electronic surveillance, as defined in section 101 of the Foreign Intelligence Surveillance Act of 1978, as authorized by that Act." As amended, subsection 2511(2)(e) would read, "Notwithstanding any other provision of this title or section 705 or 706 of the Communications Act of 1934, it shall not be unlawful for an officer, employee, or agent of the United States in the normal course of his official duty to conduct electronic surveillance under the Constitution or the Foreign Intelligence Surveillance Act of 1978." Amendment to 18 U.S.C. § 2511(2)(f) Current 18 U.S.C. § 2511(2)(f), often referred to as the "exclusivity" provision, states: (f) Nothing contained in this chapter or chapter 121 or 206 of this title, or section 705 of the Communications Act of 1934, shall be deemed to affect the acquisition by the United States Government of foreign intelligence information from international or foreign communications, or foreign intelligence activities conducted in accordance with otherwise applicable Federal law involving a foreign electronic communications system, utilizing a means other than electronic surveillance as defined in section 101 of the Foreign Intelligence Surveillance Act of 1978, and procedures in this chapter or chapter 121 and the Foreign Intelligence Surveillance Act of 1978 shall be the exclusive means by which electronic surveillance, as defined in section 101 of such Act, and the interception of domestic wire, oral, and electronic communications may be conducted. Thus, under the current exclusivity provision in 18 U.S.C. § 2511(2)(f), electronic surveillance is prohibited except when carried out under the provisions of FISA; chapter 119, 18 U.S.C. §§ 2510 et seq . (which deals with interception of wire, oral, or electronic communications); or chapter 121, 18 U.S.C. §§ 2701 et seq . (which deals with stored wire and electronic communications and transactional records access). As amended, 18 U.S.C. § 2511(2)(f) would read, "Nothing contained in this chapter or chapter 121 or 206 of this title, or section 705 of the Communications Act of 1934, shall be deemed to affect the acquisition by the United States Government of foreign intelligence information that is authorized under a Federal statute or the Constitution of the United States." Amendments to Section 109 of FISA The amendments to FISA in Sec.8(b)(2) of S. 3931 , Sec. 208(b)(2) of S. 3929 , address Section 109 of FISA, 50 U.S.C. § 1809, which currently provides criminal sanctions for any person who intentionally "(1) engages in electronic surveillance under color of law except as authorized by statute; or (2) discloses or uses information obtained under color of law by electronic surveillance, knowing or having reason to know that the information was obtained through electronic surveillance not authorized by statute." As amended by Sec. 8(b)(2)(A) of S. 3931 , Sec. 208(b)(2)(A) of S. 3929 , a person would face criminal liability if he or she: (1) intentionally engages in electronic surveillance under color of law except as authorized by law ; (2) intentionally discloses or uses information obtained under color of law by electronic surveillance, knowing or having reason to know that the information was obtained through electronic surveillance not authorized by law ; or (3) " knowingly discloses or uses information obtained under color of law by electronic surveillance in a manner or for a purpose not authorized by law ." (Italics indicate new language.) Under Sec. 8(b)(2)(B) of S. 3931 , Sec. 208(b)(2)(B) of S. 3929 , the current penalties provided in Sec. 109(c) of FISA, 50 U.S.C. § 1809(c) would be increased from a fine of up to $10,000 to a fine of up to $100,000, while imprisonment would be increased from a term of up to 5 years to imprisonment for up to 15 years. Modernizing Amendments to FISA Sec. 9 of S. 3931 , Sec. 209 of S. 3929 , makes several additional amendments to FISA. Definitions Sec. 9(b) of S. 3931 , Sec. 209(b) of S. 3929 , amends several of the definitions in Sec. 101 of FISA, 50 U.S.C. § 1801. Agent of a foreign power Sec. 9(b)(1) of S. 3931 , Sec. 209(b)(1) of S. 3929 , expands the definition of "agent of a foreign power" under Sec. 101(b)(1) of FISA, 50 U.S.C. § 1801(b)(1), to include a person other than a United States person who "otherwise is reasonably expected to possess, control, transmit, or receive foreign intelligence information while that person is in the United States, provided that the official making the certification required in section 104(a)(6) deems such foreign intelligence information to be significant." This definition would become subsection 101(b)(1)(D) of FISA, 50 U.S.C. § 1801(b)(1)(D). Electronic surveillance Sec. 9(b)(2) of S. 3931 , Sec. 209(b)(2) of S. 3929 , deletes the current definition of "electronic surveillance" under Sec. 101(f) of FISA, 50 U.S.C. § 1801(f), and replaces it with a new definition. Under the new definition, "electronic surveillance" would mean: (1) the installation or use of an electronic, mechanical, or other surveillance device for acquiring information by intentionally directing the surveillance at a particular known person who is reasonably believed to be in the United States under circumstances in which that person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes; or (2) the intentional acquisition of the contents of any communication under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes, and if both the sender and all intended recipients are reasonably believed to be located within the United States. This appears to be a shorter, but more expansive definition than that under current law. Minimization procedures with respect to electronic surveillance Minimization procedures under FISA are designed to minimize the acquisition and retention, and prohibit the dissemination of non-publicly available information regarding unconsenting U.S. persons acquired during the course of electronic surveillance or physical search for foreign intelligence purposes, consistent with the need of the United States to obtain, produce, and disseminate foreign intelligence information. Such procedures permit retention and dissemination to law enforcement of evidence of criminal activity. Under these procedures, nonpublicly available information which is not foreign intelligence information shall not be disseminated in a manner that identifies any United States person, without such person's consent, unless such person's identity is necessary to understand foreign intelligence information or assess its importance. Current Sec. 101(h)(4) of FISA, 50 U.S.C. § 1801(h)(4), also includes minimization procedures applicable to any electronic surveillance without a court order to acquire foreign intelligence information upon Attorney General certification pursuant to Sec. 102(a) of FISA, 50 U.S.C. § 1802. In that context, minimization procedures also encompass procedures requiring that no contents of any communication to which a United States person is a party be disclosed, disseminated, or used for any purpose or retained for longer than 72 hours unless a court order under Sec. 105 of FISA, 50 U.S.C. § 1805, is obtained or unless the Attorney General determines that the information indicates a threat of death or serious bodily harm to any person. Subsection 104(h)(4) of FISA, 50 U.S.C. § 1801(h)(4), would be deleted by Sec. 9(b)(3) of S. 3931 , Sec. 209(b)(3) of S. 3929 , and replaced with new language under which minimization procedures would include: (4) notwithstanding paragraphs (1), (2), and (3) [of Section 104(h) of FISA, 50 U.S.C. § 1804(h)], with respect to any electronic surveillance approved pursuant to section 102 or 704, procedures that require that no contents of any communication originated or sent by a United States person shall be disclosed, disseminated, used or retained for longer than 7 days unless a court order under section 105 is obtained or unless the Attorney General determines that the information indicates a threat of death or serious bodily harm to any person. Current definition of "wire communication" deleted Under current law, subsection 101( l ) defines the term "wire communication" to mean "any communication while it is being carried by a wire, cable, or other like connection furnished or operated by any person engaged as a common carrier in providing or operating such facilities for the transmission of interstate or foreign communications." Sec. 9(b)(4) of S. 3931 , Sec. 209(b)(4) of S. 3929 , would strike this subsection. Contents The current definition of "contents" in subsection 101(n) of FISA, 50 U.S.C. § 1801(n), would be replaced with a new definition. Under Sec. 9(b)(5) of S. 3931 , Sec. 209(b)(5) of S. 3929 , "contents," "when used with respect to a communication, includes any information concerning the substance, symbols, sounds, words, purport, or meaning of a communication, and does not include dialing, routing, addressing, or signaling information." Electronic surveillance without a court order to acquire foreign intelligence information pursuant to Attorney General certification Section 102 of FISA, 50 U.S.C. § 1802, authorizes electronic surveillance without a court order to acquire foreign intelligence information for up to one year upon certification by the Attorney General in writing under oath that certain criteria have been met. As amended by Sec. 9(c) of S. 3931 , Sec. 209(c) of S. 3929 , the application under subsection 102(a)(1)(A)(i) of FISA, 50 U.S.C. § 1802(a)(1)(A)(i), would be expanded to include, among other things, electronic surveillance directed at (not "solely directed at") the acquisition of the contents of communications of foreign powers, as defined in Section 101(a)(1), (2), or (3) of FISA, 50 U.S.C. § 1801(a)(1), (2), or (3), or an agent of a foreign power other than a United States person, as defined in subsection 101(b)(1) of FISA, 50 U.S.C. § 1801(b)(1). The amendment also deletes a requirement in current Sec. 102(a)(1)(B) of FISA, 50 U.S.C. § 1801(a)(1)(B), that the Attorney General certify that "there is no substantial likelihood that the surveillance will acquire the contents of any communication to which a U.S. person is a party." Under both the current and amended versions of subsection 102(a)(2) of FISA, 50 U.S.C. § 1802(a)(2), an electronic surveillance authorized under subsection 102(a)(1) of FISA, 50 U.S.C. § 1802(a)(1), may only be conducted in accordance with the Attorney General's certification and applicable minimization procedures. Both require the Attorney General to assess compliance with such procedures and to report his assessments to the congressional intelligence committees under subsection 108(a) of FISA, 50 U.S.C. § 1808(a). Under the amended language, if such an electronic surveillance is directed at an agent of a foreign power, the Attorney General's report assessing compliance with the minimization procedures must also include a statement of the facts and circumstances relied upon to justify the belief that the target of the electronic surveillance is an agent of a foreign power. Under the current and amended subsection 102(a)(3) of FISA, 50 U.S.C. § 1802(a)(3), the Attorney General must immediately transmit under seal to the FISC a copy of the applicable certification, which shall remain under seal unless certain criteria are met. The current Sec.102(a)(4), 50 U.S.C. § 102(a)(4), permits the Attorney General to direct a specified common carrier to provide any information, facilities, or technical assistance necessary to accomplish an electronic surveillance authorized under subsection 102(a) in a manner which will protect its secrecy and produce a minimum of interference with the services such carrier is providing to its customers, and to maintain any records the carrier wishes to retain concerning such surveillance or the aid furnished with respect thereto under security procedures approved by the Attorney General and the Director of National Security. This provision is absent from the proposed subsection 102(a) of FISA, new 50 U.S.C. § 1802(a). Acquisition of foreign intelligence information for up to one year concerning persons outside the United States upon Attorney General certification The proposed subsection 102(b)(1) of FISA, Sec. 9(c) of S. 3931 , Sec. 209(c) of S. 3929 , creates a new authority for the President, acting through the Attorney General, to authorize the acquisition of foreign intelligence information for periods of up to one year concerning a person reasonably believed to be outside the United States if the Attorney General certifies in writing under oath that (A) the acquisition does not constitute electronic surveillance as defined in section 101(f); (B) the acquisition involves obtaining the foreign intelligence information from or with the assistance of a wire or electronic communications service provider, custodian, or other person (including any officer, employee, agent, or other specified person thereof) who has access to wire or electronic communications, either as they are transmitted or while they are stored, or equipment that is being or may be used to transmit or store such communications; (C) a significant purpose of the acquisition is to obtain foreign intelligence information; and (D) the minimization procedures to be employed with respect to such acquisition activity meet the definition of minimization procedures under section 101(h). The certification need not identify the specific facilities, places, premises, or property at which the acquisition will be directed. Compliance with the Attorney General's certification and minimization procedures would be required. The Attorney General is also directed to report his assessments regarding compliance with such procedures to the congressional intelligence committees under subsection 108(a) of FISA, 50 U.S.C. § 1808(a). A copy of the Attorney General's certification would be immediately transmitted to the FISC and there maintained under seal unless it is necessary to determine the legality of the acquisition under proposed subsection 102(o) of FISA. Under the proposed subsection 102(c) of FISA, with respect to such an acquisition, the Attorney General would be authorized to direct a specified person to furnish the government with all information, facilities, and assistance needed to accomplish the acquisition in a manner that will protect its secrecy and minimize interference with the services that such a person is providing to the target. Any records the person providing aid to the Government wishes to maintain must be kept under security procedures approved by the Attorney General and the Director of National Intelligence (DNI). New subsection 102(d) of FISA would require the government to compensate the specified person furnishing the aid at the prevailing rate. If the person so directed fails to comply with the Attorney General's directive to provide such aid, then, under proposed subsection 102(e) of FISA, the Attorney General could take recourse to the FISC to compel compliance with the directive. Failure to obey the resulting FISC order could be punished as contempt of court. Under the new subsection 102(f) of FISA, a person receiving such a directive would have a right to challenge the legality of the directive by filing a petition with the petition review pool of FISC judges established under subsection 103(e)(1) of FISA. The petition must be immediately assigned by the FISC Presiding Judge to one of the judges in the pool. Within 24 hours of the assignment of the petition, the assigned judge must conduct an initial review of the directive. If the petition is deemed frivolous, it must be immediately denied and the directive or portion of the directive that is the subject of the petition must be affirmed. If the assigned judge determines that the petition is not frivolous, the assigned judge must consider the petition and make a written statement for the record of his determination and the reasons underlying it for the record within 72 hours. A petition to modify or set aside a directive may only be granted if the judge finds that the directive does not meet the requirements of Section 102 or is otherwise unlawful. If the judge does not modify or set aside the directive, he must immediately affirm it and order the recipient's compliance. A petition to the FIS Court of Review, by the Government or any person receiving such a directive seeking review of an FISC decision to affirm, modify, or set aside the directive must be made within seven days of the issuance of the FISC decision. The FIS Court of Review must provide for the record a written statement of the reasons for its decision. The Government or any person receiving such a directive seeking review of the FIS Court of Review decision may petition the U.S. Supreme Court for a writ of certiorari. The FIS Court of Review must transmit its record under seal to the Supreme Court. Proposed subsection 102(g) of FISA. Judicial proceedings under Section 102 must be conducted expeditiously, and the record of such proceedings, including petitions filed, orders granted, and statements for reasons for decision, must be maintained under security measures established by the Chief Justice of the United States in consultation with the Attorney General and the DNI. Proposed subsection 102(h). All petitions under this section are to be filed under seal. In proceedings under Section 102 of FISA, upon request by the Government, any Government submissions or portions of submissions, which may contain classified information, may be reviewed by the court ex parte and in camera. Proposed subsection 102(i). Limitation on liability Proposed subsection 102(j) of FISA would preclude any cause of action in any court against any provider of a communication service or other person (including any officer, employee, agent, or other specified person thereof) for furnishing information, facilities, or assistance to the Government pursuant to a directive under new subsections 102(a) or 102(b). Use or disclosure of information acquired under Attorney General authorization under Section 102 of FISA Under proposed subsection 102(k) of FISA, information regarding a United States person, acquired pursuant to an Attorney General authorization under Section 102 of FISA, 50 U.S.C. § 1802, may be used or disclosed by federal officers and employees without the consent of that United States person, only in accordance with minimization procedures required by either subsection 102(a) or subsection 102(b), as applicable. Information acquired under this section may be used or disclosed by federal officers or employees only for lawful purposes. Under proposed subsection 102( l ), no information acquired under Section 102 shall be disclosed for law enforcement purposes unless the disclosure is accompanied by a statement that "such information, or any information derived therefrom, may only be used in a criminal proceeding with the advance authorization of the Attorney General." New subsection 102(k) also provides that no otherwise privileged communication obtained in accordance with or in violation of Section 102 shall lose its privileged character. Procedures for use or disclosure against an aggrieved person in a federal, state, or local proceeding of information obtained or derived from an acquisition under Section 102 of FISA Proposed subsections 102(m) and (n) of FISA, respectively, provide procedures for use or disclosure of such information in federal proceedings or in state or local proceedings. Use or disclosure in federal proceedings Under Sec. 9(c) of S. 3931 , Sec. 209(c) of S. 3929 , the federal government may only introduce into evidence or otherwise use or disclose information acquired by or derived from an acquisition under Section 102 of FISA, 50 U.S.C. § 102, in any trial, hearing or other proceeding in or before any court, department, officer, agency, regulatory body, or other authority of the United States against an aggrieved person, if it complies with the requirements of proposed subsection 102(m). Under this subsection, the Government, prior to the proceeding or at a reasonable time prior to seeking to place the information in evidence or otherwise to use or disclose the information, must notify the aggrieved person and the court or other authority in which the information is to be used or disclosed of the United States' intent to do so. Use or disclosure in state or local proceedings Somewhat similarly, under proposed subsection 102(n), a state or political subdivision may only introduce into evidence or otherwise use or disclose information obtained by or derived from a Section 102 acquisition, in any trial, hearing, or other proceeding in or before any court, department, officer, agency, regulatory body, or other state or local authority, against an aggrieved person, if the state or political subdivision notifies the aggrieved person, the court or other authority in which the information is to be used or disclosed, and the U.S. Attorney General, of the state or political subdivision's intent to so use or disclose the information. Aggrieved person's motion to suppress An aggrieved person against whom information acquired by or derived from a Section 102 acquisition is intended to be used or disclosed in a federal, state, or local proceeding may move to suppress the evidence so acquired or derived on one of two grounds: the information was unlawfully acquired, or the acquisition was not made in conformity with an order of authorization or approval. A motion to suppress is to be made before the trial, hearing, or other proceeding involved unless there is no opportunity to make such a motion or unless the person is not aware of the grounds of the motion. Proposed subsection 102(o) of FISA. Consideration by U.S. district court of the legality of an acquisition upon Attorney General affidavit Under proposed subsection 102(p) of FISA, if the Attorney General files an affidavit under oath, pursuant to proposed subsection 102(b) of FISA, that disclosure or an adversary hearing would harm the national security of the United States; then whenever a court or other authority is given notice under subsections 102(m) or 102(n), a motion to suppress is filed under subsection 102(o), or a request is made by an aggrieved person under any other federal or state statute or rule before a federal or state court or other authority, seeking to discover or obtain an Attorney General directive or other materials related to a Section 102 acquisition, or seeking to discover, obtain, or suppress evidence or information acquired by or derived from a Section 102 acquisition, the U.S. district court before whom the matter is pending, or the U.S. district court in the same district as the other authority before whom the motion is made, shall determine whether the acquisition under Section 102 was lawfully conducted and authorized. The U.S. district court may review in camera and ex parte the Attorney General's directive and other materials related to the Section 102 acquisition necessary to making its determination. The court may disclose to the aggrieved person, under appropriate security procedures and protective orders, portions of the directive or other related materials only where such disclosure is necessary to an accurate determination of the legality of the acquisition. Under proposed subsection 102(q) of FISA, if the U.S. district court were to find that an acquisition authorized under Section 102 of FISA was not lawfully authorized or conducted, the evidence thereby unlawfully obtained or derived would be suppressed. If the U.S. district court were to determine that the acquisition was lawfully authorized and conducted, the court would deny the aggrieved person's motion except to the extent that due process requires discovery or disclosure. Any orders granting motions or requests under subsection 102(o), decisions holding that a Section 102 authorization was not lawfully authorized or conducted, or U.S. district court orders requiring review or granting disclosure of directives or materials related to a Section 102 acquisition, would be binding on all other federal or state courts except a U.S. court of appeals or the U.S. Supreme Court. Proposed subsection 102(r) of FISA. Authority for federal officers who acquire foreign intelligence information under Section 102 of FISA to consult with federal or state law enforcement Federal officers who acquire foreign intelligence information pursuant to Section 102 of FISA, 50 U.S.C. § 1802, may consult with federal law enforcement officers or state or local law enforcement personnel to coordinate efforts to investigate or protect against (1) actual or potential attack or other grave hostile acts of a foreign power or an agent of a foreign power; (2) sabotage, international terrorism, or the development or proliferation of weapons of mass destruction by a foreign power or an agent of a foreign power; (3) clandestine intelligence activities by an intelligence service or network of a foreign power or by an agent of a foreign power. Such coordination would not preclude the certifications required under subsections 102(a) or (b). Proposed subsection 102(t). Retention of Directives and Orders Under proposed subsection 102(u), directives made under Section 102 of FISA and orders granted under that section must be retained for 10 years. Designation of FISC judges Under Sec. 9(d) of S. 3931 , Sec. 209(d) of S. 3929 , Sec. 103(a) of FISA is amended to authorize the Chief Justice of the United States to publicly designate 11 district court judges from at least seven of the U.S. judicial circuits to be FISC judges, of whom no fewer than three shall reside within 20 miles of the District of Columbia. A new subsection 103(g) would also be added to FISA providing express authority for applications for an FISC order under Title I of FISA if the President has authorized the Attorney General in writing to approve applications to the FISC. An FISC judge to whom an application is made is explicitly authorized to grant an order under Section 105 of FISA approving electronic surveillance of a foreign power or an agent of a foreign power for the purpose of obtaining foreign intelligence information. Applications for FISC orders under Sec. 104 of FISA Sec. 9(e) of S. 3931 , Sec. 209(e) of S. 3929 , makes a series of amendments to Sec. 104 of FISA, 50 U.S.C. § 1804. Current subsections 104(a)(6) through (11) are deleted from FISA and replaced by new subsections 104(a)(6) through (10). An application for a court order to authorize electronic surveillance under FISA must contain, among other things, a certification that certain requirements are met. Under current law, such certification or certifications are made by the Assistant to the President for National Security Affairs or an executive branch official or officials designated by the President from among those executive officers employed in the area of national security or defense and appointed by the President with the advice and consent of the Senate. As amended, the certification would be made by "the Assistant to the President for National Security Affairs or an executive branch official authorized by the President to conduct electronic surveillance for foreign intelligence purposes." Under current law, subsection 104(b) of FISA, 50 U.S.C. § 1804(b) deals with the exclusion of certain information from an application for a FISC order authorizing electronic surveillance where the target is a foreign power as defined in subsection 101(a)(1), (2), or (3), and each of the facilities or places at which the surveillance is directed is owned, leased, or exclusively used by that foreign power. In such circumstances, the application currently is required to include a statement as to whether physical entry is required to effect the surveillance, and to contain such information about the surveillance techniques and communications or other information concerning U.S. persons likely to be obtained as may be necessary to assess the proposed minimization procedures. Sec. 9(e)(2) and (3) of S. 3931 , Sec. 209(e)(2) and (3) of S. 3929 , would strike current Sec. 104(b) of FISA, 50 U.S.C. § 1804(b), and redesignate subsections 104(c)-(e) as 104(b)-(d) of FISA. Current subsection 104(e)(1)(A) (as redesignated above, subsection 104(d)(1)(A)) provides that, upon written request of the Director of the Federal Bureau of Investigation, the Secretary of Defense, the Secretary of State, or the Director of National Intelligence, the Attorney General shall personally review under subsection 104(a), 50 U.S.C. § 1804(a) an application under that subsection for a target described in section 101(b)(2) of FISA, 50 U.S.C. § 1801(b)(2). New subsection 104(d)(1)(A) would expand this list to include the Director of the Central Intelligence Agency. Issuance of FISC order under Sec. 105 of FISA Sec. 9(f) of S. 3931 , Sec. 209(f) of S. 3929 , would amend Sec. 105 of FISA, 50 U.S.C. § 1805, in a number of respects. Current subsection 105(a)(1) provides that, upon an application under Sec. 104 of FISA, the FISC judge shall enter an ex parte order as requested or as modified approving the electronic surveillance in the application if he finds that "the President has authorized the Attorney General to approve applications for electronic surveillance for foreign intelligence information." As amended, this subsection would be stricken and subsections 105(a)(2) through (a)(5) of FISA, 50 U.S.C. §§ 1805(a)(2) through (a)(5), would be redesignated subsections 105(a)(1) through (a)(4), 50 U.S.C. §§ 1805(a)(1) through (a)(4). Specifications to be included in a FISC order for electronic surveillance Current subsection 105(c)(1) of FISA, 50 U.S.C. § 1805(c)(1), which deals with specifications to be included in an order approving electronic surveillance under Sec. 105 of FISA, would also be deleted and replaced with a new subsection 105(c)(1), which includes in the following order the current subsections 105(c)(1)(A), (B), (E), (C) and (D), and deletes current requirements in subsections 105(c)(1)(F). The latter provision provides that an order approving electronic surveillance under Section 105 of FISA, 50 U.S.C. § 1805, shall specify, "whenever more than one electronic, mechanical, or other surveillance device is to be used under the order, the authorized coverage of the devices involved and what minimization procedures shall apply to information subject to acquisition by each device." Current subsection 105(d) deals with the exclusion of certain information from applications for court orders authorizing electronic surveillance where the target of the surveillance is a foreign power as defined in Sec. 101(a)(1), (2), or (3), and each facility or place to be surveilled is owned, leased, or exclusively used by that foreign power. It also requires description of information sought, the communications to be subject to surveillance, and the type of electronic surveillance involved, including whether physical entry would be required. As amended, the current language would be stricken and replaced with a requirement that, "Each order under this section specify the type of electronic surveillance involved, including whether physical entry is required." Extensions of orders for electronic surveillance under FISA Under current Section 105(e)(2), extensions of an order authorizing electronic surveillance under Title I of FISA, 50 U.S.C. § 1801 et seq ., may be granted on the same basis as an original order upon an application for an extension and new findings made in the same manner as required for an original order, with two exceptions. First, an extension of an FISC order for a surveillance targeted against a foreign power that is a foreign-based political organization, not substantially composed of United States persons; or an entity that is directed and controlled by a foreign government or governments; or targeted against a group engaged in international terrorism or activities in preparation therefor that is not a United States person, may be for a period not to exceed one year if the judge finds probable cause to believe that no communication of any individual United States person will be acquired during the period. Second, an extension of an order under FISA for a surveillance targeted against an agent of a foreign power who is not a United States person may be for a period not to exceed one year. As amended, current subsection 105(e)(2), 50 U.S.C. § 105(e)(2) would be stricken and replaced with a new subsection 105(e)(2), providing that extensions of an order issued under Title I of FISA may be granted on the same basis as an original order upon an application for an extension and new findings made in the same manner as required for an original order and may be for a period not longer than the court determines to be reasonable or one year, whichever is less. Emergency authorization of electronic surveillance without a court order Current subsection 105(f), 50 U.S.C. § 1805(f), provides for emergency authorization of electronic surveillance without a court order for up to 72 hours by the Attorney General if he reasonably determines that an emergency situation exists with respect to the employment of electronic surveillance to obtain foreign intelligence information before an order authorizing such surveillance can, with due diligence, be obtained; and that the factual basis for issuance of an order under this title to approve such surveillance exists. The Attorney General or his designee must notify an FISC judge of the emergency employment of electronic surveillance at the time of its authorization. During this 72 hour window, a court order under Sec. 105 must be sought. Subsection 105(f) also currently requires termination of the surveillance when the information sought is acquired, if a FISC order approving the surveillance is denied, or at the end of the 72 hours, whichever is earliest; and restricts use or disclosure of information acquired or derived from that surveillance if a court order is not obtained. Under Sec. 9(f)(5) of S. 3931 , Sec. 209(f)(5) of S. 3929 , the current subsection 105(f) of FISA, 50 U.S.C. § 1805(f) would be deleted and replaced with an new subsection 105(f). While current law authorizes the Attorney General to determine whether to authorize electronic surveillance without a court order on an emergency basis if he reasonably determines that the requisite factors exist, the new language would grant such authority to "an executive branch officer appointed by the President with the advice and consent of the Senate who is authorized by the President to conduct electronic surveillance." The new language would require that the Attorney General be informed of the emergency electronic surveillance. While current law requires a FISC judge to be informed by the Attorney General or his designee at the time of authorization of emergency electronic surveillance, the new law would require such judge to be informed "as soon as practicable following such authorization that the decision has been made to employ emergency electronic surveillance." New subsections 105(f)(2)(a) and (b). Current law requires that an application for an FISC order authorizing electronic surveillance be made to the FISC judge so notified within 72 hours of the authorization of employment of emergency electronic surveillance. Under the new provision, an application must be made to that FISC judge or another FISC judge as soon as possible within seven days after the surveillance is authorized. Under current subsection 105(f), in the absence of a judicial order approving such electronic surveillance, the surveillance shall terminate when the information is obtained, when the application for the order is denied, or after the expiration of 72 hours from the time when the Attorney General approved the emergency electronic surveillance, whichever is earliest. As amended, the period of 72 hours after the Attorney General approved the emergency electronic surveillance would be replaced by one of seven days after approval of the emergency electronic surveillance by an executive branch officer appointed by the President with the advice and consent of the Senate who is authorized by the President to conduct electronic surveillance. The restrictions on disclosure and use of information obtained or derived from such an emergency electronic surveillance in the absence of an authorizing court order parallel those in existing law. While, under current law, if the Attorney General authorizes such emergency employment of electronic surveillance, he shall require that the minimization procedures required by this subchapter for the issuance of a judicial order be followed, the revised language would provide that, "The official authorizing the emergency employment of electronic surveillance shall require that the minimization procedures required by this title for issuance of a court order be followed." New subsection 105(f)(1)(D) of FISA. Limitations of liability for providers aiding in a FISA electronic surveillance or physical search Sec. 9(f) of S. 3931 , Sec. 209(f) of S. 3929 , would also modify subsection 105(i) dealing with limitations of liability for those who provide information, facilities, or technical assistance with respect to execution of a FISA electronic surveillance or physical search. As amended, no cause of action would lie against any provider of electronic communication service, landlord, custodian, or other person (including any officer, employee, agent, or other specified person thereof) that furnishes any such aid in accordance with a court order or a request for emergency assistance under this title for electronic surveillance or physical search, or in response to a certification by the Attorney General or his designee seeking information, facilities, or technical assistance from such person that does not constitute electronic surveillance as defined in Sec. 101(f) of FISA. Use of information acquired by electronic surveillance under FISA Sec. 106 of FISA limits the use by federal, state, or local governments of information regarding unconsenting U.S. persons acquired or derived from electronic surveillance under FISA. It also includes notification requirements and provides an opportunity for an aggrieved person against whom such information is proffered in an official proceeding to move to suppress such information if it was unlawfully acquired or if the surveillance was not made in conformity with an order of authorization or approval. Under Sec. 9(g) of S. 3931 , Sec. 209(g) of S. 3929 , Sec. 106(i) of FISA, 50 U.S.C. § 1806(i), which deals with destruction of unintentionally acquired information, would be modified to provide that, where any communication is unintentionally acquired by an electronic, mechanical, or other surveillance device, in circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes, and if both the sender and all intended recipients are located in the United States, such contents shall be destroyed upon recognition, unless the Attorney General determines that the contents indicate a threat of death or serious bodily harm to any person. Current subsection 106(i) includes parallel provisions, but applies only to unintentionally acquired radio communications. (Emphasis added.) The import of a second amendment to subsection 106(i) of FISA, 50 U.S.C. § 1806(i), in Sec. 209(g)(1)(B) of S. 3886 , Sec. 9(g)(1)(B) of S. 2453 , is somewhat unclear. The provision indicates that subsection 106(i) of FISA would be amended by "inserting 'contain significant foreign intelligence information or' after 'Attorney General determines that the contents' inserting 'contain significant foreign intelligence information or.'" [sic] As written, this language is unclear. If one were to insert "contain significant foreign intelligence information or contain significant foreign intelligence information or" after "Attorney General determines that the contents," the result would be an amended provision reading: In circumstances involving the unintentional acquisition by an electronic, mechanical, or other surveillance device of the contents of any communication, under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes, and if both the sender and all intended recipients are located within the United States, such contents shall be destroyed upon recognition, unless the Attorney General determines that the contents contain significant foreign intelligence information or indicate a threat of death or serious bodily harm to any person. This would expand the circumstances in which destruction of the unintentionally acquired contents of the communication would be forestalled. However, the inclusion twice in the amending language of the phrase "inserting 'contain foreign intelligence information or'" suggests that one of these inclusions may be redundant. Sec. 9(g)(2) of S. 3930 , Sec. 209(g)(2) of S. 3929 , makes a conforming amendment to subsection 106(k), replacing "104(a)(7)" with "104(a)(6)," reflecting a change made to Sec. 104 of FISA, 50 U.S.C. § 1804, by Sec. 9(e) of S. 3930 , Sec. 209(e) of S. 3929 . Congressional oversight under Sec. 108 of FISA regarding a document management system for applications for FISC orders authorizing electronic surveillance Sec. 9(h) of S. 3931 , Sec. 209(h) of S. 3929 , amends the congressional oversight provisions of Sec. 108 of FISA, 50 U.S.C. § 1808, to add a new subsection 108(c) requiring the Attorney General and the Director of National Intelligence, in consultation with the Director of the FBI, the Director of the NSA, the Director of the CIA, and the FISC, to conduct a feasibility study to develop and implement a secure, classified document management system that would permit prompt preparation, modification, and review by appropriate personnel of the Department of Justice, the FBI, the NSA, and other applicable U.S. government elements, of applications for FISC orders authorizing electronic surveillance before their submittal to the FISC. Such a system would permit and facilitate prompt submittal of applications and all other matters, including electronic filings to the FISC under Sections 104 or 105(g)(5) of FISA, and would permit and facilitate the prompt transmittal of FISC rulings to personnel submitting such applications. Amendments to FISA, Title I, Relating to Weapons of Mass Destruction Sec. 9(i) of S. 3931 , Sec. 209(i) of S. 3929 , made a series of amendments to Title I of FISA, which deals with electronic surveillance. Agent of a Foreign Power definition Section 101(b)(1) of FISA, 50 U.S.C. § 1801(b)(1), lists a number of categories of persons, other than U.S. persons, who are defined as "agents of a foreign power" under FISA. Sec. 9(i)(1) of S. 3931 , Sec. 209(i)(1) of S. 3929 , would add a new subsection 101(b)(1)(E) to the definition of "agent of a foreign power" under subsection 101(b)(1), and redesignate current subsection 101(b)(1)(E) of FISA as subsection 101(b)(1)(F). Under the new definitional category, any person other than a U.S. person who "engages in the development or proliferation of weapons of mass destruction, or activities in preparation therefor" would be deemed an "agent of a foreign power" under FISA. Section 101(b)(2) of FISA, 50 U.S.C. § 1801(b)(2) lists a series of categories of persons (whether or not they are U.S. persons) who are also defined as "agents of a foreign power." Under current subsection 101(b)(2)(C), any person who "knowingly engages in sabotage or international terrorism, or activities that are in preparation therefor, for or on behalf of a foreign power" is deemed to be an "agent of a foreign power." As amended by Sec. 9(i)(1)(B) of S. 3931 , Sec. 209(i)(1)(B) of S. 3929 , under subsection 101(b)(2)(C) of FISA, 50 U.S.C. § 1801(b)(2)(C), any person who "knowingly engages in sabotage, international terrorism, or the development or proliferation of weapons of mass destruction or activities that are in preparation therefor, for or on behalf of a foreign power" would be considered an "agent of a foreign power" under FISA. New definition of Weapon of Mass Destruction Sec. 9(i)(1)(C) of S. 3931 , Sec. 209(i)(1)(C) of S. 3929 , would add a new subsection 101( l ) to the definitions in Section 101 of FISA, 50 U.S.C. § 1801. Under this new subsection, "weapon of mass destruction" would mean: (1) any destructive device (as that term is defined in section 921 of title 18, United States Code) that is intended or has the capability, to cause death or serious bodily injury to a significant number of people; (2) any weapon that is designed or intended to cause death or serious bodily injury through the release, dissemination, or impact of toxic or poisonous chemicals, or their precursors; (3) any weapon involving a biological agent, toxin, or vector (as those terms are defined in section 178 of title 18, United States Code); or (4) any weapon that is designed to release radiation or radioactivity at a level dangerous to human life. Sections 101(e)(1)(B), 106(k)(1)(B), and 305(k)(1)(B) of FISA, 50 U.S.C. §§ 1801(e)(1)(B), 1806(k)(1)(B), and 1825(k)(1)(B), each would be amended to encompass not only sabotage or international terrorism, but also the development or proliferation of weapons of mass destruction. Conforming Amendments to Titles I and III of FISA to Accommodate International Movements of Targets Sec. 9(j) of S. 3931 , Sec. 209(j) of S. 3929 , amends both Sections 105(e) and 304(d) of FISA, 50 U.S.C. §§ 1805(e) and 1824(d), dealing with the duration and extension of FISC orders authorizing electronic surveillance and physical searches, respectively under FISA, to address international movements of targets. A new subsection 105(e)(4) would be added to FISA, providing, "An order issued under this section shall remain in force during the authorized period of surveillance notwithstanding the absence of the target from the United States, unless the Government files a motion to extinguish the order and the court grants the motion." Similarly, a new subsection 304(d)(4) would be added to FISA, stating, "An order issued under this section shall remain in force during the authorized period of physical search notwithstanding the absence of the target from the United States, unless the Government files a motion to extinguish the order and the court grants the motion." Conforming Amendment to Table of Contents of FISA Sec. 10 of S. 3931 , Sec. 210 of S. 3929 , would make conforming amendments to the table of contents of FISA, to reflect the replacement of the current Section 102 of FISA with a new Section 102; the repeal of the wartime authorities under FISA, Sections 111, 309, and 404; and the creation of a new Title VII of FISA and redesignation of the current Title VII as Title VIII of FISA.

In the wake of disclosures related to the National Security Agency's Terrorism Surveillance Program (TSP), congressional attention has been focused on issues regarding authorization, review, and oversight of electronic surveillance programs designed to acquire foreign intelligence information or to address international terrorism. A number of legislative approaches were considered in the 109th Congress, and three related bills have been introduced to date in the 110th Congress: H.R. 11, S. 187, and S. 139. In a January 17, 2007, letter to Chairman Leahy and Senator Specter of the Senate Judiciary Committee, Attorney General Gonzales advised them that, on January 10, 2007, a Foreign Intelligence Surveillance Court (FISC) judge "issued orders authorizing the Government to target for collection international communications into or out of the United States where there is probable cause to believe that one of the communicants is a member or agent of al Qaeda or an associated terrorist organization." In light of these orders, which "will allow the necessary speed and agility," he stated that all surveillance previously occurring under the TSP will now be conducted subject to the approval of the FISC. He indicated further that the President has determined not to reauthorize the TSP when the current authorization expires. Among the foreign intelligence surveillance bills introduced in the 109th Congress were S. 3931, the Terrorist Surveillance Act of 2006, and S. 3929, the Terrorist Tracking, Identification, and Prosecution Act of 2006, Title II of which parallels S. 3931. The bills would create a new Title VII of the Foreign Intelligence Surveillance Act of 1978, as amended (FISA), 50 U.S.C. § 1801 et seq., to address electronic surveillance programs. In addition, the measures would amend other provisions of FISA dealing with electronic surveillance without a warrant pursuant to an Attorney General certification, applications for a Foreign Intelligence Surveillance Court orders authorizing electronic surveillance for foreign intelligence purposes, the contents of such orders, emergency electronic surveillance under FISA, limitations on liability for those who aid the federal government in connection with electronic surveillance to obtain foreign intelligence information, and applicable congressional oversight. The bills would repeal the current wartime authorities for electronic surveillance without a warrant following a congressional declaration of war. Changes would be made to the FISA definitions of "electronic surveillance" and "agent of a foreign power," among others. Other provisions would modify the criminal provisions of FISA and the exclusivity clause 18 U.S.C. § 2511(2)(f). Still other provisions amend FISA to address those who engage in the development or proliferation of weapons of mass destruction and to accommodate the international movements of targets of electronic surveillance under FISA. This report discusses the provisions of S. 3931 and Title II of S. 3929, and notes the changes to existing law that these measures would make if enacted. The 110th Congress may choose to consider similar or different legislative approaches to these issues, or to forego legislation in light of the FISC orders and the anticipated termination of the TSP, while continuing congressional oversight. This report will not be updated.

Introduction After over two years of deliberations, spanning the 112 th and 113 th Congresses, the Agricultural Act of 2014 (the "2014 farm bill") was enacted on February 7, 2014. Within this omnibus reauthorization of dozens of agricultural and nutrition statutes, the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) was reauthorized. While the reauthorization maintained the vast majority of prior law eligibility and benefit calculation policies, the new law does change the impact of the Low Income Home Energy Assistance Program (LIHEAP) in the calculation of SNAP monthly benefit amounts. Under prior law, SNAP recipients who also receive benefits from LIHEAP may have received increased SNAP benefits, no matter the amount of LIHEAP received. Under the 2014 farm bill, LIHEAP can only impact a household's benefit if a household receives more than $20 a year. This policy contained in the farm bill conference agreement follows similar changes in the Senate- and House-passed bills, with the Senate passing a $10 threshold and the House passing a $20 threshold. Because SNAP benefits are 100% federally funded and because SNAP is an open-ended entitlement, policy changes to benefit amounts or eligibility can generate substantial changes in spending. The Congressional Budget Office (CBO) estimated that this LIHEAP-related change included in the 2014 farm bill would reduce SNAP spending by approximately $8.6 billion over the 10-year budget window of FY2014-FY2023. (Although this change is similar to the House-passed proposal, it is estimated to impact spending slightly less due to the timing of implementation. ) Throughout the formulation of the new farm bill, reauthorization proposals focused on deficit reduction as well as agricultural program reforms. At issue throughout the process was whether and/or to what extent a reauthorization of SNAP should reduce program spending, affect eligibility, or affect benefit amounts. Supporters of the changes to LIHEAP's treatment in SNAP have framed it as a policy to improve SNAP integrity, assuring that LIHEAP is treated uniformly across all states and according to congressional intent. Detractors argue that ending the so-called "Heat and Eat" practice reduces benefits for those in need. In addition to the significance of this provision for the farm bill's cost estimate, the newly enacted policy is complex, and it can be difficult to untangle how the farm bill change would work and which states and households may be affected. This report provides prior law background on the benefit amount interactions between SNAP and LIHEAP, an explanation of the 2014 farm bill change, as well as the potential impact of this change on households and states' administration of SNAP. For further information on the farm bill and SNAP in general, please see CRS Report R43076, The 2014 Farm Bill (P.L. 113-79): Summary and Side-by-Side , coordinated by [author name scrubbed] CRS Report R43332, Reauthorization of SNAP and Other Nutrition Programs in the Next Farm Bill: Issues for the 113 th Congress , by [author name scrubbed] CRS Report R42353, Domestic Food Assistance: Summary of Programs CRS Report R42505, Supplemental Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits SNAP Benefit Calculation, Prior Law, and the 2014 Farm Bill Brief Overview of SNAP Benefit Calculation8 SNAP benefits are a function of a household's size, its net (counted) monthly income, and inflation-indexed maximum monthly benefit levels (in some cases, adjusted for geographic location). An eligible household's net income is determined (i.e., the deductions noted earlier for judging eligibility are subtracted from gross income), its maximum benefit level is established, and a benefit is calculated by subtracting its expected contribution (by law, 30% of its net income) from its maximum allotment. This equation is illustrated in the first row of Figure 1 . The calculation for a hypothetical three-person household in the 48 states with a net income of $400 is shown in the second row of Figure 1 . The current FY2014 maximum three-person benefit in the 48 states (and DC) is $497. Subtract from that maximum benefit, 30% of the household's net income. Thus, a three-person household in one of the 48 states with $400 in counted net income (after deductions) would receive a monthly allotment of $377 in FY2014. A three-person household with no counted/net income would receive the maximum monthly benefit. LIHEAP's Role in SNAP Deductions and Benefit Calculation In most states, SNAP programs can use LIHEAP payments as proof that households have incurred heating and cooling costs. Under prior law, if a SNAP household received a LIHEAP payment in any amount , then that household could receive a higher SNAP benefit than if the household had not received LIHEAP (assuming they did not document heating and cooling costs in some other way). Under the 2014 farm bill, using LIHEAP to document heating and cooling costs is limited to payments of more than $20. Figure 2 depicts an overview of LIHEAP's role in the SNAP benefit calculation, namely that receiving such energy assistance can result in a larger monthly SNAP benefit. Under the 2014 farm bill's change, it will take greater than $20 in assistance for LIHEAP to have any impact. The discussion after Figure 2 elaborates on the definitions of various deductions used in calculating SNAP benefits, potentially including LIHEAP receipt, and how they interact in the benefit calculation process. As shown earlier in Figure 1 , the amount of SNAP benefits that an eligible household receives is based, in part, on the maximum benefit and also in part on the household's net income. The SNAP agency computes net monthly income by subtracting certain "deductions" from a household's basic (or gross) monthly income. This calculation is based on the recognition that not all of a household's income is available for food purchases. Thus, a standard portion of income, plus amounts that represent costs such as dependent care expenses or high non-food living expenses, are deducted from the gross income. For households without an elderly or disabled member, net monthly income equals gross monthly income minus the following deductions, if applicable: Standard deduction: A "standard" monthly deduction that varies by household size and is indexed for inflation. Every applicant household gets this deduction; Earned income deduction: 20% of any earned income, in recognition of taxes and work expenses; Child support deduction: Any amounts paid out as legally obligated child support; Dependent care deduction: Out-of-pocket dependent care expenses, when related to work or training; and Excess shelter deduction: The amount of shelter expenses (including utility costs, which states may standardize with a "standard utility allowance" (SUA) figure representing average state costs) that exceed 50% of net income after all other deductions. This deduction is capped for households that do not contain an elderly or disabled member. 2014 FARM BILL NOTE: Under prior law, households that receive LIHEAP could automatically qualify for a higher SUA, no matter the amount of LIHEAP received . The higher SUA is based on the assumption that households incur expenses for heating and cooling. Under the 2014 farm bill, without receipt of LIHEAP over $20 per year, households must document heating/cooling expenses another way or risk a reduction from what their benefit amount had been. For households with an elderly or disabled member, net monthly income equals gross monthly income minus: The same standard , child support , earned income , and dependent care deductions noted above; Any out-of-pocket medical expenses (other than those for special diets) that are incurred by an elderly or disabled household member, to the extent they exceed a threshold of $35 a month; and An uncapped excess shelter deduction , to the extent such expenses exceed 50% of counted income after all other deductions; 2014 FARM BILL NOTE: Because the excess shelter deduction is uncapped for households with elderly or disabled members, the change to LIHEAP in SNAP benefit calculation has the potential to make a larger difference for these households. In understanding the role of LIHEAP in benefit calculation, it is key to note that a standard utility allowance (SUA) is not something tangible; instead, it is a number that states use in place of gathering all of an applicant's utility cost and usage information. The methodology and the amounts of an SUA vary by state, and many states have several different utility allowances based upon whether a household incurs heating/cooling costs or not. An SUA often "tips the scale" toward enabling an applicant household to qualify for an excess shelter deduction, which in many cases will result in an increased monthly benefit. Background on LIHEAP LIHEAP is a formula grant program under which the federal government gives annual grants to states, tribes, and territories (collectively referred to in this report as "states") to operate home energy assistance programs for low-income households. States may use funds to help eligible households pay for heating and cooling costs, for crisis assistance, and to weatherize their homes. Both renters and homeowners are eligible for LIHEAP. Federal LIHEAP requirements are minimal and leave most important program decisions to the states, including eligibility guidelines, types of assistance provided, and benefit levels. Regarding eligibility , states may set maximum LIHEAP eligibility for households up to 150% of the federal poverty income guidelines (or, if greater, 60% of the state median income), but they may not go below 110% of the poverty guidelines. States may also choose to make eligible for LIHEAP assistance any household of which at least one member is a recipient of Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), benefits through the Supplemental Nutrition Assistance Program (SNAP) , or certain needs-tested veterans' programs. In terms of benefits , states decide the types of assistance that households receive and the amount. For example, while all states provide heating assistance, only a portion of states provide assistance for cooling. The amount of benefits also varies; in FY2008, the most recent year for which information is available from the Department of Health and Human Services (HHS), the average annual LIHEAP benefit for heating assistance was $293 with a range from $73 to $1,172. HHS does not have data indicating the number of households receiving payments at or below $20. Unlike SNAP, LIHEAP is not an open-ended entitlement, and funding is not sufficient to assist every household that is eligible for the program. In FY2009, 7.4 million households received heating and/or winter crisis assistance and 900,000 received cooling assistance. The number of households assisted may now be lower. FY2009 was a year in which states received a total of $5.1 billion for LIHEAP, compared to about $3.4 billion in FY2014. What is "Heat and Eat"? "Heat and Eat" is a phrase that the low-income and hunger advocacy community has used to describe state and program policies that leverage nominal (as low as 10 cents) LIHEAP payments into an increase in households' SNAP benefits that is larger than the initial LIHEAP payment. In June 2012, the U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) surveyed states and determined that 16 states (including the District of Columbia) had implemented or would soon implement "Heat and Eat," and one state provided the standard utility allowance based on LIHEAP application (see Text Box , below). Part of the rationale for the nominal LIHEAP benefits (vs. more substantive benefits) is that LIHEAP is not an entitlement, and states may not be able to assist every household that is eligible for the program, particularly because the statute requires that states prioritize "households with the highest home energy costs or needs in relation to household income." On the other hand, SNAP is open-ended and the benefits are financed 100% by the federal government, so "Heat and Eat" policies are a net gain for states in times of limited state and LIHEAP resources. Providing increased food assistance would then appear to free up more income for other household expenses. Are Recipients of These Nominal Payments Ineligible for LIHEAP? If states adhere to LIHEAP law, then only households that are eligible for LIHEAP qualify for LIHEAP benefits. This involves two determinations: (1) household eligibility based on income or enrollment in another means-tested program (including SNAP), referred to as categorical eligibility and (2) use of LIHEAP funds for a statutory purpose. Regarding the first determination, there are no separate eligibility criteria for recipients of nominal LIHEAP benefits. Therefore, a household would not receive LIHEAP benefits unless they are eligible for the program based on income or categorical eligibility. In states that use receipt of SNAP to determine eligibility, SNAP participants are eligible for LIHEAP. Otherwise, households would have to meet LIHEAP income eligibility requirements. Regarding the second determination, the LIHEAP statute provides that states may use LIHEAP funds to provide direct assistance to households in several ways: to help meet "home energy costs" (defined as heating or cooling), to assist in energy crisis situations, for home weatherization, or for services to reduce the need for energy assistance such as needs assessment or counseling on how to reduce energy consumption. CRS is not aware of the way in which states with nominal LIHEAP payments determine whether households have need of LIHEAP for the statutory purposes. Payments to households that are not provided for one of these purposes could be inappropriate. Potential Implementation and Impact of This Change At this juncture, much is unknown about the implementation and impact of this change; much will depend on USDA-FNS and states' implementation. However, there are some things that can be said based on SNAP benefit calculation rules and other available information. First, this change is expected to affect some households' SNAP benefit amounts, but it will not affect households' eligibility for SNAP benefits. Second, this change is expected to affect states that have implemented "Heat and Eat" policies. Third, within the provisions of the new law, however, states and households may have some options to reduce the impact of this change. Will This Change Affect Households' Eligibility for SNAP Benefits? As noted above, subject to USDA-FNS's implementation of the new law, it is not expected that this change will affect households' eligibility for benefits. In other words, if nothing else changed in a household's economic profile, but they had received a 10-cent LIHEAP payment, the household's benefit might be reduced when the household reapplies, though the household would not stop receiving SNAP. This is the case because the excess shelter deduction—for which LIHEAP plays a role—is calculated after eligibility has been determined. When Will States Reduce Affected Households' Benefits? Three aspects of "when" are specified in the text of the legislation (Section 4006 of P.L. 113-79 ): 1. Provision takes effect 30 days after enactment: The law says that the amendments in Section 4006 take effect 30 days after enactment of the law. The law was enacted on February 7, 2014. However, this must be read in conjunction with two other aspects of the law. 2. Provision applies to certification periods after the effective date: SNAP households are certified to receive benefits for a period of time, and have to follow state rules for reporting changes, such as changes in household income or size of the household. The period of certification is based on state choices within a federal framework. The new law indicates that when a new SNAP household applies for benefits, if that is 30 days after the law's enactment, the benefits will be calculated based on the $20 threshold rule, but for households already receiving SNAP it will be only when they apply to recertify that their benefit calculation will be subject to the $20 rule. This recertification scenario, though, is subject to a state's decision to delay implementation. 3. States have the option to delay implementation for current recipients: The law gives states the option to delay implementation or reduce its impact for as long as five months after the law takes effect. The specifics of this state option—how USDA-FNS will implement it and how the states will implement it—are not known at this time. Taken together, this means that for new SNAP applicants , the new rules should take effect 30 days after February 7, 2014. However, for current SNAP recipients , the exact date that they are subject to the new rules (and possible benefit reduction) will depend both on (1) when their current certification period ends, and (2) whether and how their state delays implementation. Can States or Households Prevent This Change in Law from Reducing Benefit Amounts? In addition to the option to delay implementation, a state continues to have the option to issue LIHEAP payments greater than $20. Because of the budgetary constraints associated with LIHEAP funds, it seems unlikely that a state would give more than $20 to every household that had been receiving less than $20, but it is an option that is open to states. If a household can document heating or cooling costs in another way, then the higher SUA can continue to be included in the household's excess shelter deduction even if the household does not receive more than $20 of LIHEAP assistance. Applicants would have to be aware of the need to present utility bills or other documentation. How Many Will Be Affected, By How Much? In their cost estimate of the conference agreement, CBO did not release estimates of the number of SNAP-recipient households that would be affected by Section 4006 of the Agricultural Act of 2014. In September 2013, CBO estimated that the House-passed $20-threshold provision in H.R. 3102 would result in 850,000 SNAP-recipient households receiving benefits reduced by an average of $90 per household per month; however, due to later implementation timing of the new law it is expected that fewer will be affected than forecasted in H.R. 3102 . A policy change could result in a reduction of benefits for some households that either currently receive the excess shelter deduction or receive a higher excess shelter deduction due to LIHEAP payments that are lower than the $20 threshold. The total number will also depend on whether households are able to document their utility costs in other ways. Other Impacts for Program Administration Modifying the treatment of LIHEAP in SNAP might create changes in the program application process, but it is difficult to know just what these might be. The "Heat and Eat" states would appear to no longer have any reason to issue LIHEAP payments below the enacted threshold requirement of $20 to SNAP participants, since such sums would neither substantially assist with utility costs nor generate larger SNAP benefits. In addition, compared to a $1 payment, a payment greater than $20 to multiple recipients could strain state LIHEAP budgets. Further, advocates contend that presenting LIHEAP documentation is an administrative simplification that ensures that eligible households are getting all of the deductions—or at least credit for all the deductions—that such households are due, especially in "Heat and Eat" states where the LIHEAP payment may be communicated to SNAP computer systems through a data-matching process. In the absence of the "Heat and Eat" practice, states could institute other systems or practices to ensure that households are getting all of the deductions for which they qualify.

The Agricultural Act of 2014 ("the 2014 farm bill") was enacted on February 7, 2014. Included in the law's reauthorization of the Supplemental Nutrition Assistance Program (SNAP) is a change to how Low Income Home Energy Assistance Program (LIHEAP) payments are treated in the calculation of SNAP benefits. This change is expected to reduce some households' monthly benefit amounts, particularly households in states that have adopted the so-called "Heat and Eat" practice, where states leverage a nominal LIHEAP benefit into a larger SNAP benefit. The Congressional Budget Office (CBO) estimated that this change will reduce SNAP spending by approximately $8.6 billion over the 10-year budget window of FY2014-FY2023. Based on CBO's May 2013 baseline, this is approximately a 1% reduction in forecasted program spending over the 10-year period. SNAP law provides for both eligibility rules and, for eligible households, benefit calculation rules. The SNAP statute allows for certain deductions from income when calculating a household's monthly benefit amount; one of these deductions is the "excess shelter deduction," which incorporates utility costs. If a family incurs heating and/or cooling expenses, this deduction from income can be higher than for households not incurring these expenses, allowing for a higher SNAP benefit for the household. One way households can document heating and cooling expenses is by showing receipt of LIHEAP assistance. Under prior law, any amount of LIHEAP assistance could increase benefit amounts; under the 2014 farm bill change, LIHEAP assistance will have to be greater than $20 per year in order to be included in a household's benefit calculation. In SNAP benefit calculation, a LIHEAP payment documents that the household has incurred heating and cooling costs. This documentation triggers a standard utility allowance (SUA), a figure intended to represent typical state-specific utility costs, which enters into the SNAP benefit calculation equation. (Most states use an SUA, but some opt not to and use only actual utility costs.) Unless the household is receiving the maximum SNAP benefit already, a household's monthly benefit can increase if the inclusion of an SUA results in an excess shelter deduction. Proof of heating or cooling expenses will trigger a higher SUA than proof of only telephone or water expenses. The higher SUA then gets factored into the calculation of a household's excess shelter deduction. In many cases, the higher the excess shelter deduction, the higher the monthly SNAP benefit will be. The 2014 farm bill's change is expected to impact the "Heat and Eat" practice. Approximately 16 states provide nominal LIHEAP benefits through a "Heat and Eat" practice. "Heat and Eat" is a phrase that the low-income and anti-hunger advocacy community has used to describe state and program policies that leverage nominal (as little as 10 cents) LIHEAP payments into an increase in households' SNAP benefits that is larger than the initial LIHEAP payment. Also, a 17th state allows SNAP applicants to benefit from an SUA if the household applies for LIHEAP. Thus, the farm bill is expected to change 17 states' administration of SNAP and is expected to reduce some households' benefit amounts. The 2014 farm bill's change in the law will require more than $20 a year in LIHEAP assistance in order to trigger the potential increase in benefits. The exact implementation timeline, details, and share of households affected will depend upon the U.S. Department of Agriculture Food and Nutrition Service's (USDA-FNS) interpretation and implementation of the policy, the options states choose in their implementation, and the share of households that will be able to document their heating and cooling expenses in other ways. Congress's final decision to change the law came after the passage of related proposals in both the House and the Senate. The 113th Congress's Senate-passed farm bill (S. 954) would have set a $10 threshold for LIHEAP payments to confer this potential advantage. The House-passed farm bill (H.R. 2642 combined with H.R. 3102) included the $20 threshold.

Introduction The widely reported increase in federal contract dollars awarded to Alaska Native Corporations (ANCs) and their subsidiaries in recent years has generated congressional and public interest in the legal authorities governing contracting with these entities. Of particular interest are the authorities creating the alleged "special procurement advantages" that ANC subsidiaries enjoy in contracting under the Small Business Administration's Minority Small Business and Capital Ownership Development Program (commonly known as the 8(a) Program). According to some reports, federal contract dollars awarded to ANCs and their subsidiaries increased by 916% between FY2000 and FY2008, going from $508.4 million to $5.2 billion. The dollars awarded to ANC-owned firms through the 8(a) Program, in particular, reportedly tripled between FY2004 ($1.1 billion) and FY2008 ($3.9 billion). Critics are concerned about the impact of these increases on other minority-owned businesses participating in the 8(a) Program, as well as the potential for fraud, waste, and abuse when agencies make sole-source awards to ANCs or their subsidiaries. However, supporters of contracting programs for ANCs point out that, even with the recent increases, contracting with ANCs and their subsidiaries represents a small percentage of federal contract dollars. They also note that profits from federal contracts are vital to improving the economic well-being of Alaska Natives. Members of the 112 th Congress have introduced legislation ( H.R. 598 , S. 236 ) that would generally subject ANC-owned firms participating in the 8(a) Program to the same treatment as individually owned firms. Among other things, this legislation would preclude ANC-owned firms from receiving sole-source awards valued in excess of $4 million ($6.5 million for manufacturing contracts) under the authority of Section 8(a) of the Small Business Act. Also, in 2011, SBA promulgated regulations that seek to address alleged issues regarding ANCs' participation in the 8(a) Program (e.g., requiring annual reporting on ANCs' benefits to Alaska Natives). The History of Contracting Programs for ANCs Alaska Native Claims Settlement Act and ANCs The Small Business Administration's (SBA's) 8(a) minority contracting program slightly predates the creation of Alaska Native Corporations. The 8(a) minority contracting program dates from the late 1960s, when it was created administratively. The SBA considered Indian tribes eligible for the 8(a) minority contracting program, as indicated by a September 1970 SBA pamphlet encouraging Indian tribes and individuals to participate in the 8(a) Program. Creation of Alaska Native Corporations ANCs were created under the authority of the Alaska Native Claims Settlement Act (ANCSA), enacted in 1971 to settle Alaska Natives' aboriginal land claims to most of Alaska. Congress's stated intent in passing ANCSA—shared by Alaska Native organizations and the state of Alaska—was to settle the claims without establishing any permanent racially defined institutions ... without creating a reservation system or lengthy wardship or trusteeship, and without adding to the categories of property and institutions enjoying special tax privileges. To carry out this intention, Congress authorized Native corporations, not tribes, to receive the lands and monies awarded in the settlement. Unlike Indian trust lands, the corporations' lands would be held in fee simple and could be developed without federal approval. Congress intended ANCs to be vehicles for the economic development of Alaska Natives. The conference report on ANCSA stated that the Regional Corporations shall be organized as business for profit corporations…. [T]he investment functions to be carried out by the [state-wide] Alaska Native Investment Corporation [under the Senate version] have been assigned ... to the Regional Corporations. The intended functions of this state-wide Investment Corporation, according to the earlier Senate committee report on its bill, were to: conduct business for profit activities and to provide a long-range return through dividends to its Native stockholders. The Investment Corporation thus is intended to act as a prudent businessman would, and to administer the Natives' funds with the object of maximizing the value of their stock and their future unrestricted income. ANCSA created four types of ANCs, all to be incorporated under state law: 12 regional corporations, based on the regions of 12 specified Alaska Native associations, covering the entire state (plus a 13 th regional corporation for Alaska Natives permanently residing outside Alaska); village corporations, for Alaska Native communities with populations of 25 or more Natives; group corporations, for Alaska Native communities with populations of fewer than 25 Natives in which Natives constituted a majority; and urban corporations, for urban Alaska Native communities. An Alaska Native could become a voting shareholder in both the local regional corporation and the local village, group, or urban corporation. As compensation for settling the land claims, ANCSA provided for the conveyance of some 40 million acres (including subsurface rights) and $962.5 million to the ANCs, chiefly to the 12 regional corporations and the village corporations. The settlement lands were to be divided among the 12 regional corporations based on the acreage of their regions and among the village corporations based chiefly on their populations. Group and urban corporations were to receive a set number of acres apiece. (Conveyance of title to the ANCs is the responsibility of the Bureau of Land Management, which reported in its FY2013 budget justifications that 59% of the lands to be conveyed had been surveyed and patented to the ANCs.) The settlement funds were to be paid out over a number of years and divided among the regional corporations (including the 13 th corporation) based on their population. Each regional corporation was to distribute at least half of its share of these funds to the village corporations in its region. As noted above, the ANCs were to hold their ANCSA lands in private fee title, not in the trust title usual for Indian lands, and subject to federal, state, and local taxation in specified circumstances. The regional corporations were to operate as for-profit entities, and the village corporations as either for-profit or non-profit entities. Their revenues from investment of their settlement funds were to be subject to taxation. Definition of ANCs as Tribes The Indian Self-Determination and Education Assistance Act of 1975 Congress has taken several steps to assist ANCs. An important step in relation to the 8(a) Program came in 1975, when Congress included regional and village ANCs in the definition of "Indian tribe" in a major Indian law, the Indian Self-Determination and Education Assistance Act of 1975: "Indian tribe" means any Indian tribe, band, nation, or other organized group or community, including any Alaska Native village or regional or village corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act (85 Stat. 688) which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians. 8(a) Definition of Tribes This 1975 definition of "Indian tribe" was used in two later amendments to the Small Business Act. First, in 1978, the definition was incorporated by reference in an amendment specifying that small businesses wholly owned by Indian tribes were eligible for the loan program implemented under the authority of Section 7(a) of the act. Second, 1986 amendments to the Small Business Act used the language of the 1975 definition when making "economically disadvantaged" Indian tribes and ANCs eligible for the 8(a) Program. These 1978 and 1986 amendments to the Small Business Act were each added after Indian tribes complained about SBA officials' varying opinions as to whether Indian tribes were eligible for the 7(a) and 8(a) Programs. ANCs Deemed Economically Disadvantaged The 1986 amendments meant that tribes and ANCs still had to prove they were economically disadvantaged to be eligible for the 8(a) Program. In 1988, ANCSA was amended to specify that "Native Corporations" (ANCs) were to be considered "minority business enterprises" for all purposes of federal law. Designation as minority business enterprises did not, however, lead the SBA to deem ANCs to be economically as well as socially disadvantaged. According to 1991 testimony of the Alaska Federation of Natives, [w]hen the ANCSA amendments of 1987 [P.L. 100-241] were being legislated, the parties involved agreed to include an amendment that would make it clear that Alaska Native corporations were eligible for SBA minority programs. At that time, congressional staff relied on the fact that "disadvantaged business enterprises" (called DBE's), were a subset of "minority business enterprises" (called MBE's), and would thus be covered by the explicit inclusion of Native corporations and specified affiliates as MBE's.... Since then, we have found that SBA is distinguishing disadvantaged business enterprises from minority business enterprises, saying that a statutory definition as an MBE does not qualify Native corporations as DBE's for purposes of SBA programs. In 1992, Congress further amended ANCSA to clarify that Native Corporations were to be considered "economically disadvantaged" for all purposes of federal law. Since 1988, according to Government Accountability Office (GAO) figures, ANCs have consistently increased their involvement in the 8(a) Program, as measured by the number of ANCs owning subsidiaries that participate in the 8(a) Program. ANCs' Economic Performance ANCs were to be ANCSA's vehicles—the "engines," as it were—for the economic development of Alaska Natives. However, the variation among regions and villages in acreage and population meant that ANCs differed widely in their shares of the $962.5 million settlement fund and the 40 million acres to be conveyed. The 12 land-based regional corporations, which together cover the entire state of Alaska, also varied not only in the size of their regions but in their regions' economic resources and activities. Likewise, the village, group, and urban corporations, which are scattered unevenly across the 12 regions, varied in their degree of isolation and the economic activity of their surroundings. Hence, ANCs differed widely in their initial ANCSA funding, the land-based resources they received, and their opportunities for economic development. Since 1971, the ANCs have also differed widely in their business success, growth, income, and losses, but an overall pattern of loss, recovery, and gradual expansion has been suggested by several observers. Loss In the 1970s, ANCs organized themselves, made their land selections, and received their ANCSA payments. The last major ANCSA payments to regional ANCs were made in 1980. In the 1970s and 1980s, the ANCs invested in a wide variety of business operations, such as hotels, seafood processing, shipping, oilfield services, and construction, as well as in natural resources. Their businesses and investments were chiefly in Alaska. However, as a group, regional ANCs lost substantial amounts of money in the period of 1971-1985, especially in non-resource business operations. "The [regional] corporations altogether lost money on business operations every year except 1974 and 1985," according to economist Steve Colt. The same analyst later stated, the consolidated financial performance of the Alaska Native corporations over their first two decades was surprisingly poor. The twelve regional corporations lost about $380 million—more than three quarters of their original cash endowment—in business operations between 1973 and 1993. At the same time, the ANCs struggled with the significant financial costs of litigation to determine how ANCSA was to be applied and interpreted. There was "heavy litigation" over land selections, Native village and group eligibility, individual Natives' enrollment, ANC elections and corporate governance, revenue-sharing among regional ANCs and with village ANCs, and other issues. During this period, ANCs reportedly had little or no involvement in the SBA's 8(a) Program. Recovery What allowed the ANCs to recover, apparently, was their brief, unique opportunity to sell net operating losses (NOLs) to other U.S. companies between 1986 and 1988. The ANCs' sale of NOLs provided an estimated $410 million for regional ANCs and $500 million for village ANCs. Congress created the ANCs' window of opportunity for NOL sales in 1986 when it added a provision to the Internal Revenue Code that disallowed sales of NOLs by any corporation except ANCs. Two years later Congress repealed the ANC exception. "For the regional corporations as a group, NOL sales proceeds provided a cash infusion equal (in real dollars) to two thirds of the original ANCSA payments." ANC income from NOL sales "essentially recapitalized many of the struggling regional corporations, and put them in position to benefit from the economic boom that began in the early 1990s." Expansion Given the opportunity to start over, ANCs apparently selected investments more wisely and emphasized diversification, especially in businesses outside Alaska, although they also continued "to do what they do well." ANCs became active and made profitable investments in tourism (including hotels), oilfield services, communications, catering, real estate, construction, and other businesses, as well as in natural resources (timber and mining). In addition, by about 1992, litigation costs were diminishing. Some ANCs also became active in federal contracting, especially through the SBA's 8(a) Program. As noted above, the first ANC 8(a) contract was awarded in the late 1980s. However, the 8(a) certification process was considered by many ANCs "arduous" until the 1992 amendment to ANCSA, discussed above, that deemed ANCs economically disadvantaged for purposes of the SBA's 8(a) Program and other federal programs. By 1992, an Alaska Business article had mentioned two regional ANCs as having 8(a) contracts. By 1997, two regional ANCs, Aleut Corporation and Chugach Alaska Corporation, got the bulk of their revenues and profits from 8(a) contracts. A chart in a 2006 GAO report on contracting with ANCs shows a gradual but consistent increase in the number of ANCs (of all types) with 8(a) subsidiaries and the total number of such subsidiaries in the 8(a) Program, from very low numbers in 1988 to a total of 49 ANCs and 154 subsidiaries in December 2005. According to GAO, as of 2005, 12 of the 13 regional ANCs had 8(a) subsidiaries, as did 33 village ANCs and 4 urban ANCs (out of a total of 182 village, urban, and group ANCs). Legal Authorities Governing Contracting with ANCs Various authorities presently govern contracting between federal agencies and ANCs or ANC-owned firms. These include (1) the general contracting authorities, (2) the general small business authorities, (3) Section 8(a) of the Small Business Act, (4) authorities pertaining to Native Americans, and (5) various appropriations riders. These authorities address the award of contracts, as well as related issues. General Contracting Authorities The Armed Services Procurement Act of 1947 and the Federal Property and Administrative Services Act of 1949, as amended, give defense and civilian agencies, respectively, broad authority to contract for goods and services. So long as they comply with statutory and regulatory requirements governing solicitation of bids or offers, competition in contracting, and similar matters, agencies may generally make awards to any entity that happens to be the lowest qualified responsible bidder or offeror. This includes ANCs and their subsidiaries. Moreover, agencies may make sole-source awards to ANCs or ANC-owned firms under the general contracting authorities in the same circumstances in which they can make sole-source awards to other entities. Such circumstances exist when 1. only one source can supply the goods or services, 2. there are unusual and compelling circumstances, 3. the agency seeks to maintain the industrial base, 4. international agreements require the agency to award the contract to a particular entity, 5. a statute authorizes non-competitive awards or the agency is acquiring brand-name commercial items for resale, 6. considerations of national security keep the agency from advertising its requirements, or 7. a particular award is necessary in the public interest. Contracting officers must generally justify such sole-source awards in writing and obtain approval of these justifications from their superiors. They must also generally issue a notice of their intent to make a sole-source award prior to awarding the contract. The general contracting authorities may, in fact, be necessary to make awards to ANCs themselves, as opposed to their subsidiaries or ANC-owned firms, given that some ANCs may not qualify as "small" under the size standards applicable to contracts awarded under the authority of the Small Business Act. The general contracting authorities also do not require that entities be for-profit to receive an award, unlike the small business authorities. Not all ANCs are for-profit, and small non-profit ANCs could receive awards under the general contracting authorities when they could not receive awards under the small business authorities. General Small Business Authorities Contracts could also be awarded to small ANCs or ANC-owned firms under the general small business authorities. Section 15 of the Small Business Act of 1958, in conjunction with Sections 2711 and 2723 of the Competition in Contracting Act of 1984, provides agencies with special authorities for contracting with small businesses. Under these authorities, agencies may "set aside" contracts for small businesses—by conducting competitions in which only they can compete—when certain conditions are met. These set-asides can be total or partial, encompassing the entire acquisition or a severable segment of it. Agencies may also make sole-source awards to small businesses when one of the seven circumstances authorizing noncompetitive awards under the general contracting authorities exist, although such awards are made under the general contracting authorities and not the general small business authorities. They are thus subject to the notice, justification, and approval requirements discussed previously. One of the alleged "special provisions" governing contracting with ANCs, discussed below, arguably assists ANC-owned firms in qualifying as "small" for purposes of contracting under the general small business authorities. While all affiliations between businesses, or relationships allowing one party control or the power of control over another, count when the SBA makes size determinations, certain affiliations with the parent ANC or its subsidiaries are generally excluded when the SBA determines the size of an ANC-owned firm. Although the SBA is authorized to consider these affiliations when not doing so results, or is likely to result, in an ANC-owned firm obtaining a "substantial unfair competitive advantage within an industry category," the SBA and agencies exercising delegated authority on its behalf reportedly seldom exercise this authority. In contrast, ANC-owned firms are not exempt from the requirement that they be "businesses" for purposes of the Small Business Act, which means that they must be for-profit to be awarded contracts under the general small business authorities. They also must self-certify that they are "small," as measured by the size standards for the goods or services to be procured, when submitting bids or offers for contracts to be awarded under the general small business authorities. However, while there are potentially severe penalties for misrepresentation of size and other entities may generally protest firms' size, self-certifications are not necessarily closely scrutinized. SBA regulations provide that A contracting officer may accept a concern's self-certification as true for the particular procurement involved in the absence of a written protest by other offerors or other credible information which causes the contracting officer or SBA to question the size of the concern. Section 8(a) of the Small Business Act Agencies can also contract with ANC-owned firms, although not necessarily ANCs themselves, under the authority of Section 8(a) of the Small Business Act of 1958, as amended. Section 8(a) generally authorizes set-asides and sole-source awards to "socially and economically disadvantaged small business concerns," which include firms at least 51% owned and unconditionally controlled by ANCs, Indian tribes, Native Hawaiian Organizations (NHOs) or Community Development Corporations (CDCs). Contracts whose value is at or below the so-called "competitive threshold" ($4 million, $6.5 million for manufacturing contracts) may generally be awarded on a sole-source basis, without the competition among 8(a) firms that would result if the contract were set aside. Contracts whose value exceeds the competitive threshold, in contrast, generally must be set-aside for competitions in which all 8(a) firms may compete unless there is not a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers at a fair market price. See Figure 1 . However, agencies also have special authority to make sole-source awards to ANC- or other group-owned firms under Section 8(a) in circumstances when they could not make awards to individually owned 8(a) firms (e.g., when the contract exceeds the "competitive threshold," and there is a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers at a fair market price). Because this authority does not derive from the Competition in Contracting Act (CICA), such awards were not subject to the same requirements regarding justifications, approvals, and notices as other sole-source awards prior to enactment of the National Defense Authorization Act (NDAA) for FY2010. The NDAA for FY2010 changed this by requiring justifications, approvals, and notices for sole-source contracts in excess of $20 million (base plus all options) awarded under the authority of Section 8(a) similar to those required for sole-source contracts awarded under the general contracting authorities. However, justifications, approvals, and notices are still not required for sole-source contracts valued at between $4 million ($6.5 million for manufacturing contracts) and $20 million awarded under the authority of Section 8(a). While agency discretion in determining whether to procure particular goods or services under the authority of Section 8 (a) is fairly broad, detailed statutory and regulatory requirements govern firms' eligibility for and participation in the 8(a) Program. The places where the statutory or regulatory requirements pertaining to contracting with ANC-owned firms differ from the general 8(a) requirements have attracted the most scrutiny from those concerned about the alleged "special procurement advantages" of ANC-owned firms. These places are briefly summarized in Table 1 , while a separate report explains the general 8(a) requirements in more detail. ANC-owned firms are, however, subject to other requirements governing eligibility for and participation in the 8(a) Program, including requirements that they (1) be small under the SBA's size standards, (2) be businesses under the SBA's definition, (3) be unconditionally owned and substantially controlled by their owner (i.e., the ANC), (4) possess good character, (5) demonstrate potential for success, and (6) obtain increasing percentages of their income from non-8(a) sources in their final five years of participation in the 8(a) Program. ANC-owned firms must also apply to participate in the 8(a) Program like other firms. This application form is somewhat different from that used by individually owned firms, but requires similarly extensive supporting documentation concerning company personnel, corporate organization, financial status, and company operations. ANC-owned firms must also submit an "8(a) Annual Update" like other 8(a) firms. This update requires additional documentation much like that submitted with applications to the 8(a) Program. Careful review of this documentation could potentially disclose some of the alleged problems with ANC-owned 8(a) firms, such as joint ventures to which the ANC-owned firm contributes nothing beyond its eligibility for 8(a) contracts. However, a November 2008 GAO report questioned whether SBA's resources are adequate for thorough reviews of 8(a) firms, and a January 2012 GAO report opined that SBA "cannot implement" its new rules (discussed below) intended to strengthen 8(a) firms' role in any joint ventures using currently available information. Authorities in Native American Laws Several authorities governing contracting with ANCs and their subsidiaries are located in statutes and U.S. Code sections pertaining to Native Americans, rather than those pertaining to contracting or small business. These provisions create incentives for agencies to contract with ANCs or their subsidiaries by, for example, allowing contracts with "large" ANCs to count toward federal prime contractors' goals for subcontracting with small businesses. 5% "Subcontracting Bonus" Federal prime contractors are eligible for so-called "bonuses" equal to "5 percent of the amount paid, or to be paid, to a subcontractor" when they subcontract with ANCs or ANC-owned firms, among others. Congress authorized such bonuses in 1988, in part, because of concerns that federal prime contractors had less incentive to use Indian-owned subcontractors than other minority-owned subcontractors because of the geographical "remoteness of [Indian] reservation[s]." Congress also appropriated funds for the Department of Defense (DOD), in particular, to pay subcontracting bonuses. The amount appropriated remained constant at $8 million per year between FY1989 and FY2006, and was increased to $15 million per year during the 110 th Congress. Other agencies have not received similar appropriations to pay subcontracting bonuses, but have the same statutory authority to pay them that DOD has. To be eligible for a bonus, the prime contractor must use its best efforts to give Indian organizations and Indian-owned economic enterprises … the maximum practicable opportunity to participate in the subcontracts it awards to the fullest extent consistent with efficient performance of its contract. Contracting officers and contractors may generally rely on subcontractors' representations regarding their eligibility as Indian organizations or Indian-owned economic enterprises unless an interested party challenges their eligibility, or the contracting officer has independent reason to question it. Any challenges are referred to the Bureau of Indian Affairs for eligibility determinations. Credit Toward Prime Contractors' Subcontracting Goals Subcontracts awarded by federal prime contractors to ANCs or their subsidiaries count toward contractors' goals for subcontracting with small businesses and "small disadvantaged businesses" even if the ANC or ANC subsidiary is large or not certified as "disadvantaged": Subcontracts awarded to an ANC or an Indian tribe shall be counted towards the subcontracting goals for small business and small disadvantaged business (SDB) concerns regardless of the size or Small Business Administration certification status of the ANC or Indian tribe. Section 8(d) of the Small Business Act, as amended, requires federal agencies to negotiate subcontracting plans with the apparently successful bidder or offeror on eligible prime contracts prior to awarding the contract. These subcontracting plans establish goals for the value of subcontracts that prime contractors should award to small businesses and small disadvantaged businesses, among others. A contractor's failure to comply with its subcontracting plan constitutes a material breach of the contract, potentially allowing the agency to terminate the contractor for default. The contractor could also potentially be required to pay liquidated damages. Other firms must qualify as "small" under the SBA regulations for subcontracts with them to count toward contractors' goals for subcontracting with small businesses or small disadvantaged businesses (SDBs). Moreover, until October 3, 2008, other firms had to be certified SDBs for subcontracts with them to count toward contractors' goals. All 8(a) firms were deemed to be SDBs, but other firms at least 51% unconditionally owned and controlled by socially and economically disadvantaged individuals or groups could also obtain certification. Small Disadvantaged Businesses for Purposes of Transportation Contracts The same statute that allows subcontracts with large or uncertified ANCs or ANC affiliates to count for purposes of contractors' subcontracting goals for small businesses also enables large ANCs or ANC affiliates to qualify as "small disadvantaged businesses" for certain contracts funded by the Department of Transportation (DOT), provided that they obtain the necessary certifications. The Transportation Equity Act for the 21 st Century (TEA-21) originally required that not less than 10 percent of the amounts made available for the program under titles I, III, and V of this Act shall be expended with small business concerns owned and controlled by socially and economically disadvantaged individuals. However, later regulations, promulgated in response to court cases challenging the constitutionality of "quotas" for minority firms, construe "10 percent" as an "aspirational goal at the national level," which "does not authorize or require recipients to set overall or contract goals at the 10 percent level, or any other particular level, or to take any special administrative steps if their goals are above or below 10 percent." Allowing large ANCs and their affiliates to qualify as small disadvantaged businesses for purposes of DOT contracting goals is potentially significant for two reasons. First, "small business" arguably has a narrower meaning under TEA-21 than it does under the Small Business Act, which could render some non-ANC-owned firms that might otherwise qualify as "small" ineligible for the DOT program. Second, "small disadvantaged businesses" under TEA-21 include women-owned firms, which could place the collective interests of women-owned small businesses more directly at odds with those of ANC-owned firms than is the case when individual women-owned firms participate in the 8(a) Program or are designated as small disadvantaged businesses for SBA programs. Women are not among the groups presumed to be socially disadvantaged for purposes of SBA programs, and small businesses owned and controlled by women are eligible for such programs only when individual women owners prove by a preponderance of the evidence that they are socially disadvantaged. Appropriations Riders Allowing Direct Conversion of DOD Functions The Department of Defense (DOD) can contract out functions performed by government employees to ANCs or ANC-owned firms without going through the competitive sourcing process normally required under Office of Management and Budget (OMB) Circular A-76. OMB Circular A-76, along with its four attachments, generally sets forth guidelines and procedures for determining whether an activity should be performed in-house by the agency with government personnel or contracted-out to the private sector. Beginning in the early 1980s, a series of appropriations riders and permanent laws affected DOD's use of the A-76 process. While most of these enactments in some way limited DOD's ability to contract out functions using the A-76 process, one rider attached to every DOD appropriations act since 1989 has permitted DOD to avoid the A-76 process and its restrictions on outsourcing by contracting functions out to firms owned by ANCs, Indian tribes, or NHOs. The original version of this rider generally restricted outsourcing using the A-76 process, but exempted so-called "direct conversions" to "qualified firm[s] under 51 percent Native American ownership," among others. Such firms included those owned by ANCs, Indian tribes, or individual Native Americans. The 106 th Congress later made two modifications to this provision. First, it exempted direct conversions to "qualified firms" from requirements concerning federal employee comments and congressional notification codified in 10 U.S.C. §2461(b)-(c), as well as from the A-76 process codified in 10 U.S.C. §2461(a). Second, while it maintained the exemption for direct conversion to firms owned by ANCs and Indian tribes, it removed the exemption for direct conversions to firms owned by Native American individuals and replaced it with one for direct conversions to NHO-owned firms. The exemptions for direct conversions remained unchanged since the 106 th Congress. However, while these appropriations riders allowed DOD to avoid the A-76 process when contracting out functions to ANCs or ANC-owned firms, they did not authorize DOD to make noncompetitive awards to such entities. For this reason, DOD has used the authority to make sole-source awards above the competitive threshold to ANC-owned firms codified in Section 8(a) of the Small Business Act in conjunction with its authority under the appropriations riders. Legislative Activity in the 112th Congress Members of the 112 th Congress have introduced legislation ( H.R. 598 , S. 236 ) that would remove all the "special rules" for contracting with ANC-owned 8(a) firms described in Table 1 and subject ANC-owned firms to eligibility and other requirements like those to which individually owned 8(a) firms are subject. The proposed legislation would accomplish this, in part, by amending the Alaska Native Claims Settlement Act (ANCSA) so that ANCs are no longer deemed to be socially or economically disadvantaged for purposes of Sections 7(j) and 8(a) of the Small Business Act. It would also amend the definition of "Indian tribe" contained in Section 8(a)(13) of the Small Business Act so that ANCs no longer constitute "Indian tribes" for purposes of the 8(a) Program. By doing so, H.R. 598 and S. 236 would preclude ANCs from receiving sole source awards in excess of $4 million ($6.5 million for manufacturing contracts) under the authority of the Business Opportunity Development Reform Act (BODRA) of 1988. Section 602(a) of BODRA currently provides that the "competitive thresholds" contained in Section 8(a) of the Small Business Act do not apply to entities defined as "Indian tribes" in Section 8(a). Excluding ANCs from Section 8(a)'s definition of "Indian tribe" would, thus, subject them to the competitive thresholds, as well as require that all affiliations of ANC-owned firms count when the firms' size is determined and that an ANC may participate in the 8(a) Program only one time. The proposed legislation would also amend Section 8(a) to (1) prevent ANC-owned firms from receiving additional sole-source awards when the total amount of competitive and sole-source awards they have received in any year exceeds the total amount of competitive and sole-source awards that individually owned firms may receive (currently, $100 million); (2) prohibit the SBA from exempting ANC-owned firms from any time limitations on participation in the 8(a) Program to which individually owned 8(a) firms are subject; and (3) require ANCs to report annually to the SBA on their total revenue, the amount of this revenue attributable to the 8(a) Program, and the "total amount of benefits paid to shareholders." H.R. 598 and S. 236 would also require the SBA to amend the regulations for the 8(a) Program so as to preclude SBA from waiving the requirement that the management and daily business operations of ANC-owned firms be controlled by one or more socially and economically disadvantaged individuals; prohibit ANCs from conferring eligibility to participate in the 8(a) Program on more than one firm at a time; and preclude ANC-owned 8(a) firms from acquiring ownership interests in other 8(a) firms that exceed the ownership interests that individually owned 8(a) firms may acquire. Regulatory Developments On February 11, 2011, SBA amended its rules to change certain eligibility and other requirements pertaining to the 8(a) Program. Several of these changes apply specifically to ANC-owned firms. Under the new rules, ANC-owned 8(a) firms (1) may not receive a sole-source 8(a) contract that is a follow-on contract to an 8(a) contract that was performed immediately previously by a firm owned by the same ANC; (2) must report annually to the SBA on the benefits provided to Alaska Natives from the ANC's participation in the 8(a) Program; and (3) may be found to have potential for success if the ANC pledges to use its resources to support the firm and to not allow the firm to cease operations. The rule also generally prohibits non-8(a) firms that form joint ventures with 8(a) firms to perform sole-source contracts in excess of $4 million ($6.5 million for manufacturing contracts) from serving as subcontractors (at any tier) on the contract. In addition, the rule indicates that it is the SBA's policy to have ANC-owned firms' applications for the 8(a) Program processed at the San Francisco Division of Program Certification and Eligibility whenever possible. These applications had previously been processed in the Anchorage District Office. These changes generally took effect on March 14, 2011, although the SBA has delayed implementation of the requirement that ANCs report on the benefits provided to Alaska Natives through their participation in the 8(a) Program.

The widely reported increase in federal contract dollars awarded to Alaska Native Corporations (ANCs) and their subsidiaries in recent years has generated congressional and public interest in the legal authorities that govern contracting with these entities. Currently, federal agencies may contract with ANCs or their subsidiaries under several different statutory authorities. These include (1) the Armed Services Procurement Act (ASPA) and the Federal Property and Administrative Services Act (FPASA); (2) Section 8(a) of the Small Business Act; and (3) Section 15 of the Small Business Act. The identity of the procuring agency and the size of the ANC or ANC-owned firm, in part, determine which authority is used in particular circumstances. ASPA and FPASA, for example, generally give defense and civilian agencies, respectively, broad authority to contract with any qualified, responsible source, including ANCs and their subsidiaries. Contractors do not need to be "small" in size, or for-profit entities, as they generally must be to receive contracts under the Small Business Act. ASPA and FPASA also authorize agencies to make sole-source awards in certain circumstances (e.g., unusual and compelling urgency), although such awards must be justified in writing and approved by agency officials. Two sections of the Small Business Act also permit contracts with certain ANCs or their subsidiaries. Section 8(a) of the act authorizes agencies to contract with small businesses owned and controlled by socially and economically disadvantaged individuals or groups participating in the "8(a) Program." ANCs are deemed to be socially and economically disadvantaged, and ANC-owned firms may participate in the 8(a) Program. Under Section 8(a), agencies may conduct competitions in which only 8(a) firms may compete (i.e., set-asides), as well as make sole-source awards in circumstances where such awards would not be permitted under ASPA or FPASA. 8(a) contracts valued in excess of $4 million ($6.5 million for manufacturing contracts) must generally be competed among 8(a) firms. However, Section 8(a) authorizes sole-source awards of such contracts to 8(a) firms if (1) the contracting officer does not reasonably expect that at least two 8(a) firms will submit offers at a fair market price; or (2) the Small Business Administration accepts the requirement on behalf of an 8(a) firm owned by an ANC or other disadvantaged group. Sole-source contracts under the authority of Section 8(a) historically did not need to be justified or approved. However, since 2009, agencies have been required to justify and obtain approval for sole-source 8(a) contracts valued in excess of $20 million (base plus options). Section 15 of the Small Business Act also authorizes set-asides (but not sole-source awards) for various types of small businesses. ANC-owned small businesses not participating in the 8(a) Program could receive awards under the authority of Section 15. In addition, several other statutes create incentives for agencies to contract with ANCs or their subsidiaries by, for example, allowing contracts with "large" ANCs to count toward federal prime contractors' goals for subcontracting with small businesses. Similarly, various appropriations riders permit the Department of Defense to contract out functions performed by government employees to ANCs without going through the customary competitive sourcing process. Members of the 112th Congress have introduced legislation (H.R. 598, S. 236) that would generally subject ANC-owned firms participating in the 8(a) Program to the same treatment as individually owned firms. Among other things, this legislation would limit the circumstances in which ANC-owned firms could receive sole-source awards valued in excess of $4 million ($6.5 million for manufacturing contracts) under the authority of Section 8(a) of the Small Business Act.

Introduction From April 20 to 24, 2009, United Nations (U.N.) member states will meet in Geneva, Switzerland, for the U.N. Durban Review Conference Against Racism (Review Conference). Some Members of Congress are concerned that the Review Conference will repeat the perceived mistakes of the U.N. World Conference Against Racism, Racial Discrimination, Xenophobia and Related Intolerance (WCAR), which was held in Durban, South Africa, from August 31 to September 7, 2001. At WCAR, participating governments, including the United States, sought to acknowledge and recommend ways for the international community to address racism and related intolerance. The Conference attracted a significant amount of national and international attention because of what many viewed as participating governments' disproportionate focus on Israel as a perpetrator of racism and intolerance in the Middle East. The United States withdrew from WCAR when, in its view, it became clear that governments, particularly members of the Organization of the Islamic Conference (OIC) , would continue to target Israel while contemporary forms of racism remained unaddressed. In December 2006, the U.N. General Assembly adopted a resolution calling for a Durban Review Conference to assess the implementation of WCAR's main outcome documents—the Durban Declaration and Program of Action. The Bush Administration opposed the Review Conference and did not participated in the preparatory process or voted for U.N. resolutions supporting or funding it. In February 2009, the Barack Obama Administration decided to participate in Review Conference consultations to observe the current status of negotiations related to the Review Conference outcome document. After attending the consultations and reviewing the draft outcome document, it determined that it would not participate in future negotiations because of the draft document's focus on Israel. The Administration stated that it remained open to re-engaging in negotiations if a draft document appeared to take a "constructive approach" to addressing racism and discrimination. Other countries, including Canada, Israel, and Italy have announced that they will boycott the Conference, and some governments stated they will not participate unless it is clear that the Conference will not target Israel. In the coming weeks, participating countries will continue to negotiate the Review Conference draft outcome document. Members of Congress have demonstrated continued interest in the Durban Review Conference. Some Members, for example, are concerned that the United States would fund a U.N. conference that serves as a forum for anti-Semitism. They have proposed legislation that would withhold a proportionate share of U.S. assessed contributions to the U.N. regular budget, which funds the Review Conference. Limiting U.S. contributions to the Review Conference in this manner would have no impact on the Review Conference because assessed contributions finance the U.N. regular budget in its entirety and not specific or separate parts of it. Other Members of Congress have emphasized the importance of combating racism internationally, and have proposed and passed resolutions urging President Obama to engage in diplomatic efforts to ensure that the Review Conference does not further discredit U.N. efforts to address racism by disproportionately focusing on Israel. Members of the 111 th Congress will likely consider a number of issues when conducting oversight of the Review Conference and determining appropriate levels of U.S. participation and financial contributions. Some suggest, for example, that ongoing Review Conference preparations indicate that certain U.N. member states will continue to target Israel. Others are concerned about the potential diplomatic or political impact of U.S. participation, or lack thereof. Some, for instance, maintain that the question of U.S. participation in the Review Conference is inherently linked to the larger issue of U.S. participation in international organizations. They are concerned that a selective approach to U.S. engagement in the United Nations may damage the reputation and negotiating influence of the United States both within and outside of the U.N. system. Opponents, however, contend that U.S. participation in the Review Conference contradicts the objectives of the Conference and would provide legitimacy to U.N. mechanisms that allow member states to criticize Israel in the context of racism. This report provides background information on previous U.N. efforts to address racism and the 2001 World Conference Against Racism. The report also discusses the objectives of the Durban Review Conference, including U.S. policy and responses from other governments. It examines charges of bias against Israel in the preparatory process for the Review Conference, potential implications for U.S. participation or non-participation, and the impact of withholding a proportionate share of U.S. contributions to the Conference from the U.N. regular budget. Overview of U.N. Activities to Address Racism The 2001 World Conference Against Racism and the upcoming Durban Review Conference are part of broader U.N. efforts to address racism and racial discrimination. Previous U.N. Efforts Since the United Nations was established in 1945, member states have sought to address racism both in the broader context of human rights and as a stand-alone issue. Member states, for instance, incorporated the idea of racial equality into international documents such as the U.N. Charter in 1945 and the Universal Declaration of Human Rights in 1948. Through the 1960s, member states negotiated and ratified international agreements and declarations that addressed the issue. The International Convention on the Elimination of All Forms of Racial Discrimination (ICERD), for example, requires parties to condemn and work to eliminate discrimination in all of its forms, regardless of race, sex, language, or religion. The treaty, which entered into force on January 4, 1969, has been ratified or acceded to by 173 U.N. member states. It was ratified by the United States on October 21, 1994. U.N. member states have also addressed racism through U.N. bodies such as the Sub-Commission on Prevention of Discrimination and Protection of Minorities, the main subsidiary body of the Commission on Human Rights (now the Human Rights Council). In 1993, the Human Rights Council appointed a Special Rapporteur on racism, racial discrimination, and xenophobia to report to U.N. member states on contemporary forms of racism. In the past three decades, U.N. member states have focused on raising global awareness of racism and taking measures to address the issue through U.N. "Decades Against Racism" and three global anti-racism conferences. During each Decade Against Racism—1973 to 1982, 1983 to 1992, and 1993 to 2002—participating U.N. member states held world conferences against racism, including the 2001 World Conference in Durban, South Africa. At each Conference, U.N. member states negotiated programs of action that would be implemented by governments and U.N. specialized agencies, funds, and programs. Some U.N. member state efforts to address racism in U.N. fora have been controversial. Probably the most notorious effort occurred in 1975, when member states adopted General Assembly resolution 3379, which stated that Zionism is a form a racism and racial discrimination. The United States strongly opposed the resolution, stating that it treated racism not as a serious injustice, but as an "epithet to be flung at whoever [sic] happens to be one's adversary." Sixteen years later, on December 16, 1991, the General Assembly adopted a resolution to revoke resolution 3379. Despite its repeal, many argue that the adoption of resolution 3379 greatly diminished the credibility of U.N. efforts to address racism and had a lasting and adverse effect on relations among U.N. member states—particularly among Israel and other Middle Eastern countries. U.S. Role The United States did not participate in the 1978 and 1985 World Conferences Against Racism because of its strong opposition to resolution 3379. The Bush Administration decided, however, to participate in the 2001 World Conference Against Racism—in large part because of the 1991 General Assembly decision to revoke resolution 3379. Congressional response to U.N. efforts to address racism has varied over time. Members have supported U.N. mechanisms that address racism, such as ICERD. On the other hand, Congress has condemned the efforts of some U.N. member states to address racism that appear to target Israel. Many Members were particularly critical of General Assembly resolution 3379 and adopted a joint resolution condemning its passage. Members also generally agreed with the U.S. decisions not to participate in the first two U.N. Decades Against Racism and first two World Conferences Against Racism. The 2001 World Conference Against Racism The World Conference Against Racism, Racial Discrimination, Xenophobia and Related Intolerance (WCAR or the Conference) was held in Durban, South Africa, from August 31 to September 7, 2001. Conference objectives included (1) reviewing progress made in the fight against racism, xenophobia, and intolerance; (2) increasing the level of awareness about racism; and (3) recommending ways to increase U.N. effectiveness through programs that combat racism and related intolerance. Conference participants also aimed to recommend ways to improve regional, national, and international measures to combat racism, and ensure that the United Nations had the resources to combat racism. Unlike previous World Conferences that focused primarily on racism and racial discrimination, WCAR also addressed issues related to xenophobia and related intolerance. The U.N. General Assembly designated the U.N. Commission on Human Rights (now the Human Rights Council) as the Conference preparatory committee, and directed that the Conference secretariat operate out of the Office of the U.N. High Commissioner for Human Rights (OHCHR). Participation was open to representatives from all U.N. member states, U.N. bodies and programs, regional organizations and commissions, non-governmental organizations (NGOs), and intergovernmental organizations. Approximately 2,300 representatives from 163 countries attended WCAR, and nearly 4,000 NGO representatives were accredited. The Conference was funded through the U.N. regular budget and voluntary contributions from U.N. member states. To prepare for WCAR, participating governments held a number of regional and organizational meetings where they made decisions related to the scope and agenda of the Conference. At the regional sessions, for example, governments drafted Declarations and Programs of Action for their regions. At the second session of the Preparatory Committee, held in May 2001, governments established a working group of 21 states (Group of 21), which included the United States. The group synthesized the outcome documents from regional meetings into the draft Declaration and Program of Action (hereafter "outcome documents") that was considered at the Conference. Though the outcome documents were non-binding, many countries considered them crucial to the success of WCAR because they provided international guidance and credibility for governments and organizations aiming to combat racism. Bush Administration Position on WCAR Initially, the United States supported the World Conference on Racism. In December 1997, the Clinton Administration co-sponsored the U.N. General Assembly resolution that decided to convene the Conference and established an interagency Task Force (WCAR Task Force) to coordinate U.S. participation in the Conference. The Bush Administration supported the Conference and continued to support the Task Force. It also agreed to pay the U.S. share of the Conference costs and to provide an additional $250,000 in voluntary contributions to the U.N. Secretariat. In addition, the Administration participated in Preparatory Committee and Group of 21 discussions. As preparations for WCAR progressed, however, the Bush Administration increasingly expressed concern with two issues: anti-Israel language in the draft outcome documents, and proposals for reparations and compensation for victims of slavery. Anti-Israel Language In February 2001, at the Asian regional preparatory meeting in Iran, members of the Organization of the Islamic Conference (OIC) included language in the region's outcome documents that appeared to target Israel. Some of the controversial text from the regional meeting was incorporated into the outcome documents negotiated at the Conference. Initial drafts of the WCAR Declaration, for example, included language that equated Zionism with racism. Some countries, including the United States, Canada, and members of the European Union, strongly objected to these sentiments. They argued that WCAR was the wrong forum in which to raise the Israel-Palestine issue, and emphasized that individual countries and regional conflicts should not be singled out in Conference outcome documents. Countries in support of the text argued that the Israeli occupation of Palestine was racially motivated and therefore should be addressed at WCAR. The Bush Administration emphasized that it would not participate in the Conference if language in the draft outcome documents continued to target Israel. Consequently, there were some questions regarding the level and extent of U.S. participation, and, in late August 2001, the Administration announced that then-Secretary of State Colin Powell would not attend WCAR. The Administration stated that it would instead send a mid-level working delegation. Slavery and Reparations Language The United States also expressed concern with language in the draft WCAR outcome documents that addressed reparations and compensation for slavery. At the African regional meeting in Senegal in 2001, participating governments agreed to language that requested an apology from states involved in the slave trade, as well as compensation and reparations for victims of racial discrimination and slavery. Some of this proposed language was included in the outcome documents considered at Durban. The draft Program of Action, for example, urged countries to protect against racism by ensuring that all persons have access to "adequate remedies ... and adequate reparations" for damage resulting from racial discrimination. The draft Declaration also expressed "explicit and unreserved apologies" to victims of slavery and their heirs. The trans-Atlantic slave trade, in particular, was cited several times in the draft outcome documents. In July 2001, the Administration called the specific mention of trans-Atlantic slavery in the proposed Durban drafts "extreme and unbalanced," noting that its mention was "selective," and "inconsistent with the goals of WCAR." The Administration further stated that there was no consensus in the United States on the reparations issue, and noted that the United States had consistently opposed calls for reparations and would continue to do so. Assistant Secretary Wood further stated that the United States was ready to join WCAR participants in expressing regret for historic injustices such as slavery. He also emphasized that the purpose of WCAR was to focus on contemporary manifestations of racism and intolerance. The Administration advocated what it described as a "future-oriented approach" on the reparations issue, expressing support for programs that aimed to overcome Africa's development challenges. U.S. Walk-Out At the Conference, the United States participated in initial negotiations. When it became clear that the anti-Israel language would not be removed, however, the U.S. delegation withdrew under instructions from then-Secretary of State Powell. Israel joined the United States in withdrawing from the Conference. Because of its withdrawal, the United States did not pay $250,000 in voluntary contributions to WCAR. Congressional Response to WCAR Some Members of Congress viewed WCAR as a crucial international mechanism for combating racism and supported full U.S. participation. Others, however, were concerned that language in the draft outcome documents appeared to target Israel, and urged the Administration not to participate if such language remained. Some Members viewed WCAR as an opportunity to address historic and contemporary factors that may have contributed to present-day racism. They urged the Administration to participate regardless of controversial text in the draft outcome documents, arguing that the United States could bring balance to the issue. Some Members also viewed the Conference as an opportunity for the United States to acknowledge its role in the trans-Atlantic slave trade, and disagreed with the Administration's position that slavery reparations should not be discussed at the Conference. Some Members of the Congressional Black Caucus (CBC) were particularly supportive of WCAR's objectives and full U.S. participation. Members who attended the Conference as part of a congressional delegation held differing views on the U.S. withdrawal. Some argued that singling out one country (Israel) in Conference outcome documents was unacceptable, and maintained that the Israel-Palestine dispute was not a racial issue. Other Members disagreed with the U.S. decision to withdraw and emphasized that the United States should not allow one issue to overshadow the Conference's overall purpose of combating racism. WCAR Outcomes: The Durban Declaration and Program of Action After the United States and Israel withdrew from the Conference, the remaining member states engaged in a series of intense and difficult negotiations that resulted in WCAR's main outcome documents—the Durban Declaration and Program of Action. These documents created international definitions and established new U.N. mechanisms to address racism and other related issues. In the Program of Action, for example, governments agreed to definitions of "victims of racism" and "grounds for discrimination." Governments also decided to establish an anti-discrimination unit within the Office of the High Commissioner for Human Rights (OHCHR), and requested that OHCHR work with five independent experts to follow up on the implementation of provisions in the Declaration and Program of Action. The outcome documents also urged member states to establish and implement national policies and action plans to address racism, racial discrimination, and related intolerance. Some observers expressed concern that WCAR's focus on Israel and Palestine overshadowed other aspects of the Conference. Some, for example, spoke positively of the outcome documents' focus on the vital role of human rights institutions in combating racism. Many supported the outcome documents' focus on education and the role of good governance in addressing racial discrimination. Yet, some maintain that WCAR's focus on Israel and Palestine diverted attention from subjects that they believe WCAR should have addressed more effectively—such as the rights of indigenous people and specific instances of contemporary racism—such as caste discrimination in India. Prior to the adoption of the Declaration and Program of Action, however, some governments disassociated themselves from or expressed reservations about specific provisions in the text—particularly those that addressed the situation in the Middle East, the impact of historic injustices such as slavery and colonialism, and the rights of indigenous peoples. Some countries also disagreed with text that appeared to equate colonialism with slavery and genocide. Provisions on the Situation in the Middle East In the final WCAR outcome documents, governments expressed concern about the "plight of the Palestinian people under foreign occupation" and recognized "the inalienable right of the Palestinian people to self-determination and to the establishment of an independent State." They also called for the "the end of violence and the swift resumption of negotiations" in the Middle East. The outcome documents did not include text equating Zionism with racism. Members of the European Union viewed the final language as an improvement over previous drafts that appeared to repeatedly target Israel. Other countries, however, maintained that the situation in the Middle East should not be addressed at WCAR because it was a political situation rather than a racial one. Canada, in particular, disassociated itself from text that directly or indirectly mentioned the situation in the Middle East. Conversely, some countries argued that the text did not go far enough to address the situation in the Palestinian territories. Provisions on Slavery and Reparations The Declaration acknowledged slavery and the slave trade, including the trans-Atlantic slave trade, as a "crime against humanity," and invited the international community to express regret or remorse for slavery. The Program of Action also recognized that slavery has "undeniably contributed" to poverty and underdevelopment. It urged countries to reinforce protection against racism by ensuring that all persons enjoy the right to seek just and adequate reparations from damage resulting from discrimination. Further, it recognized the need to develop programs for the social and economic development of societies impacted by historic injustices such as slavery. It called on developed countries and the U.N. system to support development mechanisms, particularly in Africa. The outcome documents did not call for reparations or an explicit apology for historical injustices such as slavery. Consequently, some African and Caribbean states maintained that the Conference did not sufficiently address the issue. General Assembly Adoption of Outcome Documents In March 2002, the U.N. General Assembly adopted a resolution on the Durban Declaration and Program of Action that endorsed the implementation of the outcome documents, urged U.N. member states to create national action plans and policies to combat slavery, and called for the creation of the Anti-Discrimination Unit and a Group of Experts to follow up on implementation of Durban outcomes. One hundred and thirty-four countries voted for the resolution, two opposed it (United States and Israel), and two abstained (Australia and Canada). When explaining its vote, the United States stated that because it withdrew from the WCAR, it did not agree to the Durban Declaration and Program of Action. It opposed the creation of the Discrimination Unit and the group of experts, arguing that the cost of the new mechanisms would place additional pressure on the U.N. regular budget. Non-governmental Organization (NGO) Forum Representatives from local, national, and international NGOs held an NGO Forum parallel to the Conference in Durban. At its conclusion, Forum participants agreed to the NGO WCAR Declaration, which a number of observers viewed as an unbalanced document that disproportionately focused on Israel. Specifically, the Declaration called for the end of "Israeli systematic perpetration of racist crimes, including war crimes, acts of genocide and ethnic cleansing," and declared Israel a "racist, apartheid state." Because of the highly politicized wording of the Declaration, some NGOs disassociated themselves from the final text. Then-U.N. High Commissioner for Human Rights Mary Robinson described the NGO Forum as "hateful, even racist," and refused to receive or endorse the NGO Declaration. The Forum attracted significant attention from the international media, and some argued that it overshadowed the Conference itself. The 2009 Durban Review Conference Since WCAR, U.N. member states increasingly explored the possibility of holding a follow-up conference to review progress made on the implementation of the Durban Declaration and Program of Action. On December 19, 2006, the U.N. General Assembly adopted a resolution deciding to convene the Durban Review Conference. The Conference will be held in Geneva, Switzerland, from April 20 to 24, 2009. Objectives, Funding, and Participation At the Conference, governments aim to review the progress and assess implementation of the Durban outcome documents by all stakeholders, including assessing contemporary manifestations of racism; assess the effectiveness of the existing Durban follow-up mechanisms and other related U.N. programs; and identify and share good practices achieved in combating racism. The preparatory process for the Review Conference is similar to the process for WCAR. The U.N. Human Rights Council, for instance, is the Preparatory Committee for the Review Conference. All U.N. member states were invited to join the Review Conference Preparatory Committee to determine the objectives of the Conference. The Committee elected a Bureau composed of one chairperson and 20 vice-chairpersons (Group of 21) to decide on the objectives of the Review Conference. As with WCAR, governments are engaging in organizational, substantive, and regional meetings to determine the scope of the Conference and agree to regional outcome documents. (For more information on these meetings, see the "Issues for Congress" section.) The Review Conference is funded through assessed contributions to the U.N. regular budget and through voluntary contributions from member states and organizations. On November 17, 2008, a report from the Secretary-General estimated that the overall additional financial requirements for the Durban Review Conference and its preparatory process was $3,754,800. The Secretary-General will ask for only $570,400 because he anticipates that the remaining balance of $3,184,400 will be absorbed by other human rights-related parts of the U.N. regular budget. Funding for the Conference and the Human Rights Council does not overlap. Both the Council and the Review Conference are funded under separate parts of the OHCHR budget. Participation in the Review Conference is open to U.N. member states, U.N. bodies and programs, regional organizations and commissions, intergovernmental organizations, and NGOs. It is unclear whether an NGO Forum will be held parallel to the Conference. U.S. Response Barack Obama Administration On February 14, 2009, the Barack Obama Administration announced that it would send a delegation to Review Conference consultations held from February 16 to 18, 2009. Administration officials stated that U.S. participation in the consultations "does not indicate—and should not be misconstrued to indicate—that the United States will participate in April in the World Conference Against Racism itself." On February 20, 2009, the Administration announced that during the February 16-18 consultations, "the [U.S.] delegation consulted with 30 national delegations from every region to outline our concerns with the current outcome document and to explore whether there exists the possibility for progress in re-shaping the document and tenor of the discussions." On February 27, 2009, the Administration further announced that the draft Review Conference outcome document being negotiated by member states "has gone from bad to worse, and....is not salvageable." Consequently, according to Administration officials, the United States "will not engage in further negotiations on this draft text nor will we [the United States] participate in a conference based on this text." The Administration stated that it remained open to re-engaging in negotiations if a draft document appeared to take a "constructive approach" to addressing racism and discrimination. Specifically, it emphasized that the Review Conference outcome document text should: not reaffirm the "flawed" 2001 Durban Declaration and Program of Action (DDPA); single out a specific country (such as Israel); embrace the "troubling concept" of defamation of religion; or go further than the DDPA in addressing the issue of slavery reparations. George W. Bush Administration The Bush Administration consistently opposed a Durban Review Conference. It stopped short, however, of announcing it will boycott the Conference, likely recognizing that a new Administration would make the final decision regarding participation. The United States, along with Israel, voted against the General Assembly resolution calling for the Review Conference in December 2006. Similarly, in December 2007, the United States voted against a resolution related to the biennium budget for 2008-2009, primarily because it included funding for the Conference. The Administration also declined to participate in the preparatory events for the Review Conference, and has consistently voted against U.N. General Assembly resolutions that support or fund the Review Conference. On April 8, 2008, then-U.S. Ambassador to the United Nations Zalmay Khalilzad announced, "the United States is not participating in the process and we have no plans to do so. We will not participate unless it is proven that the conference will not be used as a platform for anti-Semitic behavior." The Ambassador also announced that the United States would withhold a portion of its 2008 contribution to the U.N. regular budget that would fund the U.N. Human Rights Council, including money for the preparatory process for the Review Conference. 111th and 110th Congresses Members of the 110 th and 111 th Congresses have demonstrated an interest in the Review Conference. Some Members, for example, have introduced legislation stating the United States should not participate in the Conference because of WCAR's focus on Israel. On March 13, 2008, the Senate unanimously passed an amendment to the FY2009 Budget Resolution to deny funding to the Durban Review Conference. Some Members have also expressed opposition to U.S. funding of or participation in the Review Conference in correspondence with Administration officials. Nevertheless, some Members viewed the Conference as a key opportunity to address international racism. On September 23, 2008, for example, the House adopted a resolution expressing the sense of the House that the United States should lead a high-level diplomatic effort to ensure that the Durban Review Conference serves as a forum to review implementation of commitments made at the 2001 Durban Conference, rather than as a vehicle for anti-Semitism. Participation of Other Governments A number of governments have concerns about the Review Conference. In January 2008, Canada announced that it would boycott the Conference because of indications that it would repeat the mistakes of WCAR. Other countries announced that they will not participate if it becomes evident that the Review Conference will target Israel. French President Nicolas Sarkozy stated that France will "not allow a repeat of the digressions and extremes of 2001." Representatives of the United Kingdom announced that the government would not participate in an international conference with the "degree of anti-Semitism that was disgracefully on view" at WCAR. Initially, Israel stated that it would boycott the Review Conference unless it was proven that the Conference would not be used as a platform for further anti-Israeli sentiments and activities. In November 2008, however, Israel formally announced it would not participate in the Conference, stating that the Conference "appears to be heading once again towards becoming an anti-Israel tribunal, which has nothing to do with fighting racism." In March 2009, Italy also announced that it would not participate in the Conference. U.N. High Commissioner for Human Rights Navanethem Pillay urged countries that announced they may not participate in the Conference to reconsider. She argued that the anti-racism debate and agenda will be significantly compromised without the participation of all countries. Issues for Congress Members of the 111 th Congress may wish to consider a number of issues when conducting oversight and considering U.S. funding for the Durban Review Conference and possible follow-up activities. Balance in the Durban Review Preparatory Process? The Obama Administration and some Members of Congress have suggested that the United States should participate in the Durban Review Conference only if it is proven that the Conference will not: (1) become a vehicle for anti-Semitism, (2) reaffirm the 2001 Durban Declaration and Program of Action, or (3) focus on defamation of religion. Consequently, Members of the 111 th Congress may wish to consider U.N. member state actions during the Review Conference preparatory process. Scope of the Review Conference During the preparatory process, participating governments aimed to determine the scope and agenda of the Conference. Countries such as Australia, Canada, and Israel, and members of the European Union, maintain that the Conference should focus primarily on member state and U.N. system implementation of the Durban Declaration and Program of Action instead of reopening controversial issues agreed to at WCAR. Some hope that by concentrating on the implementation of WCAR outcomes, participants can achieve a broad consensus and avoid repeating the perceived mistakes of the previous Conference. Other countries, particularly members of the Organization of the Islamic Conference (OIC), contend that the Review Conference should focus not only on implementation of WCAR outcomes but also on "the contemporary scourge of racism," including the plight and suffering of the Palestinian people and the defamation of religions, particularly Islam. Composition of the Conference Bureau (Group of 21) On August 27, 2007, the Review Conference Preparatory Committee elected a Bureau of 21 members (Group of 21) to determine Conference modalities and objectives. A number of Conference observers and participants have expressed concern about the composition of the Group, which includes countries that expressed anti-Israel sentiments at WCAR, including Iran, Indonesia, and Senegal. Some are particularly concerned that Libya and Cuba—states that many view as anti-Israeli and anti-democratic—are Bureau Chair and Vice-Chairperson Rapporteur. Organizational Meetings and Intergovernmental Working Group Drafts109 To prepare for the Review Conference, participating governments have attended several organizational meetings to consider the scope and agenda of the Review Conference. Some governments also have participated in meetings of the Intersessional Open-ended Intergovernmental Working Group of the Preparatory Committee, which is tasked with reviewing recommendations submitted by countries and other stakeholders for possible inclusion in the Review Conference outcome document. Some expressed concern with drafts proposed by the Working Group. In May 2008, for example, the Working Group circulated a list of issues that might be included in the Conference outcome document. The list specifically referred to the "plight of the Palestinian people" and stated that the situation in the occupied Palestinian territories violates a range of civil and political rights. Draft Review Conference Outcome Document (as of March 17, 2009) During the past year, U.N. Member States have been formally and informally negotiating the draft outcome document that will be considered at the Review Conference. On March 17, 2009, the Office of the High Commissioner for Human Rights published a draft outcome document "rolling text" based on ongoing Member State negotiations. The 17-page document eliminates many controversial aspects of previous drafts, including specific mentions of Israel, Palestine, and "defamation of religion." Critics, however, contend that while the March 8 text might be seen as an improvement over previous drafts it does not meet the conditions for U.S. participation. Specifically, opponents point to paragraph 1 which reaffirms the Durban Declaration and Program of Action (DDPA). The DDPA had expressed concern about the "plight of the Palestinian people under foreign occupation" and recognized "the inalienable right of the Palestinian people to self-determination and to the establishment of an independent State." Critics hold that by reaffirming the DDPA, the Review Conference draft outcome is singling out Israel as a perpetrator of racism. Supporters of U.S. participation argue that the shortened March 8 text is an encouraging development and that the United States should participate in the Review Conference to influence its outcome. A representative from the U.N. Office of the High Commissioner for Human Rights reportedly stated, "we believe this shortened text represents a solid and meaningful basis for negotiations by member states toward a positive outcome for the Conference." When advocating U.S. participation, a number of supporters emphasize the difference between early WCAR drafts in 2001 that equated Zionism with racism and the final DDPA that contained, in the view of many, relatively moderate language by comparison. U.S. Funding of the Review Conference Bush Administration officials indicated that the United States would not fund the Review Conference or its preparatory process unless it was proven that the Conference would not become a platform for anti-Semitic behavior. The final decision regarding U.S. funding of the Conference, however, will be made by the Obama Administration or Members of the 111 th Congress. If Congress does not enact legislation prohibiting U.S. funding for the Review Conference, the Obama Administration may decide on its own to withhold the U.S. proportionate share of U.S. contributions prior to the Conference. If such a scenario occurred, it would raise the question as to whether the Administration would release funding after the Conference if the outcome was acceptable to the United States. Specifically, some Members of the 110 th and 111 th Congresses proposed that the United States withhold a proportionate share of its U.N. assessed contributions, approximately 22%, from the U.N. regular budget, which is used to fund the Conference. Withholding funds in this manner would not affect the Conference because assessed contributions finance the U.N. regular budget in its entirety and not specific parts of it. The U.S. decision to withhold a proportionate share of funding from the U.N. Human Rights Council for FY2008 would not affect funding for the Durban Review Conference or its preparatory process because funding for both mechanisms falls under separate parts of the budget of the U.N. Office of the High Commissioner for Human Rights. As of November 17, 2008, the Secretary-General estimates that the cost of the Review Conference and its preparatory process will be $3,754,800. However, the Secretary-General will seek only $570,400 in additional funding because he anticipates that the balance of $3,184,400 will be absorbed by other related parts of the U.N. regular budget. WCAR Outcome Documents and U.S. Participation Some suggest that the United States should participate in and provide funding for the Durban Review Conference in part because the final text that addresses the situation in Israel and Palestine in the Durban Declaration and Program of Action was significantly toned down from drafts that led to the U.S. withdrawal. Some argue that the U.S. and Israeli withdrawals from WCAR were a turning point in negotiations and sent a powerful diplomatic message to Conference participants. They contend that the withdrawals pressured other governments to adopt more moderate language on the Middle East in the final outcome documents. Conversely, some contend that the language in the Declaration and Program of Action remains unacceptable to the United States. To support this view, opponents point to the Bush Administration's policy of consistently voting against resolutions supporting the Review Conference in U.N. fora. They maintain that the Declaration and Program of Action unfairly single out one regional conflict and refer to the plight of only one party—the Palestinians—with no mention of Israel. Political and Diplomatic Impact of U.S. Engagement For some, the question of U.S. participation or non-participation in the Durban Review Conference touches on the broader issue of U.S. engagement in the U.N. system. Supporters contend that U.S. participation in U.N. efforts such as the Review Conference is important to the success and credibility of the United Nations as a whole. They argue that instead of withdrawing from U.N. conferences that have processes or outcomes it opposes, the United States should fully participate and work from within to build member state coalitions in support of U.S. policies. If the United States does not fully participate in U.N. fora, some argue, U.N. member state actions might be determined by groups of member states advocating agendas that are contrary to U.S. interests. They maintain that U.S. absence from such U.N. efforts could create a vacuum in which views opposed by the United States hold supreme. Supporters contend that a piecemeal and selective approach to participation in the United Nations damages the U.S. negotiating position and its influence both within and outside of the U.N. system. Moreover, some argue that U.S. engagement in U.N. human rights efforts such as the Review Conference provides a valuable international tool for groups and individuals battling racism in countries where human rights is not a priority. Opponents of U.S. participation in the Review Conference maintain that U.S. engagement would give undeserved legitimacy to U.N. mechanisms that provide a platform for member states to target Israel. They also argue that it would imply that the United States supports the anti-Semitism demonstrated at WCAR as well as what many perceive as unbalanced language in the Durban Declaration and Program of Action. According to some, U.S. non-participation in the Review Conference sends a clear message to U.N. member states that repeatedly targeting one country and regional conflict in U.N. fora is unacceptable to the United States. They contend that the long-term political impact of such a message outweighs the short-term diplomatic impact of U.S. non-participation or withdrawal. These opponents therefore agree with the Bush Administration's decision not to participate in the preparatory process until, as U.S. officials say, it is proven that the Review Conference will not become a platform for anti-Semitism. They argue that holding out the possibility of U.S. participation—as well as the participation of other like-minded governments who have made similar statements—may persuade U.N. member states to take a more balanced approach when drafting and negotiating Review Conference outcome documents in preparation for the April 2009 Conference.

In April 2009, U.N. member states will convene in Geneva, Switzerland, for the U.N. Durban Review Conference Against Racism (Review Conference) to examine possible progress made since the 2001 U.N. World Conference Against Racism, Racial Discrimination, Xenophobia and Related Intolerance (WCAR), held in Durban, South Africa. At WCAR, participating governments, including the United States, sought to recommend ways for the international community to address racism. The United States withdrew from WCAR because of what it viewed as participating governments' disproportionate focus on Israel as a perpetrator of racism and intolerance in the Middle East. The George W. Bush Administration did not participate in Review Conference preparations and voted against U.N. resolutions supporting or funding the Conference because of concerns that it may repeat the perceived mistakes of WCAR. In February 2009, the Barack Obama Administration announced that it would send a delegation to the Review Conference consultations. Based on its observations, the Administration concluded that it would not participate in further negotiations due primarily to the draft outcome document's focus on Israel. It stated that it remained open to re-engaging in negotiations if a draft document appeared to take a "constructive approach" to addressing racism and discrimination. Canada, Israel, and Italy announced that they will boycott the Review Conference, and other governments announced they will not participate unless it is demonstrated that the Review Conference will not target Israel. Congressional perspectives on U.S. participation in the Review Conference vary. Some Members of Congress have introduced legislation supporting U.S. participation in the Conference, arguing that the United States should play an active role in combating international racism. Other Members contend that the United States should not participate or fund the Conference because of WCAR's focus on Israel. Specifically, they propose that the United States withhold a proportionate share of its U.N. assessed contributions that fund the Conference. Because assessed contributions finance the U.N. regular budget in its entirety and not specific parts of it, withholding funds in this manner would not affect the Review Conference. For many, U.S. participation or non-participation in the Review Conference touches on the broader issue of U.S. engagement in the U.N. system. Supporters contend that U.S. participation in U.N. efforts such as the Review Conference is important to the success and credibility of the United Nations as a whole. Opponents maintain that U.S. engagement in the Conference would give undeserved legitimacy to U.N. mechanisms that provide a platform for member states to target Israel. This report provides information on the 2001 World Conference Against Racism and the circumstances of U.S. withdrawal. It discusses preparations for the Durban Review Conference, including U.S. policy and reaction from other governments. It also highlights possible issues for the 111th Congress, including the Review Conference preparatory process, U.S. funding of the Conference, and the political and diplomatic impact of U.S. engagement. For related information, see CRS Report RL33611, United Nations System Funding: Congressional Issues, by [author name scrubbed] and [author name scrubbed]. This report will be updated as events warrant.

Background Slightly smaller than Nevada, Ecuador has a population of 13.8 million people. Since independence from Spain in 1830, Ecuador has lost 61% of its total land area as a result of border conflicts with Brazil, Colombia, and Peru. Despite its small size, Ecuador's location on the Pacific Coast between two major drug-producing countries (Colombia and Peru) increases its strategic importance to the United States. Ecuador is both geographically and ethnically diverse, and has a relatively long, albeit unstable, experience with democratic rule. Some 40% of Ecuadorians live in poverty and another 13% live in extreme poverty. Political and Economic Situation In the past decade, Ecuador has weathered a number of political and economic crises. The three popularly elected presidents preceding Rafael Correa did not complete their terms. In 1997, Abdala Bucaram was removed from office after being declared mentally unfit by the legislature and allegedly misappropriating $90 million in public funds. In 2000, Jamil Mahuad was ousted by a coup after a prolonged economic crisis led by a junta that included then-army Colonel Lucio Gutierrez. In April 2005, Lucio Gutierrez was removed from office by Ecuador's congress after weeks of popular protests. Ecuadorians rejected Gutierrez's attempt to replace judges on the country's three highest courts with his political allies, a move that was also sharply criticized by the international community. He was replaced by his vice president, Alfredo Palacio. There are historical antecedents for the instability that has recently plagued Ecuadorian democracy. Since 1830, regionalism and personalism have defined Ecuadorian political culture. Quito, the colonial capital, and Guayaquil, the industrial port, have battled for urban dominance. Superimposed against this regional divide are the ethnic and class divisions that have encouraged political parties to develop as electoral machines for competing segments of the elite. Following the return to democracy in 1979, party splits, bureaucratic ineptitude, and corruption proliferated. As the economic situation has deteriorated since the 1980s, voters have reacted by blaming incumbents for their troubles and by periodically backing populist, anti-party candidates (similar to Correa). This trend has led to the inability of presidents to complete their terms, as well as inconsistent economic policies from one administration to the next. Ecuador has a weak and poorly regulated economy that is overly dependent on a few export commodities (oil, bananas, and shrimp) with volatile prices. In 1998, El Niño rains caused an estimated $2.6 billion worth of crop damage, white spot disease hit the shrimp industry, and oil prices plunged. As a result, Ecuador suffered a disastrous economic crisis in 1999-2000, the country's worst in more than seventy years. In late 1999, then-president Jamil Mahuad abandoned the country's domestic currency in favor of the U.S. dollar as a last-ditch effort to stop hyperinflation. Dollarization has helped curb inflation in Ecuador and restored some macroeconomic stability to the country, but limited the government's ability to conduct an independent monetary policy. Ecuador's dollarization has not been accompanied by much-needed structural reforms to diversify the economy, restrict public spending, and increase productivity and investment. In 2003, the Gutierrez government attempted to restrict spending, increase taxes, remove subsidies, and promote private investment in the oil sector. These efforts spawned sustained popular protests. Although the economy grew some 6.3% in 2004 as a result of high oil prices, remittance flows, and a weak U.S. dollar, a lack of fiscal discipline postponed the renewal of a new IMF stand-by agreement. For the last several years, investors have been concerned by the Ecuadorian government's lack of fiscal discipline during a time of strong oil revenue growth. The Ecuadorian economy could face serious budget shortfalls in the short to medium term should global oil prices continue to fall. The Correa Presidency On January 15, 2007, Rafael Correa, a left-leaning, U.S.-trained economist, began a four-year term as President of Ecuador. Correa, an economics professor whose only prior government experience was a four-month stint as Alfredo Palacio's finance minister, surprised many analysts by finishing second in the first round of presidential voting held in October 2006. Contrary to many analysts' predictions, Correa won the November 2006 run-off election with 57% of the vote against Alvaro Noboa, a well-known banana magnate, who earned 43% of the vote. Voters appeared to embrace Correa's pledge to enact dramatic political reform. Nearly halfway through his term, President Correa continues to enjoy high approval ratings. Those ratings have been boosted by his efforts to reform the country's political system, increase social spending, and reassert government control over Ecuador's economy and territory. Many Ecuadorians approved Correa's condemnation of Colombia's unauthorized March 2008 raid of a guerrilla camp in Ecuador. They also supported his decision not to renew the U.S. lease on the air force base at Manta when it expires in 2009, a decision which has strained U.S.-Ecuadorian relations. Correa's economic policies, though popular among Ecuadorians, have concerned foreign investors. Foreign direct investment in Ecuador fell from some $271 million in 2006 to roughly $179 million in 2007. President Correa has recently suggested that, given declining oil revenues, his government may default on part of its roughly $10 billion foreign debt. Constituent Assembly President Correa has carried out his campaign pledge to enact constitutional reform. On April 15, 2007, 82% of Ecuadorians approved a referendum to convene a Constituent Assembly with the power to rewrite the country's constitution and dismiss its current elected officials. Some have questioned the legality of the events leading up to the referendum, which culminated in Ecuador's Electoral Court expelling (with Correa's backing) 57 legislators who had opposed giving the Constituent Assembly power to dissolve the Congress. Elections for the new Constituent Assembly were held in September 2007. With the traditional parties in disarray, Correa's newly-formed "Alianza Pais" (Country Alliance) party captured 80 of 130 seats in the Constituent Assembly. Convened on November 29, 2007, the Assembly immediately closed the Ecuadorian Congress and assumed its legislative functions. On January 8, 2008, Ecuador's Constitutional Court ruled that the Assembly's decisions may not be challenged. By the end of July 2008, the Assembly drafted a constitution that increases the power of the president by, among other things, giving him the power to dissolve Congress and allowing him to run for two consecutive terms. On September 28, 2008, some 64% of Ecuadorian voters approved the new constitution, expressing hope that it may help end the corruption and institutional frailty that have long plagued Ecuadorian democracy. Government critics have expressed concerns about the strong presidential system created by the new constitution. They have also challenged the legitimacy of the transitional assembly that is charged with legislating until the April 2009 elections occur, as well as the process by which judges are currently being selected for the country's highest courts. Energy Policy Oil is extremely important to Ecuador's economy, accounting for more than 50% of exports. High oil prices fueled an economic growth rate of 4.2% in 2006, but declining production levels resulted in growth of only about 1.5% in 2007. Production by Petroecuador, the state-owned oil company, has fallen by 50% in the last ten years, and a lack of capital has forced the company into a deep financial crisis. In recent years, Petroecuador has lost some $200 million annually in production due to protests and other community-related problems. President Correa is seeking to increase state control over the energy sector. In October 2007, he issued a decree that increased the Ecuadorian state's share of windfall oil revenues from 50% to 99%, unless companies were willing to switch from production sharing agreements to new service contracts controlled by Petroecuador. Five foreign oil companies entered into negotiations with the government and were about to agree to switch to service contracts within a two-year period when President Correa shortened the proposed transition period to just six months. As of November 2008, three of those companies had signed interim agreements with the Correa government. Private companies have long experienced problems investing in the Ecuadorian oil industry, stemming from the country's chronic instability and tendency for conflicts with private producers. President Correa supports the prior government's 2006 termination of its contract with the U.S. firm Occidental Petroleum (Oxy) over an alleged breach of contract, a controversial move that is currently in dispute settlement. Ecuador-Colombia-Venezuela Border Crisis On March 1, 2008, the Colombian military bombed a Revolutionary Armed Forces of Colombia (FARC) camp in Ecuador, killing at least 25 people, among them, Raúl Reyes, the terrorist group's second highest commander. In a subsequent raid on the camp, Colombian forces captured laptop computers, which Interpol has verified as belonging to Reyes. Files in those laptops allege that the government of Hugo Chávez of Venezuela was planning to provide millions of dollars in assistance to the FARC for weapons purchases and that President Correa received campaign donations from the FARC in 2006. Both Chávez and Correa have vigorously rejected those claims. Colombia's unauthorized incursion caused a major diplomatic crisis between Colombia, Ecuador and Venezuela. President Correa responded to the raid by breaking diplomatic ties with Colombia and sending additional troops to the Ecuador-Colombia border. In a show of solidarity with Ecuador, President Chávez broke ties with Colombia and sent troops to Venezuela's border with Colombia. Some feared that the Ecuador-Colombia-Venezuela crisis might escalate into a military conflict, but those concerns were allayed after a Rio Group summit held in the Dominican Republic on March 7, 2008. At the summit, President Uribe publicly apologized for the incursion and vowed that it would never happen again. President Chávez appeared to accept the apology and called for an end to the crisis, but President Correa remained angered by the incident. The Rio Group issued a resolution that rejected Colombia's incursion of Ecuadorian territory, but acknowledged Uribe's apology. On March 18, 2008, after extended debate, the Organization of American States adopted a resolution rejecting, but not condemning, the bombing raid and called for the restoration of diplomatic ties between Ecuador and Colombia. Ecuador has yet to restore diplomatic relations with Colombia. The border crisis may have served to reinforce the pre-existing ties between the Correa government in Ecuador and the Chávez government in Venezuela. U.S. Relations Ecuador's relations with the United States have traditionally been close, although recent events have strained bilateral relations. While the United States has concluded free trade agreements (FTAs) with Peru and Colombia, negotiations for a bilateral free trade agreement with Ecuador have been suspended indefinitely in the wake of the dispute with the U.S. firm Occidental Petroleum. U.S. officials have expressed concerns about Correa's populist tendencies, his ties with Hugo Chávez of Venezuela, and his state-centered economic policies. Some analysts have urged the U.S. government to use pragmatic means to urge President Correa to maintain open-market and democratic policies, such as maintaining U.S. trade preferences for Ecuador Others are more skeptical, questioning why the United States should extend trade benefits for a country that has taken hostile actions against U.S. companies and refused to negotiate an FTA. Counternarcotics Ecuador, a major transport country for cocaine and heroin, has worked closely with the United States on counter-narcotics efforts in years past, but positions taken by the Correa government may not bode well for the future of U.S.-Ecuadorian counternarcotics cooperation. In November 1999, the United States signed a 10-year agreement with Ecuador for the creation of a forward operating location (FOL) for U.S. aerial counter-drug detection and monitoring operations at Manta, an air force base along the Pacific Coast. The United States reportedly spent some $60 million to build those FOL facilities. President Correa has repeatedly confirmed that his government will not renew the lease on the U.S. air base at Manta when it expires in 2009. He has opposed involvement in Plan Colombia, the Colombian army's incursions into Ecuadorian territory, particularly the March 2008 raid of a FARC camp in Ecuador, and Colombia's aerial fumigation of coca crops along the Ecuador-Colombia border. U.S. Aid The United States is the largest bilateral donor in Ecuador. Principal goals for U.S. assistance to Ecuador are bolstering democracy, reducing poverty, protecting the environment, and securing the northern border with Colombia. Ecuador received roughly $32 million in U.S. aid in FY2008, including $9.1 million in counternarcotics assistance. The FY2009 request for Ecuador was for $32.5 million, with $13.4 million in counternarcotics assistance. An enacted continuing resolution ( P.L. 110-329 ) will provide funding for U.S. aid programs at FY2008 levels through March 6, 2009. Trade The United States is Ecuador's main trading partner, with some 45% of Ecuadorian exports going to the United States. Machinery and plastics are the leading U.S. exports to Ecuador, while oil, bananas, and shrimp account for the bulk of U.S. imports from Ecuador. Since joining the World Trade Organization (WTO) in 1996, Ecuador has lowered its average tariff rate from 30% to 13%, but a number of nontariff trade barriers impede U.S. access to the Ecuadorian market. Since 1992, Ecuador, along with Peru, Colombia, and Bolivia, has been a beneficiary of the Andean Trade Preference Act (ATPA), which provides trade preferences for Andean countries in exchange for counternarcotics cooperation. Although oil continues to dominate Ecuador's export market, other goods, such as seafood and cut flowers, have benefitted from the program. The ATPA was reauthorized and expanded by the Andean Trade Promotion and Drug Eradication Act (ATPDEA), Title XXXI of the Trade Act of 2002, ( P.L. 107-210 ). ATPDEA extended the preferential trade program until December 31, 2006, and expanded benefits to include certain textiles, petroleum, and pouched tuna. Since that time, Congress has favored short-term extensions of ATPA. Ecuadorian officials estimate that some $5.6 billion in U.S. trade and 350,000 jobs could be lost without ATPA. While Colombia and Peru have concluded FTAs with the United States, the Ecuadorian government opposes completing negotiations for an FTA with the United States and is not willing to restart negotiations as a condition to continue receiving U.S. trade preferences. Some Members of Congress favor continuing ATPA benefits regardless of a country's position on FTAs, while others oppose extending benefits for Bolivia and Ecuador. On October 16, 2008, the 110 th Congress enacted legislation to extend ATPA trade preferences until December 31, 2009 for Colombia and Peru, and until June 30, 2009 for Bolivia and Ecuador ( P.L. 110-436 ). Under certain conditions, trade preferences for Bolivia and Ecuador may be extended for an additional six-month period. For Bolivia, ATPA trade preferences will be extended only if the President determines that Bolivia has met program eligibility criteria. In the case of Ecuador, ATPA trade preferences will be automatically extended unless the President finds that the country is in violation of the eligibility criteria.

Ecuador, a small, oil-producing country in the Andean region of South America, has experienced ten years of political and economic instability. On January 15, 2007, Rafael Correa, a left-leaning, U.S.-trained economist, was inaugurated to a four-year presidential term, becoming the country's eighth president in ten years. President Correa has fulfilled his campaign pledge to call a Constituent Assembly to reform the country's constitution. The Assembly, which had a majority of delegates elected from Correa's party, drafted a new constitution that was approved by 64% of voters in a referendum held in late September 2008. New presidential, legislative, and municipal elections are scheduled for April 26, 2009. Some observers are concerned that the new constitution concentrates too much power in the Ecuadorian presidency. U.S. officials have expressed concerns about President Correa's populist tendencies, ties with Hugo Chávez of Venezuela, and trade and energy policies. Despite those concerns, Congress enacted legislation in October 2008 to extend U.S. trade preferences for Ecuador through June 2009. For more information, see CRS Report RS22548, ATPA Renewal: Background and Issues, by [author name scrubbed].

Most Recent Developments On November 7, 2003, the House passed the conference report on H.R. 1588 ,the FY2004 DOD authorization, by a vote of 362 to 40, after the conference report was filed earlyThursday morning. The Senate passed the bill by 95 to 3 on November 12. On November 24, thePresident signed the bill ( P.L. 108-136 ). Compromises were reached on the main issues that had heldup the conference for several months: Buy American provisions, the Air Force lease of BoeingKC767 aircraft, a new National Security Personnel System, concurrent receipt, and TRICARE fornon-deployed reservists. The conference version ( H.Rept. 108-283 ) of H.R. 2658 , the FY2004Department of Defense (DOD) appropriations bill, provided $368.7 billion in funding. It passed theHouse on September 23, 2003, and the Senate on the following day, in both cases quickly and withlittle debate. On September 30, 2003, the President signed the bill into law ( P.L. 108-87 ). The FY2004 DOD Authorization Act included several contentious issues, which were settledonly after long negotiations. On domestic preference restrictions in the Buy American Act and theBerry Amendment, the DOD authorization added provisions to assess the U.S. defense industrialbase and the extent of U.S. reliance on foreign suppliers but dropped proposals to require DOD topurchase certain items only from American suppliers. In the case of the tanker lease, DOD agreedto a proposal by Senator Warner to lease 20 and buy 80 Boeing KC767 tankers rather than lease 100aircraft, a proposal less costly than the original lease but more costly than a straight multiyear buy. The fate of the deal remains uncertain in light of Boeing's recent firing of high-level officials forimproprieties and an ongoing investigation by the DOD Inspector General. Compromises were also brokered on other contentious issues on which the Administrationhad threatened a veto. The Administration agreed to a new benefit that provides concurrent receiptof military retirement and disability payments to all military retirees with disability ratings of 50%or higher as well as an expansion of those eligible under the "Purple Hearts Plus" program enactedlast year that provides benefits to military retirees with combat or combat-related disabilities. TheAdministration also agreed to a 15-month pilot program to offer access to TRICARE tonon-deployed reservists who are unemployed or do not qualify for health benefits offered by theiremployer. H.R. 1588 also authorizes the Secretary of Defense to develop a new NationalSecurity Personnel System for DOD's civilian employees, gives DOD special exemptions to certainenvironmental statutes, and lifts the current ban on development of low-yield nuclear weapons. Both the House and Senate versions of H.R. 1588 , the authorization bill, provide$400.5 billion for national defense programs, about $1.5 billion above the request of $399.7 billionthat the Administration submitted in February. The authorization covers not only defense programsfunded in the defense appropriations bill but also programs funded in the military construction,energy and water, and some other appropriations measures. The FY2004 DOD appropriations bill provides a total of $368.7 billion for the defenseprograms it covers, $500 million less than the $369.2 billion that was included in both the House andSenate versions. The total in the conference agreement is slightly below the amounts provided fordefense by the budget committees under Section 302(b) allocations of the Congressional Budget Actand $3.1 billion below the request. This decrease freed up the same amount for other appropriationsbills while staying within the cap on discretionary spending established by the FY2004 budgetresolution ( H.Con.Res. 95 ). Final funding for DOD could also be affected by a $1.8billion rescission included in the conference version of the FY2004 Omnibus Appropriations bill( H.R. 2673 ) that was passed by the House on December 8 but is unlikely to beconsidered by the Senate until January 2004. The final version of DOD's FY2004 appropriations cushioned the programmatic impact ofthe $3.5 billion cut to the request by making an offsetting rescission of $3.6 billion from the $62.6billion in FY2003 supplemental appropriations that Congress approved in April. Under budgetscoring rules, rescissions are counted as a credit in the year when they are enacted, even though prioryear monies -- in this case, FY2003 -- are cut. This allowed the appropriators to meet their FY2004targets without reducing funding for FY2004 programs by $3.5 billion. Major Issues in the FY2004 DOD Authorization Act After a conference that spanned over five months, the conferees reached agreement and fileda report on November 7, 2003, on H.R. 1588 , the FY2004 DOD Authorization Act( H.Rept. 108-354 ). The bill was passed by the House by a vote of 362 to 40 on that same day andby the Senate by a vote of 95 to 3 on November 12, the following week. The President signed thebill on November 24, 2003 ( P.L. 108-136 ). On May 22, the House and the Senate passed their respective versions of the FY2004 DODAuthorization bills after several days of floor debate. The House version, H.R. 1588 ,passed by 361 to 68. Although the Senate passed its version, S. 1050 , by 98 to 1 on thesame date, the Senate adopted a unanimous consent agreement on the next day providing forconsideration of several specific amendments. On June 4 after the Memorial Day recess, the Senateadopted amendments on concurrent receipt and expedited immigration approval for selectedreservists and their families during wartime and rejected an amendment to cancel the 2005 round ofbase closures before passing the bill again by voice vote and appointing its conferees (see Table1A ). (1) Debate in the Housetook place on May 20 and May 21, and in the Senate on May 19, 20, 21, 22, and June 4, 2003. On May 13, the Senate Armed Services Committee (SASC) reported S. 1050 , after completing markup on May 9 ( S.Rept. 108-46 ). The bill as reported did not include the DODproposal to redesign its civilian personnel system. The House Armed Services Committee (HASC)reported its bill on May 16 after completing markup on May 14 ( H.Rept. 108-106 ). On May 21, theHouse adopted a rule ( H.Res. 245 ) that limited general debate to two hours andamendments to those specified in the rule. The Senate rule required that all amendments beconsidered relevant by the Parliamentarian. The House bill included much of DOD's legislativeproposal for a new civilian personnel system as initially marked up by the House GovernmentReform Committee ( H.R. 1836 ). (2) Table 1A. Status of FY2004 Defense Authorization: H.R.1588 and S. 1050 a. The Senate initially passed S. 1050 by 98 to 1 on May 22, 2003, but then adopteda unanimous consent agreement on May 23, 2003, to continue debate on selectedamendments after the recess; see Congressional Record , p. S7115. Those amendments wereconsidered on June 4, and the bill was then passed by voice vote. The conference report reached compromises on seven major issues that held up the authorization bill for several months: Buy American restrictions proposed by the House and opposed by the Senateand the Administration; proposals to provide costly concurrent receipt of military retirement andVeterans Administration (VA) disability benefits; proposals to allow the Air Force to initiate acquisition of a $29 billion programto lease and buy 100 Boeing KC767 tanker airplanes; fashioning of the new National Security Personnel System requested byDOD; expanding access to DOD's TRICARE health system to non-deployedreservists; exempting DOD from certain environmental statutes;and changing current restrictions on research on low-yield nuclearweapons. The compromises reached are described below. Details on other conference action, includingRDT&E and weapon system funding, will be included in a later update. Buy American Restrictions(3) In its request, the Administration proposed a series of changes to long-standing domesticpreference restrictions codified in the Buy American Act and the Berry Amendment in order to giveDOD additional flexibility to buy from foreign sources. Since 1933, the federal government hasbeen required in the Buy American Act to purchase from American producers unless the head of theagency finds that it is in the "public interest" to waive the restriction and purchase items from foreignsources. (4) For specific types of items -- food, clothing, tents, textiles, specialty metals and measuringtools -- the Berry Amendment requires that DOD buy from U.S. sources unless the purchases are insupport of combat operations outside the United States. (5) In the case of other items such as machine tools and ball bearings,DOD can buy from foreign sources if the foreign country is part of the U.S. national technology andindustrial base (defined as the United States and Canada), if it is in the "national security interestsof the United States," or if DOD would face unreasonable costs or delays. The Secretary of Defensehas waived these various domestic preference restrictions in certain circumstances. (6) This year's debate focused on the extent of DOD's waiver authorities in terms of both thecriteria and the items that could be covered. The Administration sought to widen circumstancespermitting waivers, whereas the House would have either required domestic purchase of additionalitems (such as machine tools) or made it more difficult for the Secretary of Defense to waive currentrestrictions. (7) Forexample, the House bill required DOD to identify and then buy from U.S. sources items consideredto be "critical" to the U.S. defense industrial base as well as assess the extent of U.S. dependence onforeign suppliers. The House version also would have prohibited DOD from purchasing fromforeign countries who had restricted sales of military goods or services because of U.S. operationsin Iraq, a provision that could have affected both France and Germany. The Secretary of Defense had signaled that the Administration would veto the bill if theHouse provisions were included. Concerned about the effects of these provisions on U.S. traderelations, Senator Warner requested the State Department, the U.S. Trade Representative, and OMBto address the potential effects of the legislation on trade relationships and cooperative defenserelationships. (8) Reflecting a compromise between the House's desire to expand protections for the defenseindustrial base and Senate's concerns about potential effects on U.S. trade relations, the conferenceversion dropped the new restrictions on certain items but required DOD to assess potential U.S.vulnerabilities. To meet Senate and Administration concerns about potential effects on U.S. traderelations, the conference bill stated that none of the provisions in this industrial base section wouldapply if the Secretary of Defense and Secretary of State determine that U.S. international agreementswould be violated. (9) To get a better understanding of the extent of DOD dependence on foreign sources or singledomestic sources for critical items or components of military systems, the Defense Department isto develop a "Military System Essential Item Breakout List" and identify where these items orcomponents are produced. DOD is to contract for a study that will define the criteria for "critical"and recommend items to be included on the list. To give additional support to domestic producers of critical items, the conference agreementestablishes a new Defense Industrial Base Capabilities Fund that DOD can use to provide incentivepayments to domestic contractors. No funds are specifically authorized (or appropriated) for thisfund in FY2004, however. Another new industrial base tool for DOD is authority to give preferencein source selection to domestic producers of machine tools or other capital assets used to makedefense goods. The bill also requires a study of the adequacy of U.S. producers in meeting defenseneeds for beryllium industrial base. (10) To protect U.S. trade relationships, the conference agreement also softened the House'sproposed prohibition on buying from countries who opposed U.S. actions in Iraq. Instead, theSecretary of Defense, in coordination with the Secretary of State, is to identify foreign countries whonow restrict military sales to the United States because of U.S. counterterrorism or militaryoperations; that list can be revised periodically. Even for those countries, DOD can purchase goodsif the department has a "compelling and urgent" need for the item. (11) Congress agreed tobroaden waivers to Berry Amendment restrictions on purchases of food, clothing, and similar itemsfrom combat operations only to include contingency operations as well. This issue is likely to resurface in the next year or two. By February 2005, DOD is requiredto complete an interim report that assesses which items are deemed essential and the extent of U.S.dependence on foreign sources for those items. At that point, the debate could revolve aroundwhether additional protections or incentives should be provided to domestic producers of thoseitems. (12) Concurrent Receipt Adopted Until recently, the Administration threatened to veto congressional proposals to provideconcurrent receipt of military retirement and VA disability benefits to military retirees because ofconcerns about the cost and the precedents for other benefit programs. Military retirees now mustreduce their military retirement on a dollar-for-dollar basis if they wish to receive tax-exemptdisability payments, a type of offset that is required in many benefit programs. The conference bill provides new benefits to military retirees with twenty or more years ofservice and disability ratings of 50% or higher. The conference bill also expands those who wouldbe eligible for special compensation under the "Purple Hearts Plus" program enacted last year forthose whose disabilities are due to combat or combat-related activities. The conference version wasreached when the Senate dropped its proposal for full concurrent receipt and the Administrationdropped its veto threat. In response to Administration concerns, the House had not included aconcurrent receipt in its version of the bill even though support among members was widespread. Eligibility Criteria and Phase-In of Benefit. Over200,000 military retirees are likely to qualify for the new concurrent receipt including militaryretirees with 20 years of service if they have disability ratings of 50% or above; have any disability ratings as long as they meet the criteria for a combat-relateddisability, popularly known as "Purple Hearts Plus;" are Guard and Reserve retirees who meet the criteria under "Purple HeartsPlus" if they have 20 or more years of "creditable" service, defined as 50 points for performing theirannual reserve duties; and are disability retirees whose payments exceed their retirement benefits had theyretired under regular retirement. The first phase of the new benefits are slated to go into effect on January 1, 2004, with fullconcurrent receipt for those eligible by December 31, 2013. (13) In the first year, monthly benefits for those eligible will be: $100 for those with a 50% disability rating; $125 for those with a 60% disability rating; $250 for those with a 70% disability rating; $350 for those with an 80% disability rating; $500 for those with a 90% disability rating; and $750 for those with an 100% disability rating. In the following year, those eligible would receive 10% of the difference between the benefit for theprevious year and the lesser of their monthly retirement benefit or their monthly disability payment. In each succeeding year, retirees will receive an additional 10% of that difference until the retireereceives the full amount of both disability payments and retirement benefits. Cost of New Benefit. CBO estimates that the newbenefit would cost $800 million in FY2004 and $22.1 billion over ten years in outlays for currentbeneficiaries. The annual cost would increase steadily to $2 billion by FY2008 and $3.5 billion by2013. (14) Although DOD does not need to include funds in its budget to cover the costs because the legislation createsa new entitlement program, the deficit would increase by annual outlays for current beneficiaries. Unlike current military retirement, H.R. 1588 does not require that DODprovide funds to cover the accrual cost of the new benefit for today's military personnel, a practicedesigned to capture fully the cost of military personnel. This means that general revenues wouldcover this cost rather than the Defense Department because DOD would not need to budget for thiscost. (15) New Commission on VA Benefits. H.R. 1588 also sets up a 13-member Veterans Disability Benefits Commission toevaluate and make recommendations about VA benefits for combat-related disabilities or deaths. The Commission is to report by February 2005, 15 months after enactment. (16) Prospect for Next Year. The concurrent receiptissue could well be revisited next year because of pressures from those not covered by the newbenefit -- i.e. those with disability ratings below 50% whose disability is not due to combat orcombat-related circumstances. Budget impacts would continue to be a concern. Those concernedwith the loss of DOD visibility of the full cost of military personnel that is part of the currentprovision could also press to require DOD to budget for the accrual cost of the benefit for its currentmilitary personnel. Tanker Lease Compromise Another controversial provision included in the FY2004 DOD Authorization conference islanguage that would allow the Air Force to proceed with a plan to lease 20 KC767 Boeing tankeraircraft and subsequently buy an additional 80 aircraft as proposed by the Senate Armed ServicesCommittee Chairman Warner in early September. (17) Signing of the contract has been held up because of questions ofimpropriety by two Boeing officials, Darlene Druyan, formerly in charge of Air Force acquisition,and Michael Sears, the Chief Financial Officer; Ms. Druyan is alleged to have discussed employmentopportunities with Boeing at a time when she was also negotiating the tanker deal. (18) In the past week, DeputySecretary of Defense Wolfowitz asked the DOD Inspector General to review this matter, and SenateArmed Services Committee Chairman Warner called for a broader review. (19) Although the conference bill authorizes the lease 20, buy 80 proposal, there continues to becontroversy between the House and Senate interpretation of what the language requires: a Housecolloquy between members says that the Air Force can use options included in the current contractand a Senate colloquy suggests that the Air Force must negotiate two new contracts, one for the leaseand one for the buy. (20) One contract could be implemented more quickly but could mean that the Air Force would payunnecessary costs associated with the lease. (21) The lease 20, buy 80 alternative differs from the Air Force's original unprecedented proposalto contract with Boeing to lease and then buy100 aircraft for a cost of $29 billion over a 15-yearperiod, including support costs. The Air Force finds leasing attractive because major funding wouldnot be required until 2006, and the bulk of the funding would not be needed until 2010-2017. TheAir Force argues that this approach would cause less disruption to current Air Force programs thanwould a traditional buy. In later years when the program would cost $2 billion to $3.7 billionannually, however, competition with other Air Force programs could be substantial. (22) It is not clear, however, whether the Air Force will be able to delay paying for the planes untildelivery as proposed by Under Secretary Wolfowitz in a letter to Senator Warner on November 5,2003. (23) In hisconfirmation hearing to be Deputy Under Secretary of Defense for Acquisition, Technology andLogistics, Michael Wynne suggested that the conference language may require that the Air Force payfor the aircraft when ordered rather than delaying payment by three years when the aircraft aredelivered. The Air Force has not identified how to fund the tanker within its current budget plans,which did not anticipate the tanker lease. This proposal has been controversial because leases are substantially more expensive thanbuying: the Air Force, CBO, CRS, and GAO all found that the lease would cost $5 billion to morethan $6 billion more than a multiyear buy of the aircraft, because the Air Force planned to rely ona special purpose entity to finance the deal and because congressional agencies and others havesuggested that the proposed lease did not meet the criteria for an operating lease. (24) Under the conference agreement that would allow the Air Force to lease 20 Boeing KC767aircraft and incrementally buy the remaining 80 aircraft, the Air Force still plans to delay the leasefunding until 2006 and the buy funding until 2008. (25) Although leasing 20 rather than 100 aircraft would be less costlythan the original proposal, the extent of the savings depends on how the Air Force implements theproposal. According to press reports, the Air Force now plans to use two contracts -- one for thelease and one for the buy -- costing a total of $18.3 billion in acquisition costs. That total would be$3.2 billion less than the previous $21.5 billion contract to lease and buy 100 aircraft but still $3.5billion more than CBO estimates a straight multiyear contract would cost. (26) In its scoring of the FY2004 DOD Authorization Act, CBO considers the new proposal tolease and then buy 20 aircraft to be a lease/purchase that would require that the Air Force provide$3.6 billion in budgetary authority in FY2004, although none is provided in the Act. Becausemembers did not raise a point of order under budget rules, however, the funding implied by the bill'slanguage was not challenged. (27) Although the conference reports includes language permitting incremental funding of themultiyear contract -- which would allow the Air Force to spread out the payments rather thanproviding the full amount for each year's buy as is required under standard acquisition rules -- it isnot clear whether the new language permits that. The Air Force has voiced concerns that thecompromise could jeopardize ongoing defense programs. New Personnel System for DOD Civilians As part of its April 10, 2003, bill proposal, the Defense Transformation for the 21st Century,the Defense Department requested broad authority to set up a new National Security PersonnelSystem (NSPS) governing its 735,000 civilian employees. DOD requested authority to develop anew personnel system that was "flexible" and "contemporary," allowing the Secretary of Defense todefine positions, set pay scales, establish hiring and firing rules, bargain with employees at thenational level, and set separate scales for rewarding senior level employees. Although DOD'sproposal did not include specifics, Under Secretary of Defense for Personnel and Readiness DavidChu stated that it intended to follow "best practices" for current personnel projects, including paybanding and the use of numerical ratings to link pay with job performance. (28) The chief issues raised about the DOD proposal were the nature of the proposed new system; the difficulties in designing an equitable performance rating system that wouldbe linked to pay; the appeals system for employees in case of disputes;and the level of bargaining between employees and DOD. DOD's proposal was debated within both the armed services and the governmental affairscommittees with concerns raised by both Members of Congress and government employee unionsabout the breadth of authority requested and the potential effects on government workers. Indefending new authority, others cited long-standing calls for reform of the civil service, the broadpersonnel management authorities granted to new Department of Homeland Security, and DOD'stwenty years of experience with alternative "pay for performance" systems for the 30,000 employeesin the national labs. The conference version of the FY2004 DOD authorization modified many of theAdministration provisions that were included in the House version of H.R. 1588 . TheSenate version of the FY2004 DOD Authorization bill did not include any provisions dealing with a new personnel system, but many of the provisions proposed by the Senate Governmental AffairsCommittee in S. 1166 , a bill to establish a National Security Personnel System, wereultimately adopted in the final version (see CRS Report RL31954 , Civil Service Reform: Analysisof the National Defense Authorization Act for FY2004 coordinated by Barbara Schwemle). (29) Phase-In Period, Collaboration, and Criteria for the New PersonnelSystem. Although H.R 1588 gives the Secretary of Defense broad discretion to setup the new system, DOD is required to develop its regulations jointly with the Director of the Officeof Personnel Management and to conform those regulations with criteria included in the law. Inaddition, any disputed parts of the new system could not go into effect until 90 days after theproposed system is presented for comment to labor organizations representing DOD's civilianemployees. During that period, labor organizations would have 30 days to review the proposal, DODwould have 30 days to resolve disputes, and Congress would be notified of remaining disputes 30days before implementation. (30) After this 90-day period, the new system could be put into placefor up to 300,000 DOD civilian employees but could not be expanded to the remaining employeesuntil DOD has a performance management system in place that meets criteria in the law. (31) In addition to being consistent with merit system principles and anti-discrimination laws,this new system to hire, assign, transfer, evaluate, and fire employees is required meet the followingcriteria: to be "fair, credible, and transparent;" to link employee performance to agency plans and include safeguards toensure fairness; to involve employees, supervisors and managers in the design, evaluation,and training for the new system; to include an "equitable method for appraising and compensatingemployees" in the pay-for-performance evaluation system. (32) In report language, the conferees calls on DOD to set up a pay-for-performance evaluationsystem that: groups employees into pay bands with upper and lower bounds based onposition responsibilities and types of work; sets up a performance rating system with rating periods and a feedbackprocess; includes a scoring system that is tied to salary changes and a review processthat addresses those failing to meet performance goals; and links individual performance factors to agency's goals and ensures scoringcomparability. Although this conference report language is not binding, it signals legislative intent. (33) In hearings, DOD policymakers stated that it intended to design a system like the pay banding system used by DOD'slaboratories for the past twenty years; the labs are, however, exempt from the new system until 2008and beyond that unless the new system gives them greater flexibility. (34) Details about the newpersonnel system are likely to emerge in the next year. (35) New Appeals Process and Labor Management RelationsSystems. As long as it complies with employment anti-discrimination laws, meritprinciples, and due process, DOD can set up a new, internal appeals process for handling disputesabout personnel actions. In designing this system, DOD is to consult with the Merit SystemProtection Board, the current government-wide appeals board. Although employees may appeal thedecisions of DOD's new internal board to the Merit System Protection Board (MSPB), thegovernment-wide board would only hear cases involving "arbitrary or capricious" actions, violationof due process, or those not supported by evidence. Decisions by that Board can be reviewed by acourt. (36) Jointly with the Director of the Office of Personnel Management and in collaboration withthe unions, DOD will also be able to develop its own labor management system under the newlaw. (37) This"collaborative issue-based approach to labor management relations" would go into effect 90 daysafter DOD provides a written description to unions. During that period, unions have 30 days toreview the proposed system, 30 days to discuss recommended changes, and 30 days of notificationto Congress of disputed areas. To resolve differences, either DOD or employee representatives canrequest help from the Federal Mediation and Conciliation Service. The new law provides for review of the proposed new system by an unspecified independentthird party. The authority of this new labor-management process appears to be broad because itsdecisions can " supercede all other collective bargaining agreements " in the department if theSecretary of Defense desires [italics added]. (38) Unless renewed, however, this new process would only be ineffect for a six-year period. This new system would also not be subject to the collective bargainingprocedures and deadlines that apply to other federal agencies. (39) DOD could also continue to bargain with employee unions and follow the statutoryprocedures and deadlines for collective bargaining affecting all other government agencies. (40) In another major change, H.R. 1588 gives DOD new authority to bargain at the national rather than the local leveland makes those decisions binding on all levels. Some critics have raised concerns about how localcircumstances will be taken into account in national decisions. These decisions could also bereviewed by an unspecified third party. H.R. 1588 appears to endorse two parallel systems of labor-managementrelations: one, a new "collaborative" system, and the other, a traditional collective bargaining systemas defined in current statute. The legislation does not specify what types of issues would be coveredor how responsibilities will be divided between these two systems. To the extent that the twosystems overlap, the law gives precedence to the new system. The new law appears to adopt asimilar approach in the case of appeals process for employee grievances, allowing DOD to set up itsown board but also permitting a review of those decisions by the Merit System Protection Board incertain circumstances. Funding Levels and Separation IncentiveAuthorities. Although increases for individual employees would be likely to varyfrom the current system, the new law calls on DOD to "the maximum extent practicable" to budgetthe same amount for civilian employees under the National Security Personnel System as would bethe case under the current system so that overall, employees are not "disadvantaged." (41) At the same time, the lawcalls on DOD to give civilian employees the same pay raises as are received by military personnel. As an additional workforce management tool, the law allows DOD to give separation incentives of$25,000 to up to 25,000 civilian employees annually for early retirement. (42) The budgetary implications of the new system are not obvious. It is also not clear whetherthese provisions would significantly limit DOD's current plans to transfer substantial numbers ofmilitary jobs to civilian personnel or contract employees. Other Civilian Personnel Changes. The new lawalso provides several new authorities that would be available to all federal agencies includingauthorizing pay for performance pilot projects; higher pay caps for Senior Executive Service employees;and $500 million for a new Human Capital Fund to reward exceptionalperformance. (43) The appropriators have only provided $1 million for this new fund in the final version of the FY2004Omnibus Appropriations Act currently awaiting final congressional action. Environmental Exemptions for DOD As it did last year, DOD requested that military readiness-related activities be exempted fromcertain provisions of five federal environmental laws, including the Clean Air Act, the EndangeredSpecies Act, the Marine Mammal Protection Act, the Solid Waste Disposal Act, and the "Superfund"law that governs cleanup of hazardous waste. This year, Congress proved to be receptive toproposals to modify DOD's responsibilities to protect endangered species and marine mammals, bothvery controversial provisions. H.R. 1588 also gives DOD new authority to usewetlands mitigation banks and modifies regulations governing Restoration Advisory Boards thatinform citizens about environmental cleanup. DOD has argued that compliance with environmental requirements significantly affectmilitary training, and hence readiness, while critics have questioned the extent of the impact andDOD's limited use of current waiver authorities. A recent GAO report found that environmentalrestrictions are only one of several factors, including urban growth and pollution, that affect DOD'sability to carry out training activities and that DOD continues to be unable to measure the impact ofenvironmental laws. (44) The debate centers on whether or to what extent DOD should be exempt from current environmentalstatutes. (45) Congressional Action on Endangered SpeciesAct. (46) Both the Senate and the House agreed that DOD needed additional authority to consider militarytraining requirements as well as wildlife protection in managing land on DOD installations. For thatreason, the new law permits DOD to substitute an Integrated Natural Resources Management Plan(INRMP), required under the Sikes Act, for a designation of lands as "Critical Habitat" under theEndangered Species Act, as a way to protect endangered species. (47) The authority to substitutea resource management plan for a critical habitat designation has been under dispute. Environmentalgroups are concerned that protection for endangered species may be weakened with this change. Under the Sikes Act, the INRMP, which guides the conservation, protection, andmanagement of fish and wildlife resources, is prepared by the Secretary of the military departmentin cooperation with the U.S. fish and Wildlife Service. The "use of military installations to ensurethe preparedness of the Armed Forces," or military readiness, however, takes precedence. (48) Under the EndangeredSpecies Act, once land has been designated as "critical habitat," federal agencies must "consult"regarding actions that would destroy or adversely affect those habitats or face penalties. The substitution is permitted only if the Secretary of the Interior determines in writing thatDOD's plan provides a "benefit for the species." (49) Critics have questioned, however, whether the criterion of"benefit to the species" is likely to be adequate and whether implementation of the plans can beenforced since the Sikes Act does not provide for suits by individuals or citizen groups. The finalversion also amends the Endangered Species Act rather than Title 10 of the U.S. Code which governsDOD activities, a choice that created concern among environmental groups because of the potentialprecedent for other exemptions. Other environmental interests opposed amending Title 10 becausedoing so may give the Secretary of Defense rather than the Secretary of Interior the primary role indetermining whether integrated management plans provide adequate protection. According to the Senate Armed Services Committee, portions of about 150 DOD bases couldbe designated as critical habitat were this exception not permitted. (50) The conference reportsuggests that the new language will "provide a balance between military training requirements andprotection of endangered or threatened species." (51) Congressional Action on the Marine Mammal ProtectionAct. The conference agreement adopts two of the Administration's proposedchanges to the Marine Mammal Protection Act, including new two-year exemption authority and anew definition of "harassment." Debate about the implications of both of these changes was heated. New Exemption Authority. Under a new provision,the Secretary of Defense, after consulting with the Secretary of Commerce and the Secretary of theInterior, could "exempt any action or category of actions" from compliance with the MarineMammal Protection Act for two years if the Secretary determines "it is necessary for nationaldefense." (52) At hisdiscretion and after consultation with the Commerce and Interior Departments, the Secretary ofDefense could renew such exemptions for additional two-year periods. The conference report suggested that this national security exemption parallels that includedin other environmental laws, while environmental interests argued that a "national defense"exemption is broader than that provided in other statutes. (53) DOD has not, in fact, used existing exemption authorities,arguing that the threshold was too high for most activities. Exemptions under the new law must bereported to the armed services committees. (54) New Definition of Harassment. The conferenceagreement also adopted the Administration proposal to use narrower definitions of harassment ofmarine mammals for DOD's military readiness and scientific activities of federal agencies than areapplied to other agencies. Under current law, the standard requires that activities be prohibited ifthey would have a "potential to injure or disturb" marine mammals. (55) The new language definesDOD's activities as "harassment" only if an act "injures or has the significant potential to injure" ordisturbs the activities of marine mammals by disrupting "natural behavior patterns"to a point wherethose patterns are "abandoned or significantly altered." [italics added] (56) To limit the applicationof the exemption, the Act defines readiness as training, combat operations, and testing, the definitionthat was included in the FY2003 DOD authorization. DOD had asked to broaden the application toinclude support activities. (57) In reaction to a recent court case that limited DOD's deployment of the low-frequencySURTASS sonar because of the potential impact on marine mammals, the FY2004 DODauthorization exempts DOD from complying with current standards for evaluating the impact onmarine mammals based on "specified geographical regions," or the "small numbers." DODcontended that these standards were inappropriate for marine mammals that migrate over broadexpanses of the ocean and that using a "negligible impact" standard would be a more scientific wayto make decisions rather than on the basis of the number of mammals affected. (58) Other Changes and Future Actions. Congressalso made other changes requested by the Administration, including allowing DOD purchase creditsfrom a mitigation bank to offset those lost on DOD installations, and exempting DOD's RestorationAdvisory Boards from issuing financial disclosure statements and from providing notice of theiractivities in the Federal Register. (59) These boards are the primary avenue through which localcommunities learn about cleanup decisions on military lands. The issue of when and where to carve out exemptions from environmental statutes for DODcan be expected to re-surface next year as the Administration continues its efforts to provide specialtreatment for the department to protect DOD's readiness activities. While Congress did not approveDOD's requested exemptions from other environmental laws, it did require DOD to report byJanuary 31, 2004, on how environmental statutes and residential development surrounding militarybases affect readiness activities. (60) TRICARE For Non-Deployed Reservists Because of the large number of reservists who have been in Afghanistan, Iraq, and the UnitedStates, Congress considered a number of ways to expand current benefits and decided to approve ademonstration project to provide access to DOD's TRICARE health care system to certainnon-deployed reservists. Under current law and DOD policy, reservists become eligible forTRICARE once they are on active duty. The FY2004 DOD Authorization Act offers access toTRICARE to non-deployed reservists who receive unemployment compensation or who are noteligible for coverage offered by an employer. Reservists would be required to pay a premium set at28% of the value of the actuarial cost of the plan as is currently required for civilian employees inthe government's Federal Employees Health Benefits (FEHB) insurance plan. (61) The conference versionof the FY2004 DOD authorization bill provides access to this targeted version of the new benefitthrough December 31, 2004, three months longer than is provided in the FY2004 supplemental. (62) According to the report, CBO estimates that this demonstration project would cost about$200 million annually compared to the $2 billion annual cost of providing access to all non-deployedreservists that was proposed in the Senate version of the bill. Dropped in conference, the Senateproposal had triggered a veto threat from the Administration. The conferees set a ceiling of $400million on the cost of the demonstration project. (63) To help Congress assess the health care needs of reservists and their families, the conferencereport requires that GAO conduct an evaluation by May 1, 2004. (64) With significant numbersof reservists likely to be needed in the next few years for the occupation of Afghanistan and Iraq,proposals to expand benefits for reservists are likely to be revisited next year. Lifting the Ban on Research on Low-Yield Nuclear Weapons The conferees adopted the Senate version of this change to a ban on R&D of low-yieldnuclear weapons that was enacted in 1989. Rather than modifying the ban to apply only to R&D atthe engineering and development stage, H.R. 1588 repeals the ban on R&D but requiresspecific congressional authorization for the Department of Energy (which funds this program) toproceed to engineering development of low-yield nuclear weapons or a nuclear earth penetratingweapon (see discussion in section on nuclear weapons for more detail). In the conference version of the Energy and Water appropriations bill, funding for the RobustNuclear Earth Penetrator was reduced from the $15 million request to $7.5 million; funding for theAdvanced Concepts Initiative, which would fund concept studies on low-yield nuclear weapons, wasset at $6 million. (65) Maintaining Current Levels of Imminent Danger Pay and Family SeparationAllowance One less controversial provision was included in H.R. 1588 : maintaining thehigher levels of imminent danger pay and family separation allowance adopted in last year'ssupplemental. The DOD Authorization Act adopts the higher levels for all eligible service membersthrough December 31, 2004. The FY2004 Emergency Supplemental continues the higher ratesthrough September 30, 2003. At one point, the Administration had proposed alternative ways tomaintain the higher levels, but these proposals were not adopted. Major Action On FY2004 DOD Appropriations Bills The FY2004 DOD Appropriations Act was signed into law ( P.L. 108-87 ) on September 30,2003, at the end of the fiscal year. Conferees resolved their issues, and the bill was passed onSeptember 23 by the House and September 24 by the Senate after the two-day hiatus in businesscaused by Hurricane Isabel. Differences in funding levels were resolved. Table 1B. Status of FY2004 Defense Appropriations: H.R.2658 and S. 1382 a. Full committee markup was completed on June 26, 2003; the report was filed on July 2, 2003. b. Full committee markup was completed on July 9, 2003; the report was filed on July 10, 2003. Major Funding In FY2004 DOD Appropriations Act The major changes to the Administration's request are shown in Table 2. Further details onthe appropriation conference will be provided in a later update. Table 2. FY2004 DOD Appropriations: CongressionalAction (in billions of dollars) Sources : H.Rept. 108-187 ; S.Rept. 108-87 , H.Rept. 108-283 . Notes: CRS adjusted title totals for both FY2003 and FY2004 to allocate funding in generalprovisions. [ ] Square brackets indicate the total amount of funding for general provisions that isallocated by title in the table and is not added into the total. For FY2004, see H.R. 2658 and S. 1382 . For FY2003, see P.L. 107-248 . a. Of the $4.0 billion decrease for general provisions in the House version of the FY2004 DODappropriations act, H.R. 2658 allocates $2.0 billion to O&M appropriations, and$2 billion is a rescission to the $15.7 billion provided in the Iraq Freedom Fund for latercosts of the war and occupation in the FY2003 supplemental. According to scoring rules, thatdecrease counts as a reduction to FY2004 appropriations. Of the $3.4 billion in reductionsfrom general provisions in S. 1382 , $3.2 billion is from a rescission to the IraqFreedom Fund. About $1.8 billion of the deceases in FY2003 that were made in generalprovisions affected O&M appropriations. CRS will allocate these general provisions in alater update. b. The Iraq Freedom Fund is a flexible account set up to cover later costs of the war, which couldnot be allocated to specific appropriation accounts. c. Difference is rounding: total funding is $369.193 billion in the House bill and $3.143 billion inthe Senate bill. Funding Prohibition And Restrictions On Total InformationAwareness (Terrorist Information Awareness) R&D Program. In the FY2004 DODAppropriations Act, the conferees dealt with the controversial Total Information Awareness(renamed Terrorism Information Awareness) or TIA program, which was, until recently, run byretired Admiral Poindexter in the Defense Advanced Research Projects Agency (DARPA). Conferees transferred unspecified components of the program's classified venues where research cancontinue but would be subject to safeguards in the National Foreign Intelligence Program that restrictthe sharing of information on U.S. citizens. Less controversial components of the program, such asmachine translation of languages, remain in DARPA. The components that were transferred and theamount of funding remaining cannot be determined because details are in a classified annex. (66) This agreement was a compromise between Senate action that prohibited funding for R&Dfor the controversial Total Information Awareness R&D program and the Administration's objectionsto cutoff of funding. The TIA program is designed to develop a system to collect and analyze a wideassortment of information to detect potential terrorists, and included various restrictions onimplementation or deployment of TIA programs similar to those included in the House version ofthe FY2004 DOD Appropriations Act, H.R. 2658 . The Administration objected to theSenate cutoff of funding. (67) Similar restrictions on deployment were originally included in the ConsolidatedAppropriations Resolution of FY2003 ( P.L. 108-7 ). (68) On May 20, 2003, the Defense Advanced Research ProjectsAgency (DARPA) avoided a cutoff in funding for TIA by submitting the report required by P.L.108-7 . On August 29, 2003, retired Admiral Poindexter, the head of the program, resigned, partlyin response to recent controversy about another TIA component, FutureMAP, which was designedto set up a "market" to collect predictions about potential terrorist or terrorist-related events. (69) That program wascancelled in response to public and congressional concerns. Military Construction Appropriations Bills Several months elapsed between the summer passage of H.R. 2559 , the FY2004military construction appropriations bill, and final conference action on November 22, 2003, anuncharacteristic delay for this bill ( P.L. 108-132 ). The conference bill provides $9.3 billion, about$100 million more than the request. The long hiatus between House and Senate action and the final conference reflectedcontroversy about funding for overseas bases in Europe and Korea, which was opposed by theSenate because of uncertainties about their future. This issue was finally resolved by theestablishment of an eight-member congressional commission to review overseas base structure andreport back to Congress by December 31, 2004. (70) The Administration had signaled earlier that it plans to proposesubstantial changes in overseas bases as part of efforts to "reduce the footprint" of the U.S. militaryoverseas. (71) With initialaction on the domestic base closure process kicking off next year, debate about the future of overseasbases can be expected next year, perhaps even before the new report. Overview of Administration Request and Budget Trends On February 3, 2003, the Administration submitted its FY2004 budget request to Congress. The Administration proposed $399.7 billion for the national defense budget function, about $7billion above the estimated FY2003 level. (Note: This includes in the FY2003 total $10 billion thatCongress appropriated for DOD in the FY2003 Consolidated Appropriations Act; most OMB andDOD tables prepared for the February budget release do not include these additional funds. (72) This does not include inthe FY2003 level, however, $62.6 billion in supplemental defense appropriations that Congressapproved in April for the Iraq war and other costs. (73) The FY2004 increase is in addition to substantial increases in FY2002 and FY2003. The newrequest is more than $100 billion above the FY1999 level for defense spending, and it represents anincrease over five years of 20% in inflation-adjusted constant FY2004 dollars. The FY2004 defenserequest is almost 25% higher in real terms than the budget in FY1996 when DOD's drawdown inspending and military personnel after the end of the Cold War was completed. The Administration is proposing continued increases of about $20 billion annually in thedefense budget for the next five years, which would increase national defense budget authority to$480 billion by FY2008. Table 3 shows the ten-year FY1999-FY2008 trend in defense spendingunder the Administration's plan both for the national defense budget function and for the Departmentof Defense budget. (74) Of the $399.7 billion requested for national defense in FY2004, $370.6 billion is forprograms covered by the defense appropriations bill, $9.0 billion by the military constructionappropriations bill, $17.3 billion for Department of Energy defense-related activities funded in theenergy and water appropriations bill, and the remaining $2.8 billion in other appropriations bills. Table 3. National Defense Budget Function and DOD Budget, FY1999-FY2008, AdministrationProjections (current and constant FY2004 dollars in billions) Source: Office of Management and Budget, F2004 Historical Tables, and FY2003 Consolidated Appropriations Resolution ( P.L. 108-11 ). a. Includes $10 billion in budget authority appropriated to DOD in the FY2003 Consolidated Appropriations Resolution (see P.L. 108-11 ) but not theoutlay effects of that addition because OMB has not re-estimated outlays. Does not include $62.6 billion in FY2003 supplemental appropriationsfor defense provided in H.R. 1559 , P.L. 108-11 . Annual Growth for DOD Slows In Later Years in FY2004 BudgetResolution The conference agreement on the FY2004 congressional budget resolution( H.Con.Res. 95 , H.Rept. 108-71 ), which was passed by both houses onApril 11, just before the April recess, endorses the Administration's proposed growthof $20 billion annually for defense over the next five years (see Table 4 ). Over thefollowing five years, however, defense would grow by about $10 billion annually;the Administration does not project beyond FY2008. The chief issue in this year'sbudget resolution was the amount to be provided for tax cuts. Table 4. Status of FY2004 Budget Resolution(H.Con.Res. 95, S.Con.Res. 23) Note: Senate substituted S.Con.Res. 23 into H.Con.Res. 95 afterpassage. a. Budget resolutions are only marked up in full committee. b. Budget resolutions guide the action of the authorizing and appropriatingcommittees but are not signed into law by the President. Although there has been considerable congressional support for increases in defense, some observers have questioned whether increases can be sustained in thefuture because of high federal budget deficits and the dramatic increases in costsassociated with the retirement of the baby boom generation. (75) TheFY2004 budget resolution projects a 40% increase spending on entitlement programsby FY2008 and an 80% increase by FY2013. (76) Table 5. FY2004 Budget Resolution: National Defense Request and Congressional Action (billions of dollars) Source: CRS calculations based on OMB, FY2004 Historical Tables, and DOD, Office of the Secretary of Defense, Comptroller, Briefing, FY2004Defense Budget (February 6, 2003); Conference Report on FY2004 Budget Resolution, H.Rept. 108-71 , and House report on H. Con. Res. 95, H.Rept.108-71 , p. 6. a. Administration request does not reflect outlays from the $10 billion enacted in the FY2003 Consolidated Appropriations Resolution. b. OMB does not project budget authority or outlays beyond five years. House and Senate Differences about DefenseSpending. The final version of the FY2004 budget resolutionprojects a five-year total for defense spending of $2.2 trillion, a level comparable tothe Administration projection and matching levels approved in both houses. In lateryears, however, the House projected higher funding for defense than the Senate, andthe conference compromised at $4.758 trillion through FY2013, about the midpointbetween the two houses. (77) The conference version of the budget resolution also deleted two provisionsproposed by the Senate: a measure to set aside $100 billion over the next ten years in areserve fund to pay for costs associated with the war in Iraq;and a measure to include $182 million in FY2004 and $12.8 billionin FY2004-FY2013 to cover the cost of phasing in concurrent receipt benefits formilitary retirees with disability levels of 60% or higher. The Senate bill had included a defense reserve fund that decreased by $100billion the funds set aside for a tax cut in order to provide $10 billion annually tocover continued costs of military action or reconstruction in Iraq. (78) Fundingfor Iraq in FY2003 was provided in the FY2003 supplemental, but there is no fundingfor occupation costs in the FY2004 budget, which was submitted before the initiationof hostilities. Nor is there funding in the FY2004 budget to cover the costs of thecontinued U.S. presence in Afghanistan. The Senate version of the resolution also would have allowed all militaryretirees whose disabilities are 60% or higher to receive both military retired pay andVeterans Administration disability benefits, a proposal considered but rejected in thefinal version of the FY2003 DOD Authorization Act. Instead, last year, Congressprovided special compensation for military retirees whose disabilities are a result ofcombat or combat-related activities in the FY2003 Authorization Act. (79) Theconference version of the resolution deleted both provisions. Without an allocationin the budget resolution, it appears less likely that benefits for military retirees withdisabilities will be expanded. Scoring Differences Between Congress and theAdministration. CBO scored the cost of DOD's request as$400.5 billion, $800 million higher than the Administration's estimate (see Table 4and Table 5 ). The difference between the two estimates reflects primarily CBO'sassessment that a DOD legislative proposal to set up a new account, the RefinedPetroleum Products transfer account, would cost about $675 million compared tozero expenditures assumed by DOD. According to DOD, the rationale for setting upthis new account with an "indefinite appropriation" is to allow DOD to cover thedifference between the amount budgeted for fuel costs and actual market prices. (80) SinceDOD assumes that its estimate is correct, the Administration provided no funds forthe account. CBO, however, believes that fuel prices in FY2004 are likely to beabout $5 higher per barrel than DOD assumes -- $27 a barrel compared to $22 barrel-- and scores the likely cost of the new account at $675 million based on the level ofDOD's annual fuel purchases. Although the FY2004 congressional budget resolution adopted CBO's higherscoring, it appears that Congress is unlikely to agree to set up the new account. Neither the House nor the Senate version of the FY2004 DOD Authorization Actincludes funds for the account. (81) Instead, both houses transfer that $675 millionin the CBO estimate for that account to other programs. The House and Senateappropriators also rejected DOD's proposal for this new fund and eliminated the $675million for the account. DOD's Appropriations Allocation. A sign of potential pressure on DOD's budget top line in the future is the outcome ofdecisions about the distribution of funds to the various appropriations subcommitteesto guide their markup, a process known as setting 302(b) allocations. (82) The annualcongressional budget resolution sets the total amount of discretionary spendingavailable to the appropriations committees and recommends spending allocations foreach budget function. The appropriations committees, however, have discretion toset allocations for each subcommittee. The conference agreement on the budget resolution allocates $784.7 billionin discretionary budget authority to the appropriations committees. For severalweeks after the budget resolution was agreed to, committee leaders debated how toallocate funds among the subcommittees and, especially, how to absorb what theyidentified as a $5 to $7 billion gap in spending requirements and amounts available.Departing from traditional practices where House and Senate Committees workseparately on subcommittee allocations, committee leaders negotiated across bothhouses with their leadership and with the White House to establish a commonframework within which to base their initial allocations. On June 11, House and Senate Appropriations Committee Chairmenannounced an agreed package that would free up sufficient resources to address thefunding gap and remain within the overall FY2004 discretionary budget cap of$784.7 billion. As approved by all parties, including the President, the appropriationscommittees reduced defense spending by $3.1 billion and moved $2.2 billion inFY2004 advance appropriations to FY2003. Trends in DOD Spending Plans Assessing long-term trends in the defense budget is difficult because of theeffect of the large amount of supplemental funding received since September 11,2001, in the Emergency Terrorism Response supplemental of 2001 and the FY2002supplemental. That funding, which is included in figures in Table 6 , makescomparisons difficult, particularly for operation and maintenance spending thatreceived the bulk of supplemental funding (see below). Table 6. Administration Request: NationalDefense Budget Function by Title, FY2001-FY2008 (in billions of dollars) Source: Office of Management and Budget, Budget of the U.S. Government,FY2004: Historical Tables and Budget of the U.S. Government, FY2004: AnalyticalPerspectives (February 2003), and H.Rept. 108-10 , conference report on FY2003Consolidated Appropriations Resolution for final enacted levels, and HouseAppropriations Committee. OMB figures include DOD's supplementalappropriations of $17.3 billion in the FY2001 Emergency Terrorism Responsesupplemental and $14.0 billion in the FY2002 supplemental. *Note: Does not include $62.6 billion received by DOD in FY2003 supplementalappropriations. Figures for FY2003 also include an additional $10 billion provided for DOD in the FY2003 Consolidated Appropriations Resolution for classified intelligenceprograms and for costs associated with the U.S. presence in Afghanistan and theglobal war on terrorism. The $62.6 billion provided to DOD in the FY2003supplemental, however, is not included. DOD's procurement funding shows littleincrease in FY2004. Much of the increase in RDT&E reflects an increase from $7.6billion to $9.1 billion in DOD's missile defense program, reflecting DOD's plan tobegin deployment of 10 land-based interceptors as well as to continue the ramp-upin R&D. By FY2008, however, DOD plans to increase funding for procurement byabout 40% and RDT&E by over 15% compared to FY2003. DOD Receives $103.1 Billion in Supplemental Appropriations SinceSeptember 11 Attacks Since the September 11 attacks, DOD has received $103.3 billion insupplemental or regular appropriations for the war in Afghanistan, the war in Iraq,enhanced security at DOD installations, and the global war on terrorism (see Table7 ). The most recent supplemental for the Iraq war provides funding for the U.S.presence in Afghanistan and continued operations in Iraq through FY2003. The Administration did not include any funding for these costs in its FY2004budget, however, which suggests that the Administration will propose either asupplemental or a budget amendment for FY2004. In addition to funding insupplementals, DOD received $10 billion in the FY2003 ConsolidatedAppropriations Resolution to fund the occupation of Afghanistan andclassified/intelligence programs. In its post-September 11 requests for supplemental funding, DOD hasrequested substantial flexibility in its use of funds, citing the uncertainty ofestimating the cost of war and the global war on terrorism. The Administration hasreiterated that theme in its FY2004 request as well, calling for transformation of notonly weapon systems to meet new threats but also transformation of DOD's businesspractices and personnel management systems (see discussion of MajorAdministration Themes below). Although Congress has generally provided the amounts requested by DODin its supplemental requests, it has been reluctant to provide the amount of flexibilityrequested by DOD. In fact, with each supplemental request, Congress has been lesswilling to accept the flexibility proposed by DOD. Congress rejected DOD's requestthat about 95% of the funding be provided in a flexible account, choosing instead toallocate 45% of the funds in flexible accounts (see below). Of the $40 billion appropriated in the Emergency Terrorism Responsesupplemental (ETR) passed on September 14, 2001, DOD received $17.3 billion,almost entirely within the Defense Emergency Response Fund, a flexible account. Of that total, DOD had discretion to allocate funds as long as Congress wasinformed. For the remainder, Congress set levels within ten broad categories forDOD spending. Congress also permitted DOD to move funding into variousappropriation accounts at its discretion in the FY2002 supplemental for the bulk ofthe funding requested. In the most recent supplemental, for FY2003, DOD requested that Congressprovide 95% of the funding in the Defense Emergency Response Fund (DERF) sothat DOD could transfer funds to various accounts as needs arise. Instead Congressset up an new fund, the Iraq Freedom Fund, and allocated 25% of the funds requestedto that fund but required five-day advance notifications. Table 7. Flexibility in DOD's SupplementalFunding Since September 11 Attacks (Dollars in Billions) Source: CRS calculations from CRS Report RL31829 , CRS Report RL31005 , CRS Report RL31406 , and appropriations conference reports and GAO Report, DefenseBudget: Tracking of Emergency Response Funds for the War on Terrorism , April2003. a. In the ETR, DOD funds were appropriated into the Defense Emergency ResponseFund (DERF) except for a small amount of military construction funds,procurement funding, and Pentagon Renovation Revolving Funds. In theFY2002 Supplemental, DOD funds were appropriated to the DERF, whichwas made into a transfer account. In the FY2003 supplemental, funds wereappropriated into a new Iraq Freedom Fund, set up as a transfer account, orinto regular appropriations accounts. Major Themes in the Administration's FY2004 Request The overarching theme in the Administration's FY2004 request was a call forflexibility to transform not only U.S. military doctrine and technology, but alsomilitary and civilian personnel systems and defense acquisition practices. Accordingto Secretary of Defense Rumsfeld, not only do "our armed forces need to be flexible,light and agile," but also "the same is true of the men and women who support them,"in meeting the "frequent, sudden changes in our security environment," (83) includingthe global war on terrorism. To meet this goal, the Administration delivered a broad ranging legislativeproposal, entitled the "Defense Transformation for the 21st Century Act," to Congresson April 10, 2003, shortly before Congress's two-week April recess. Among otherthings, the legislative proposal would have given the Secretary of Defense authorityto redesign the civil service system governing the 700,000 civilian employees in theDepartment of Defense, provided additional flexibility in managing senior militaryofficers, modify certain acquisition requirements, and exempted DOD from certainenvironmental statutes. Some members of Congress expressed concern that DOD had delivered suchan ambitious proposal at a time when Congress was about to recess and shortlybefore markup of the defense authorization bill was planned. Although DODwitnesses discussed their plans to submit the proposal earlier in the year and met withcongressional staff in the preceding couple of months, the specific proposals were notavailable before April 10 (84) (as noted above, CRS compares all of theproposed new measures with current law in CRS Report RL31916 , DefenseDepartment Transformation Proposal: Side by Side with Current Law , by Robert L.Goldich, [author name scrubbed], [author name scrubbed], and [author name scrubbed]). The Administration characterized its proposals as the logical followup toearlier efforts to transform weapons modernization and operational practices. According to DOD, the FY2004 budget was the first budget to reflect fully PresidentBush's commitment to "challenge the status quo" and balance the need to meetcurrent challenges from the global war on terrorism and near-term threats with theneed to transform DOD in the longer term. (85) DODcontended that transformation is now fully underway with new emphasis placed onunmanned vehicles, precision guided munitions, special operations forces, command,control, and communications, and missile defense (see discussion on modernizationbelow), as well as the establishment of a new command, NORTHCOM, to focus onhomeland security, and changes in training practices to emphasize joint operations. DOD also argued that its proposals for military pay raises and other benefitsand its funding of operational training will ensure that recruitment and retentionremain high and that readiness goals continue to be met. Over the longer term, DODplans to review its current basing strategies in Europe and review the role of reserveforces but these areas are currently under study and not incorporated in the FY2004budget. Investment and Other Issues The major issues in this year's congressional debate -- for example, DOD'srequest for broad ranging authority to manage its civilian workforce, exemptions forDOD to certain environmental laws -- are discussed above. Other issues raisedinclude whether DOD's investment priorities are transformational, affordable, and consistent with "lessons learned" from the war in Iraq; revising criteria governing the FY2005 base closure round dueto be initiated next year; various organizational and acquisition changes;and DOD's proposed changes for management of militarypersonnel. An update for conference action will be included in a later update. Proposed Acquisition and Organizational Changes In its legislative package, DOD included several provisions designed toincrease its flexibility to contract for major defense weapons systems and informationtechnology programs, receive waivers from Buy America and domestic contentrequirements, and buy standardized items. (86) Two potentially controversial proposals would allow DOD to contract out forfirefighting and security guards at bases and would allow DOD to count workperformed by contractors at federally owned facilities as part of the 50% minimumfor in-house performance of depot work. Congress has consistently opposed allowingDOD to hire private security guards and loosening the definition of work that couldbe counted as "in-house". (87) A later update will provide the details aboutconference action. Other Organizational And Financial Proposals ToIncrease Flexibility. Other DOD proposals would give the Secretaryof Defense broad discretion to reorganize the department, transfer personnel, and beexempt from current personnel caps. To increase financial flexibility, DODrequested that the limit on transfers between appropriation accounts be raised fromthe current level of $2.5 billion to 2.5% of total DOD spending or about $9 billion. (DOD made this same request in the FY2003 supplemental, and received a highertransfer limit but not the 2.5%.) (88) DOD also proposed changing the standard governing awards of contracts togovernment entities versus private companies based on the A-76 competitivesourcing rules. DOD proposed using a "best value" assessment rather than thecurrent lowest cost standard. A less controversial proposal, which has been endorsedby both OPM and DOD, would transfer the DOD civilian personnel currentlyperforming security investigations to OPM. DOD also proposed eliminating 184reports to Congress that are currently required, ranging from reports on specializedtopics to more general reports on readiness levels and operation and maintenancefunding. (89) A later update will summarize conferenceaction. Authority To Spend $200 million To SupportForeign Militaries. In its request, DOD asked Congress to give itpermanent authority to allocate up to $200 million to support "coalition forces," orforeign military forces. Although this request is similar to the request enacted in theFY2003 supplemental for $1.4 billion for coalition forces who help the U.S. tocombat terrorism, DOD's request for permanent authority included no provision forcongressional oversight. In the FY2003 supplemental, Congress required DOD toreport by July 1, 2003 on its plan to allocate funding for coalition forces. (90) Finalaction will be included in a later update. Affordability and Mix of DOD's FY2004 InvestmentPrograms A perennial issue in defense policy has been whether the Defense Departmentwill be able to afford all of the major weapons modernization programs that havebeen on the drawing boards, particularly toward the end of the decade, when anumber of new programs are planned to be in full scale production. The issue hasbeen complicated by the Defense Department's growing commitment to defensetransformation, which implies an effort to accelerate selected programs and perhapsadd some entirely new ones. During the 2000 presidential election campaign,then-Governor Bush promised to "skip a generation" of weapons programs in orderto free up funds for more transformational priorities. A full update for conferenceaction will be in a later update. Last year, and again this year, the Defense Department has tried to calculatethe amount that is being devoted to modernization programs that it regards asparticularly transformational. According to DOD Comptroller Dov Zakheim, theseprograms add up to $24.3 billion in the FY2004 budget and $239 billion over theperiod of the six-year FY2004-FY2009 future years defense plan (FYDP). UnderSecretary Zakheim said that DOD made room for these programs in part by cuttingabout $82 billion from projected service budgets over the course of the FYDP. Thecuts include termination of a number of Army programs to upgrade current weapons,early retirement of 26 Navy ships and 259 aircraft and an attendant reduction of10,000 in the Navy's personnel end-strength, and early retirement of 115 Air Forcefighter aircraft and 115 mobility/tanker aircraft, as well as efficiencies. (91) Finalconference action will be addressed in a later update. In the FY2004 budget, the Defense Department requested $74.4 billion forweapons procurement and $61.8 billion for research, development, test, andevaluation (RDT&E). Major aspects of the Administration request, and some keyissues include the following. Army Transformation. In recentyears, the Army has been pursuing three major initiatives simultaneously: (1)upgrades to the current "legacy" force, including improvements in M1 tanks andBradley Fighting Vehicles; (2) development and deployment of an "interim" forcemade up of six brigades equipped with Stryker wheeled armored vehicles anddesigned to be more rapidly deployable than heavy armored forces; and (3) pursuitof an "Objective Force" include the "Future Combat System," a family of newarmored vehicles and other systems designed to fundamentally change the way theArmy will fight in the future. In addition, the Army has been continuing to developthe Comanche helicopter, though late last year, the Defense Department decided tocut planned total Comanche procurement by about half. In the FY2004 budget request, the Defense Department cut back a number ofplanned upgrades of Army legacy systems, including high-profile M1 and Bradleyupgrades. In the wake of the Army's success in the Iraq war, there was extensivediscussion in Congress about the wisdom of these planned cuts. The House ArmedServices Committee-reported version of the authorization adds $727 million to therequest to continue M1 and Bradley upgrades along with some related Army upgradeprograms. Congressional Action. Table 8A shows action on major Army programs in the House and Senate defenseauthorization bills, and Table 8B shows action in the House and Senate versions ofthe defense appropriations bill. A few issues stand out. Legacy force modernization: The House authorization adds$258.8 million for Bradley Fighting Vehicle upgrades and $424 million for M1 tankupgrades (offset by cuts of $140 million in other M1 projects). These are among theprograms that the Administration wants to terminate as part of the $82 billion in6-year savings that officials announced when the budget was released. The Houseappropriations bill adds the same amount for Bradley upgrades and $155 million forM1 upgrades. The House appropriators also urged DOD to budget for enough M1upgrades in the future to complete equipping the 3rd Armored Cavalry Regiment withmodernized tanks. In effect, the House rejected DOD plans to cut back on Army"legacy force" upgrades, though House appropriators also indicated that they may besatisfied once sufficient upgraded Bradleys and M1s are procured to equip 2 and 1/3divisions of what the Army calls its "counterattack" force of heavy armoredunits. Stryker interim combat brigades: The House appropriationsalso added $35 million for long lead items for Stryker armored vehicle procurementto equip the 5th and 6th Stryker brigades. DOD has, in the past at least, consideredhalting the interim combat brigade program after four brigades are deployed. Houseappropriators sent a strong message that they expect DOD to fill out the plannedsix-brigade force. The Senate Appropriations Committee also added $35 million forlong lead items for Stryker procurement, though its report language did not specifythat it was for the 5th and 6th brigades. In addition, Senate appropriators added $100million in other Army procurement -- for communications and other equipment -- toaccelerate Stryker brigade deployment, a strong vote of support for the Armyprogram. Helicopters: All of the committees add money for UH-60utility helicopters, largely for the National Guard, though there are some differencesin how the money is allocated. This is a perennial congressional addition to proposedbudgets. All of the committees also support continued Comanche helicopterdevelopment despite cost growth and substantial cuts in the plannedprogram. Table 8A. House and Senate Action on Major Army Acquisition Programs: Authorization (amounts in millions of dollars) Sources: H.Rept. 108-106 ; S.Rept. 108-46 . Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action. Table 8B. House and Senate Action on Major Army Acquisition Programs: Appropriations (amounts in millions of dollars) Sources: H.Rept. 108-187 ; S.Rept. 108-87 . Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action. Note: FutureCombat System funding includes PE 0604645A - Armored Systems Modernization (ASM)-Eng. Dev. only. NavyPrograms. (92) Key Navyship-acquisition programs for FY2004 include the Virginia (SSN-774) classsubmarine program, the Littoral Combat Ship (LCS) program, the Arleigh Burke(DDG-51) class Aegis destroyer, the DD(X) next-generation destroyer program, theSan Antonio (LPD-17) class amphibius ship program, the Lewis and Clark (TAKE-1)auxiliary ship program, the Trident cruise-missile submarine (SSGN) conversionprogram, and the Aegis cruiser (CG-47 class) conversion program. The FY2004budget also includes, among other things, continued advanced procurement fundingfor CVN-21, an aircraft carrier to be procured in FY2007. One issue in congressional hearings on the FY2004 Navy program concernsthe planned size and structure of the Navy. The 2001 Quadrennial Defense Review(QDR) revalidated the plan for a 310-ship Navy established by the 1997 QDR, butalso stated that force-structure goals in the 2001 QDR, including the 310-ship goal,were subject to change pending the maturation of DOD's transformation efforts. In February 2003, in submitting its proposed FY2004 defense budget, DODofficials stated that they had launched studies on future requirements for underseawarfare and future options for forcibly entering overseas military theaters. Thesestudies have the potential for changing, among other things, the planned number ofattack submarines and the planned size and structure of the amphibious fleet. Sinceattack submarines and amphibious ships are two of the four major building blocksof the Navy (the others being aircraft carriers and surface combatants), DOD, bylaunching these two studies, appears to have taken steps to back away from the310-ship plan. At the same time, the Secretary of Defense has explicitly declined toendorse a plan for a 375-ship fleet that has been put forward in recent months byNavy leaders. As a result of these events, there is now uncertainty concerning the plannedsize and structure of the Navy: DOD may no longer support the 310-ship plan, butneither has it endorsed the 375-ship plan or any other replacement plan. Thisuncertainty over the planned size and structure of the Navy affects surfacecombatants as well as submarines and amphibious ships, because the biggest singledifference between the 310-ship and 375-ship plans is in the area of surfacecombatants. The 310-ship plan includes 116 surface combatants, all of which arecruisers, destroyers, and frigates, while the 375-ship plan includes 160 surfacecombatants, including not only cruisers, destroyers, and frigates, but as many as 60smaller Littoral Combat Ships as well. Congressional Action: Senate and HouseMarkup. Table 9A shows action on major Navy programsin the House and Senate defense authorization bills, and Table 9B shows Houseaction in the committee-reported version of the defense appropriations bill. In actionon key issues: Carrier replacement program: A major budget decision in theFY2004-FY2009 defense plan was to accelerate the transition to the next generationof carriers by incorporating more advanced technology into the next carrier to befully funded in FY2007 or FY2008. In all, the new carrier is projected to cost almost$12 billion for development and production, of which about $5 billion is for R&D. All of the congressional defense committees supported the Administration's revisedcarrier development program. Virginia-Class Attack Submarines: The House AppropriationsCommittee denied funds requested to sign a multi-year procurement (MYP) contractfor new submarines, saying (1) that the schedule for delivery of the first submarineremains too uncertain and (2) that the requirement to buy two submarines each yearin FY2007 and FY2008 may be unaffordable given the $2.6 billion price of eachboat. The Senate Appropriations Committee approved multi-year procurement ofVirginia-Class submarines, but only for 5 boats over the FY2004-FY2009 planningperiod rather than the 7 boats that the Navy had requested. Subsequently, on August14, the Navy announced an agreement with contractors on a multi-year procurementdeal for 7 boats, but with an option to reduce procurement to 5 or 6 boats with someincrease in costs per ship. Attack Submarine Refueling Overhaul: The Senate ArmedServices Committee added $248 million to refuel one Los Angeles-class attacksubmarine; the Navy did not request funding for any overhauls. The SenateAppropriations Committee added $450 million for two refueling overhauls. NeitherHouse defense committee added any funds. Littoral Combat Ship: All of the defense committees expressedsome concern about the status of the Littoral Combat Ship (LCS) developmentprogram, though none eliminated funding. The Senate Armed Services Committeeissued the most critical report language, though it also added $35 million for moreexperimentation to determine the utility of the concept. The committee said (1) aNavy report on the program that Congress required last year did not adequatelyreview alternatives or establish priorities among Navy combat requirements, (2) thatNavy cost estimates did not include firm figures on the various modules that wouldbe installed in the common sea frame, and (3) that costs of the program couldcompete with higher priority Navy shipbuilding in a constrained budget environmentin the future. The House Armed Services Committee added $35 million for moduledesign, while the House Appropriations Committee added $25 million for moduledesign but cut $10 million from the overall program. The Senate AppropriationsCommittee added funds for module design. LPD-17 Class Amphibious Ship: The House AppropriationsCommittee added $175 million for advance procurement for the next ship of theclass, the LPD-23, and told the Navy to provide full funding for the ship in FY2005,as had been planned, rather than in FY2006, as the Navy projected this year. TheSenate Appropriations Committee added $75 million for theLPD-23. Table 9A. House and Senate Action on Major Navy Acquisition Programs: Authorization (amounts in millions of dollars) Sources: H.Rept. 108-106 ; S.Rept. 108-46 . Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action. Table 9B. House and Senate Action on Major Navy Acquisition Programs:Appropriations (amounts in millions of dollars)

With passage of the FY2004 DOD Authorization Act by the House on November 7 and bythe Senate on November 12, 2003, Congress completed action on this year's defense authorization( H.R. 1588 / H.Rept. 108-384 ). The President signed the bill on November 24, 2003( P.L. 108-384 ). On September 30, just in time for the new fiscal year, the President signed H.R. 2658 , the FY2004 DOD Appropriations Act ( P.L. 108-87 ), completing action onFY2004 defense appropriations. The recently enacted FY2004 DOD authorization bill provides a total of $401.3 billion fordefense programs, including funds in the DOD and military construction appropriations as well asseveral other defense-related programs funded in other appropriations measures. The totalauthorized for these defense and defense-related programs that make up the national defense functionis $1.5 billion above the Administration's request and $9.3 billion above the FY2003 enacted level. The conference version of the FY2004 DOD authorization is the culmination of months ofnegotiation about several contentious issues: Buy American provisions, the Air Force's controversialtanker lease proposal, a new concurrent receipt benefit for military retirees, a new National SecurityPersonnel System, a new health benefit for reservists, and special exemptions for DOD to certainenvironmental regulations. Substantial differences about these issues between the houses and withthe Administration had stymied completion of the authorization bill. In conference, Buy American restrictions mandating that DOD rely exclusively on U.S.suppliers for certain items were dropped in favor of provisions that require DOD to assess the U.S.industrial base and possibly provide incentives to certain U.S. producers. In the case of the Boeing767 tanker aircraft, DOD accepted a Senate-proposed compromise allowing them to lease 20 and buy80 rather than lease100 aircraft. After the Administration dropped its veto threat, Congress passed a new concurrent receiptbenefit that is expected to provide about 200,000 military retirees with both their military retirementand disability benefits, reversing a prohibition in effect for over 100 years. DOD also received newauthority to design and implement its own civilian personnel system and new exemptions to certainenvironmental rules. The bill also provides access to DOD's TRICARE health care to unemployed, non-deployed reservists and maintains current higher levels of imminent danger pay and familyseparation allowance for eligible military personnel through December 2004. The FY2004 DOD Appropriations Act provides appropriations totaling $368.7 billion forthe defense programs it covers. That total is $3.5 billion below the Administration's request and $4.0billion above last year's enacted level. The programmatic impact of the cut is cushioned, however,because the bill receives credit for $3.5 billion rescinded from funds provided in the $62.6 billionFY2003 supplemental appropriations bill that Congress approved in April 2003. Key Policy Staff

Introduction Obesity is a major public health concern in the United States. Two-thirds of adults and one-third of children are overweight or obese. Although many factors contribute to obesity, weight gain is generally the result of an energy imbalance—an excess of calories consumed over calories expended. High rates of obesity and chronic disease have prompted various state and local nutrition labeling initiatives, in addition to other tactics and strategies. The 1990 Nutrition Labeling and Education Act (NLEA, P.L. 101-535 ) authorized the Food and Drug Administration (FDA) to require nutrition labeling of most foods and dietary supplements, but it did not require the labeling of food sold in restaurants. Section 4205 of the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 ) amended the Federal Food, Drug, and Cosmetic Act (FFDCA), establishing nutrition labeling requirements for standard menu items offered for sale in chain restaurants or similar retail food establishments (SRFEs) that have 20 or more locations, that conduct business under the same name regardless of the type of ownership of the locations, and that offer the same menu items for sale. The ACA provision required FDA to promulgate regulations specifying the scope of entities and foods covered by the law, as well as details regarding how the required calorie and nutrition information would be conveyed to consumers. In 2011, FDA proposed two rules delineating nutrition labeling requirements for restaurants and SRFEs, as well as vending machines; both rules were finalized and published in the Federal Register on December 1, 2014. Prior to the final rule, some food establishments had already begun voluntarily posting nutrition information. However, variable state and local regulations had resulted in a patchwork of labeling requirements, making compliance more challenging for chain food establishments. Certain groups, such as the National Restaurant Association, expressed support for a federal nutrition labeling standard, stating that it would ease the regulatory burden on national chain restaurants. This report discusses the role of nutrition labeling in obesity management and prevention; the research on the effectiveness of restaurant menu calorie labeling; FDA's authority to regulate nutrition labeling; and the FDA's final rules on restaurant menu and vending machine labeling. The report also identifies issues for Congress and flags stakeholders' concerns regarding FDA's final menu labeling rule. Obesity and Menu Labeling According to the most recent data from the National Health and Nutrition Examination Survey (NHANES), in 2011-2014, the prevalence of obesity in the United States was 36.5% among adults and 17% among youth. Although rates appear to have stabilized in youth since 2003-2004 (see Figure 1 ), the prevalence of obesity among U.S. adults and children is higher than the Healthy People 2020 goals of 30.5% and 14.5%, respectively. This is of public health concern because obesity is associated with increased risk of a number of health conditions, such as high blood pressure, type 2 diabetes, cardiovascular disease, and stroke. Research has shown that frequent eating out is associated with increased calorie intake, and that food eaten away from the home tends to be of lower nutritional quality and higher in saturated fat and sodium than food prepared at home. Larger portion sizes served in restaurants contribute to greater calorie intake, and analyses of three fast food chain restaurants indicate that portion sizes have not changed since the mid-1990s (1996-2013). Studies also suggest that consumers tend to underestimate the number of calories in restaurant meals. Changes in the prevalence of overweight and obesity in the United States have paralleled changes in calorie consumption. As obesity rates increased, calories consumed by individuals two years and older also increased significantly, from a daily average of 1,875 calories in 1977-1978 to 2,002 calories in 2005-2008. The same study indicates that in 1977-1978, individuals in the United States consumed approximately 18% of calories away from the home, compared with 32% in 2005-2008. More recent NHANES data suggest that obesity rates have been leveling off and even decreasing in some age groups (e.g., among two- to five-year-olds). Data from USDA's Economic Research Service show that average calorie intake has also declined—by 118 calories (about 5%) between 2005-2006 and 2009-2010. During this time period, consumption of calories from food eaten away from home fell by 127 calories per day, and daily fast food calories fell by 53 calories per day. These changes suggest that consumer preferences for nutritious foods may be increasing, and there may be greater use of available nutrition information (e.g., the Nutrition Facts panel), resulting in improved diet quality among consumers. Public health stakeholders have generally supported restaurant menu labeling as a policy option for obesity prevention. Proponents of menu labeling say that providing calorie information in restaurants and food establishments may help consumers make healthier and more informed dietary choices. However, some researchers have found that current evidence does not support a significant impact of menu labeling on calories ordered, suggesting that posting calorie counts does not result in consumers making healthier food choices. Research Evaluating the Impact of Menu Labeling It is difficult to predict what effect, if any, mandatory restaurant menu labeling will have on food purchasing and health outcomes. However, changes in behavior following implementation of calorie labeling regulations in other jurisdictions prior to publication of the final federal rule (e.g., New York City, Philadelphia, and King County, WA) may provide some insight. Studies of the Impact of Menu Labeling on Calories Purchased Studies examining the relationship between menu labeling and calorie purchasing behavior have yielded mixed findings. Although consumers often report ordering fewer calories as a result of menu labeling, studies examining restaurant transaction data have not consistently reported a decrease in calories purchased after implementation of menu labeling. This section discusses several studies that have evaluated the impact of menu labeling, using survey and transaction data, on calories purchased. Findings from current research are limited because existing studies often vary in scope and methodology. For example, several of the studies that did not find a post-labeling decrease in calories purchased were conducted by the same group of researchers using samples from low-income communities in New York, NY and Newark, NJ, and research has shown that there are socioeconomic disparities in calorie label use, with higher-income individuals being more likely to notice calorie labels. Another study limited its sample population to one chain of restaurants in King County, WA. An additional factor to consider is the time frame between implementation of menu labeling and an assessment of purchasing behavior, as there needs to be enough time for an effect to take place. One study, for instance, did not find an effect at four to six months post-mandatory menu labeling, but it did find a decrease in calories purchased 18 months after implementation. Another study that did not find an effect of menu labeling on calories purchased examined outcomes two months post implementation, which may not have been enough time for an effect to take place. In addition, most of these studies relied on self-reported data to assess customers' awareness and use of calorie labels. Such self-reporting may not be accurate, as evidenced by the inconsistencies between reported calories purchased and actual calories purchased as indicated on receipts. Finally, these studies analyzed the number of calories purchased but not changes in calories consumed, which may differ in response to menu labeling. For example, in full-service restaurants, customers may be more likely to share a meal or eat half the meal and take the rest home, which would not be captured by transaction data. Similarly, in fast food or carry-out establishments, customers may consume only a portion of their meal, which would not be captured by transaction data. Studies of the Impact of Menu Labeling on Sales and Revenue In 2009, Starbucks commissioned a Stanford University study to determine how the menu labeling mandate in New York City (NYC) affected its overall sales. Findings indicate that after the implementation of mandatory calorie labeling, average calories per transaction fell by 6% at Starbucks, an effect that lasted 10 months after the calorie posting commenced. This effect was primarily found for food purchases, as the average food calories per transaction fell by 14% (i.e., approximately 14 calories per transaction), while average beverage calories per transaction did not substantially change. Changes in beverage calories may not be reflected in transaction data. For example, if a customer orders a latte and substitutes skim milk for 2% milk, or asks for one pump of syrup instead of the usual three or four, those substitutions would not be captured by transaction data because the cost of the latte would not change. This study also assessed the impact of calorie posting on Starbucks revenue, reporting no statistically significant change in revenue as a result of calorie labeling. Because cost data associated with the policy was unavailable, profits were not measured directly. The effect on revenue was divided into (1) the effect on the number of transactions and (2) the effect on revenue per transaction. The study found that daily store transactions increased by 1.4% on average, while revenue per transaction decreased by 0.8% on average for all Starbucks in NYC, resulting in a zero net impact of calorie posting on Starbucks revenues. In NYC Starbucks stores located within 100 meters of a Dunkin Donuts, daily revenue increased by 3.3% on average. To determine consumers' preliminary knowledge of calories in Starbucks food and beverages, surveys were administered before and after the introduction of a calorie-posting law in Seattle. Pre-menu labeling survey data indicate that Starbucks customers tended to be inaccurate in predicting the number of calories in their beverage and food orders. Specifically, in this study, consumers overestimated the number of calories in beverages and underestimated the number of calories in food. This is consistent with the study's finding that calorie posting discouraged individuals from purchasing food but not beverages. Because consumers tended to underestimate the number of calories in food items, seeing the posted caloric value, which was greater than initially expected, may have led consumers to reduce their food purchases. However, because consumers tended to overestimate beverage calories, calorie posting may not have discouraged people from purchasing beverages. Proponents of menu labeling argue that, in addition to affecting consumer purchasing behavior, mandatory menu labeling may incentivize restaurants to offer lower calorie options and provide consumers with healthier choices. A study in the American Journal of Preventive Medicine reported that new menu items in restaurant chains in 2013 contained approximately 60 fewer calories compared with menu items in 2012—a 12% drop in calories. This voluntary action by large chain restaurants may have been in anticipation of the ACA's federal menu-labeling provisions which will be in effect May 7, 2018. FDA's Authority to Regulate Nutrition Labeling The Federal Food, Drug, and Cosmetic Act of 1938 authorized FDA to regulate most food products and their ingredients. In 1990, Congress passed the Nutrition Labeling and Education Act (NLEA P.L. 101-535 ), which amended the FFDCA and gave FDA authority to require nutrition labeling of most foods (including dietary supplements), exempting restaurants from this requirement. However, current regulations pursuant to the NLEA requirement do require restaurants and SRFEs that make either a nutrient content or health claim to provide certain nutrition information upon request. For example, if an entrée is listed as low-fat, the restaurant must be able to provide information about the fat content of the entrée upon request. Section 4205 of the Affordable Care Act ( P.L. 111-148 , ACA) amended FFDCA Section 403 to establish nutrition labeling requirements for standard menu items offered for sale in chain restaurants or SRFEs that have 20 or more locations, that conduct business under the same name regardless of the type of ownership of the locations, and that offer the same menu items for sale. Establishments subject to the menu labeling requirements must disclose the number of calories in each item "as usually prepared and offered for sale," and must post a succinct statement, specified by regulation, concerning suggested daily caloric intake on menus and menu boards. The law requires covered establishments to provide additional nutrition information (e.g., total fat) to consumers in writing upon request. Self-service food or food on display must have an adjacent sign that lists calories per displayed food item or per serving. Certain food items are exempted from the labeling requirements, such as items not listed on a menu or menu board (e.g., condiments), daily specials and temporary items appearing on the menu for less than 60 days, custom orders, and food items that are part of a market test and on the menu for less than 90 days. Covered establishments must have a "reasonable basis" for their nutrient content disclosures, such as nutrient databases, cookbooks, or laboratory analyses. The Secretary must establish standards for determining and disclosing the nutrient content for standard menu items that come in different flavors, varieties, or combinations but are listed as single menu items (e.g., ice cream, pizza, doughnuts, or children's combination meals). In FDA's final regulatory impact analysis, the Agency estimated that approximately 298,600 establishments, organized under 2,130 chains, would be covered by the menu labeling regulations (see Table 1 ). The law also established nutrition labeling requirements for vending machine items and amended FFDCA Section 403A regarding federal preemption of state and local food labeling requirements. FDA Rulemaking on Menu Labeling As noted, FFDCA Section 403(q)(5)(H) requires the Secretary to promulgate regulations to implement the menu labeling requirements, including standards for determining and disclosing the nutrient content for standard menu items that come in different flavors, varieties, or combinations but are listed as single menu items, as well as registration rules for establishments that are not otherwise subject to the law's requirements to voluntarily provide nutrition information. In promulgating regulations, the Secretary is required to consider, among other things, the format and manner of the nutrient content disclosure requirement. The Secretary may also require, by regulation, that other nutrient information be disclosed to help consumers maintain healthy dietary practices. In 2011, FDA published two proposed rules establishing calorie labeling requirements for food items sold in restaurants and vending machines. The two rules were finalized and published in the Federal Register on December 1, 2014. This section provides an overview of the FDA's proposed and final regulations on menu labeling, and describes corresponding statutory requirements upon which the regulations are based. Covered Establishments To be subject to the menu labeling requirements, a restaurant or SRFE must be part of a chain of 20 or more locations doing business under the same name (regardless of the type of ownership of the locations) and offering for sale substantially the same menu items. Restaurants and SRFEs may also voluntarily register with FDA to become subject to the menu labeling regulations. The meaning of SRFE is not defined in statute. The Proposed Rule The proposed rule defined restaurant or similar retail food establishment as a retail establishment that offers for sale restaurant or restaurant-type food, where the sale of food is the primary business activity of that establishment. FDA had proposed two options for clarifying which restaurants and similar retail food establishments would be covered by the rule. The two definitions would affect different segments of the food industry. Option 1 would generally have exempted entertainment venues (e.g., movie theaters, amusement parks), general merchandise stores with in-house concession stands, hotels, and transportation (e.g., food trucks, trains, airplanes). Option 2 would have generally excluded the entities in option 1, as well as grocery and convenience stores. Final Rule In the final rule, FDA defines a restaurant or similar retail food establishment to mean "a retail establishment that offers for sale restaurant-type food, except if it is a school as defined in 7 CFR 210.2 or 220.2." FDA clarified that Establishments such as bakeries, cafeterias, coffee shops, convenience stores, delicatessens, food service facilities located within entertainment venues (such as amusement parks, bowling alleys, and movie theaters), food service vendors (e.g., ice cream shops and mall cookie counters), food take-out and/or delivery establishments (such as pizza take-out and delivery establishments), grocery stores, retail confectionary stores, superstores, quick service restaurants, and table service restaurants would be restaurants or similar retail food establishments if they sell restaurant-type food. Covered entities under the final rule include restaurants and SRFEs with 20 or more locations, as well as supermarkets and convenience stores, and entertainment venues such as bowling alleys and movie theaters. FDA's decision to include supermarkets and convenience stores under the definition of SRFE has generated debate, with some industry representatives questioning FDA's broad interpretation of the statutory provision. Specifically, representatives of the supermarket industry have expressed concern over the scope of the definition of covered establishments, citing that implementing menu labeling would be costly and complex for grocery and convenience stores. Unlike many restaurants, retail supermarkets merchandise food in various forms (e.g., service, self-service, cold, hot), and the types of food offered at retail supermarkets can vary throughout the year depending on season, holiday, and promotion. FDA has provided some flexibility, exempting certain foods purchased in retail establishments, such as items that are intended for more than one person to eat (e.g., a loaf of bread, rotisserie chicken) and some items sold at deli counters, such as meat, cheeses, and bulk salads. Covered Food The menu labeling requirements apply to standard menu items offered for sale at covered establishments. Certain foods served at covered establishments are exempt from labeling requirements: custom orders, which are prepared in a specific manner at the customer's request; daily specials—foods that are not routinely listed on the menu; temporary menu items, which appear on a menu or menu board for less than 60 days per calendar year; market test items—foods that are offered for fewer than 90 consecutive days to test consumer acceptance; and condiments available for general use that every customer has access to (e.g., salt, pepper, ketchup). Proposed Rule FDA proposed to define restaurant food as "food that is served in restaurants or other establishments in which food is served for immediate human consumption, i.e., to be consumed either on the premises where that food is purchased or while walking away; or which is sold for sale or use in such establishments." Restaurant-type food was proposed to mean "food of the type described in the definition of 'restaurant food' that is ready for human consumption, offered to sale for customers, but not for immediate consumption, processed and prepared primarily in a retail establishment, and not offered for sale outside that establishment." The proposed rule further specified which foods would require labeling and which foods would be exempt, including alcoholic beverages. Final Rule In the final rule, FDA did not define restaurant food and revised the definition of restaurant-type food to better reflect the type of food usually offered for sale in restaurants. The final rule defines restaurant-type food as food that is (1) usually eaten on the premises, while walking away, or soon after arriving at another location; and (2) either (i) served in restaurants or other establishments in which food is served for immediate human consumption or which is sold for sale or use in such establishments; or (ii) processed and prepared primarily in a retail establishment, ready for human consumption of the type described in (i), and offered for sale to consumers but not for immediate human consumption in such establishment and which is not offered for sale outside such establishment. Foods covered and not covered by the new definition are listed in Table 2 . Menus and Menu Boards The law defines menu or menu board to mean "the primary writing of the restaurant or other similar retail food establishment from which a customer makes an order selection." The law requires that covered establishments provide calorie information on menus and menu boards, and include a statement of availability of other nutrition information upon request. Proposed Rule In the proposed rule, FDA defined menu or menu board as the primary writing from which a customer makes an order selection, including but not limited to breakfast, lunch, and dinner menus; dessert menus; beverage menus; children's menus; other specialty menus; electronic menus; and menus on the Internet. This definition includes different menu forms, such as booklets, pamphlets, and single sheets of paper. Menu boards may be inside a restaurant or SRFE or outside (e.g., drive-through menu boards). In the proposed rule, FDA tentatively concluded that take-out and delivery menus would be considered within the definition of menus to the extent that they included all or a significant portion of items offered for sale. Final Rule In the final rule, FDA determined that take-out and delivery menus would not be considered primary writing solely on the basis of whether they include all or a significant portion of items offered for sale. Instead, FDA identified several other factors that would determine whether certain writing qualifies as the primary writing from which a customer makes a selection. For the purposes of the final rule, a written material would be considered a menu if it includes the name (or image) and price of a standard menu item, as well as if it provides a means for the customer to order from while viewing the writing at the restaurant or SRFE. There has been some concern with FDA's interpretation of primary writing. Pizza companies, for example, have argued against in-store menu boards, citing that most of their business is driven by phone and online ordering. According to a Domino's Pizza representative, only about 10% of ordering occurs by a customer walking into a Domino's store and selecting an item from the menu board. Thus, representatives of the pizza industry propose that pizza companies be allowed to list calorie counts online instead of at their stores. Convenience store representatives have also expressed concern with FDA's final rule, arguing that the way their stores acquire, prepare, and sell food is very different from chain restaurants. Stores that are part of the same chain, for example, may sell the same food items, but the individual stores often vary in how those items are offered and prepared, as influenced by geographic region and market demand. In addition, grocery and convenience stores offer food in many different settings, such as counter areas, self-service coffee and soda stations, baked goods displayed away from the counter area, and refrigerated "grab-and-go" foods. Many of these foods and beverages are not listed on the menu boards that sometimes appear above the counter. Calorie Declaration and Other Nutrition Information The law requires covered establishments to disclose the number of calories contained in standard menu items. Calorie information must have a reasonable basis for its nutrition information disclosures (e.g., nutrient databases, cookbooks, laboratory analyses, and other reasonable means) as described in specified regulations. The calorie information must be displayed adjacent to the standard menu item on all menus and menu boards. The restaurant or SRFE must also provide a succinct statement, as specified by regulation, concerning daily recommended caloric intake to inform the consumer of the significance of the standard menu item in the context of a daily diet. The covered establishment must also be able to provide additional nutrition information, in written form, upon the consumer's request. Proposed Rule FDA proposed the following succinct statement to be listed on menus and menu boards: A 2,000 calorie daily diet is used as the basis for general nutrition advice; however, individual calorie needs may vary. Per the proposed rule, calories would have to be declared to the nearest 5-calorie increment in foods containing 50 calories or less, and to the nearest 10-calorie increment in foods containing more than 50 calories; and the term "Calories" or "Cal" would have to appear as a heading above a column listing the number of calories for each standard menu item, or adjacent to the number of calories for each standard menu item. FDA proposed use of the "80/120 rule" for nutrient substantiation, which would permit a narrow deviation between the posted calorie value for a particular item and the actual calorie content of the item. This aspect of the rule was modeled after regulations for prepackaged foods. Several comments on the proposed rule opposed use of the 80/120 standard, asserting that restaurant food is generally prepared via human labor, and is thereby subject to wider variation. For example, adding seven French fries to an order could increase calories by more than 20%, or an extra squirt of mayonnaise could render the nutrient content declaration out of compliance, deeming the food product misbranded under the "80/120 rule." Final Rule The final rule requires the following statement to be included on the menu or menu board: 2,000 calories a day is used for general nutrition advice, but calorie needs vary. Calorie information must be displayed adjacent to the name of the standard menu item on all menus and menu boards, as specified; calories must be declared to the nearest 5-calorie increment in foods containing 50 calories or less, and to the nearest 10-calorie increment in foods containing more than 50 calories; and the term "Calories" or "Cal" must appear as a heading above a column listing the number of calories for each standard menu item, or adjacent to the number of calories for each standard menu item. The menu or menu board must contain the statement, "Additional nutrition information available upon request." In the case of multiple-serving standard menu items, the calorie declaration must be for the whole menu item (e.g., pizza: 1,600 calories) or per serving, as long as the number of servings is listed on the menu as well (e.g., pizza: 200 cal./slice, 8 slices). Additional information regarding FDA's formatting requirements for calorie declaration on menu and menu boards can be found in FDA regulations, guidance, and resources for industry. In the final rule, FDA determined that using the "80/120 rule" for establishing compliance with the nutrition labeling requirements would raise practical problems. Instead, FDA specified that nutrient declarations must be accurate and consistent with the scientific basis used to determine values. In addition, covered establishments are required to submit to FDA, upon request, information substantiating nutrient values. If a nutrient database is used as the method of reasonable basis, for example, certain information must be provided to FDA, such as the identity of the database used; the recipe or formula used as a basis for the nutrient declarations; a detailed listing of the amount of each nutrient that that ingredient contributes to the menu item; and, among other information, a statement signed by a responsible employee of the covered establishment certifying that the provided information is complete and accurate. Industry groups have argued that FDA's final rule contains rigid calorie labeling requirements, and have asked for labeling flexibility that would permit establishments to provide calorie information in the form of ranges, averages, or standard offerings (e.g., the information for a sandwich without regard to whether the customer orders extra cheese or condiments), among other methods. In grocery stores, for example, foods that are "packaged and prepared for immediate consumption" are not always pre-portioned (e.g., salad bar or hot food bar items) and would not be served in standardized sizes. In addition, certain items in food establishments are served as a whole (e.g., pizza), with a variety of food combinations possible. According to the testimony of a Domino's Pizza representative, based on various combinations of crust types, sauces, and toppings, there are over 34 million ways to make a pizza at Domino's and 2 billion ways at Pizza Hut. These combinations make it difficult, if not impossible, to list all the iterations of pizza types on a menu board. FDA Rulemaking on Vending Machine Labeling In addition to the requirements for restaurants and SRFEs, the FFDCA also requires calorie labeling for food sold from vending machines; specifically, operators who own or operate 20 or more vending machines must disclose calorie information for food sold from vending machines, subject to certain exemptions. In tandem with the restaurant menu labeling rule, FDA issued a final rule regarding calorie labeling for food items sold in covered vending machines. Vending machine operators who are not subject to the calorie labeling requirements may voluntarily register with FDA to be covered by the regulation. The final rule defines a vending machine as "a self-service machine that, upon insertion of a coin, paper currency, token, card, or key, or by optional manual operation, dispense servings of food in bulk or in packages or prepared by the machine, without the necessity of replenishing the machine between each vending operation." The rule requires that if a vending machine does not permit a consumer to examine nutrition information before purchase or at point-of-purchase, then the vending machine operator must provide calorie declarations for such foods via a sign close to the article of food or on a selection button (i.e., in, on, or adjacent to the vending machine). Compliance and Enforcement As previously noted, in 2011, FDA published two proposed rules establishing calorie labeling requirements for food items sold in restaurants and vending machines. The two rules were finalized and published in the Federal Register on December 1, 2014, and were to take effect one year from publication (December 1, 2015) for restaurants and two years (December 1, 2016) for vending machines. On July 9, 2015, FDA extended the compliance date until December 1, 2016, for restaurants and SRFEs. Compliance with the regulations was delayed again as a result of language included in the Consolidated Appropriations Act of 2016 ( P.L. 114-113 ), which prohibited the use of any funds for implementation, administration, or enforcement of the menu labeling requirements until the later of December 1, 2016, or until one year from the date that the Secretary of the Department of Health and Human Services (HHS) issues final, Level 1 guidance on compliance with specified requirements for menu labeling contained in the final menu labeling rule. FDA issued draft guidance to help companies comply with the menu labeling final rule on September 11, 2015, and final guidance on May 5, 2016. In issuing the final guidance, FDA announced that enforcement of the final rule would commence on May 5, 2017. However, in response to continued concerns from certain sectors of the affected industry and some Members of Congress, FDA announced that it was further extending the compliance date to May 7, 2018. FDA has also extended the compliance date for calorie labeling of certain food products sold in vending machines to July 26, 2018. A standard menu item offered for sale in a covered establishment would be deemed misbranded under FFDCA Section 403 if its labeling does not meet the requirements of the final rule. For example, if the calorie declaration of a self-service standard menu item or food on display is not listed clearly and conspicuously in compliance with the final rule, that standard menu item would be deemed misbranded. Generally, FDA relies on manufacturers to voluntarily recall misbranded products, either by their own initiative or upon regulators' request. However, the Food Safety and Modernization Act (FSMA, P.L. 111-353 ) provided FDA with mandatory recall authority. In addition, the agency has the authority to pursue other enforcement actions, including warning letters, seizures, injunctions, civil monetary penalties, and prosecution. Costs and Benefits FDA estimates that the labeling requirements (both menu and vending machine rules combined) are estimated to have benefits exceeding costs by $477.9 million on an annualized basis (over 20 years discounted at 7%). Costs for Restaurants and SRFEs FDA expects that the final rules would have costs to both industry and consumers. For industry, there will be initial costs associated with implementing the rules (e.g., nutrient content analysis, purchasing menu boards), as well as recurring costs (e.g., employee training). The major elements of cost expected to be incurred by industry include (1) collecting and managing records of nutritional analysis for each food item subject to the labeling requirement; (2) revising and replacing existing menus and menu boards, and providing written nutrition information; (3) training employees to understand nutrition information; and (4) legal review. Cost of Nutrition Analysis Cost estimates for nutrition analysis vary depending on several factors, such as the complexity of the food item, detail of the nutrition report, and whether the analysis is conducted using existing databases or using item-specific laboratory testing. Most of the cost variation comes from how heavily restaurant chains rely on database analysis versus laboratory testing. Cost of Menu Replacement To comply with FDA regulations, restaurants and SRFEs will be required to replace their existing menus and menu boards with those that list calorie information for standard items. FDA estimates that average menu printing costs would be about $1 to $3 per copy, and the number of menus per establishment is highly variable. FDA estimates the cost for replacing menu boards would be approximately $550 per board. Cost of Training Although not mandated by the final rule, FDA expects that some employee training will be required to ensure that employees are able to respond to consumer questions and to ensure that displayed calorie and nutrition information is in compliance with the final rule. Cost of Legal Review FDA estimates that a legal analyst will spend 8 to 12 hours, on average, learning about the menu labeling rule requirements. At a labor cost of $96 per hour, the estimated cumulative cost of legal review ranges from $1.6 million to $2.5 million. Other Costs A cost not included in FDA's estimate is that associated with reformulating current food items and introducing new food items. Although not required by the rule, there may be incentive for some restaurant chains or SRFEs to create and introduce new, lower-calorie items. In addition, the expense of complying with the final labeling regulations may result in a price increase in the affected food items, potentially resulting in higher costs for consumers. Total Costs In the Final Regulatory Impact Analysis, FDA estimates that approximately 298,600 covered establishments, organized under 2,130 chains, would be affected by the menu labeling rule requirements. FDA estimates an initial cost of $397.03 million and a recurring cost of $55.13 million for complying with the regulations. Annualized over 20 years, the estimated annual cost of the final requirements is $76.90 million (at 3% discount rate) and $84.50 million (at 7% discount rate). Table 3 shows the total estimated costs of the final requirements. Costs for Vending Machine Operators FDA estimates that the total number of operators operating 20 or more vending machines ranges from 8,983 to 11,960, and the total number of associated vending machines (excluding non-food machines) ranges from 4.97 million to 5.98 million. For a breakdown of the costs associated with vending machine labeling, see Table 4 . Benefits National data reveal that approximately two-thirds of the U.S. population is overweight or obese, and a major risk factor for overweight and obesity is overconsumption of calories. The predicted benefits from the labeling regulations stem from the idea that providing consumers with nutrition information at the point of purchase will facilitate informed and healthful dietary choices, which in turn may reduce caloric intake and obesity in the U.S. population. The benefit estimates are contingent on several assumptions, including increased awareness regarding the caloric content of foods, which would encourage consumption of lower-calorie options, and increased consumer interest in lower-calorie options, which would incentivize reformulation of current menu items to make them lower calorie or decrease portion sizes, and introduction of new lower-calorie items. Determining the value of menu labeling is difficult because the benefits largely depend on whether or not individuals shift their consumption patterns toward a healthier diet. Studies examining the impact of menu labeling on calories purchased show mixed findings, suggesting that providing consumers with nutrition information does not mean they will make more healthful decisions (see " Research Evaluating the Impact of Menu Labeling "). Further research on this topic, once the labeling rules are in effect, may help determine what impact menu labeling has on consumer purchasing behaviors, if any. Issues for Congress In response to concerns from certain sectors of the industry affected by the menu labeling rule, some Members of Congress have supported amending nutrition disclosure requirements to provide for added flexibility. For example, as introduced in the 115 th Congress, the Common Sense Nutrition Disclosure Act ( H.R. 772 , S. 261 ) would permit entities that receive the majority of orders from customers who are off-premises (e.g., pizza chains) to provide their menus online in place of menu boards in restaurants; would give manufacturers greater flexibility in how they determine and document nutrient content analyses; and would permit establishments with standard menu items that come in different flavors, varieties, or combinations that are listed as a single menu item to determine and disclose nutritional information using specified methods or methods allowed by the Secretary. Under this proposal, if a restaurant or retailer is determined to be in violation of the menu labeling requirements, the entity would have 90 days to take corrective action, and the Secretary would be prohibited from taking enforcement action if the violations are corrected within those 90 days. In addition, the Secretary would be required to promulgate regulations to carry out the standards for determining and disclosing the nutrient content for standard menu items that come in different flavors, varieties, or combinations, but which are listed as a single menu item. Such regulations, as well as any regulations issued before enactment of the Common Sense Nutrition Disclosure Act, would not be allowed to take effect until the compliance date specified in the final regulations promulgated pursuant to this Act. As mentioned, the menu labeling compliance date has been extended multiple times since the final rule was issued in December 2014. Opponents of the extension have argued that many chains are successfully complying with the labeling requirements and that consumers want menu labeling. Several public health groups have signed onto a letter to FDA opposing changes to the menu labeling requirements.

High rates of obesity and chronic diseases have prompted various federal, state, and local nutrition labeling initiatives. The 1990 Nutrition Labeling and Education Act (P.L. 101-535) required nutrition labeling of most foods and dietary supplements, but it did not require labeling of food sold in restaurants. However, consumption data indicate that Americans consume more than one-third of their calories outside the home, and frequent eating out is associated with increased caloric intake. In 2010, President Obama signed the Patient Protection and Affordable Care Act (ACA, P.L. 111-148) into law, with Section 4205 mandating nutrition labeling in certain restaurants and similar retail food establishments (SRFEs). This provision also required calorie labeling of certain vending machine items. In 2011, as required by the ACA, the Food and Drug Administration (FDA) published two proposed rules establishing calorie labeling requirements for food items sold in certain restaurants and vending machines; both rules were finalized and published in the Federal Register on December 1, 2014. The labeling rules were to take effect one year later (December 1, 2015) for restaurants and two years later (December 1, 2016) for vending machines. The compliance date was extended following language included in the FY2016 Consolidated Appropriations Act (P.L. 114-113), which prohibited the use of any funds for implementation, administration, or enforcement of the menu labeling requirements until the later of December 1, 2016, or until one year from the date that the Secretary of the Department of Health and Human Services (HHS) issues Level 1 guidance on compliance with specified requirements for menu labeling contained in the final menu labeling rule. FDA issued such final guidance on May 5, 2016, and stated that the agency would not begin enforcing the final rule until May 5, 2017. In response to continuing concerns from certain sectors of the affected industry and some Members of Congress, on May 1, 2017, FDA announced that it was extending the compliance date to May 7, 2018. FDA has also extended the compliance date for calorie labeling of certain food products sold in vending machines to July 26, 2018. In addition to requiring calorie labeling for food sold in certain restaurants and vending machines, labeling will also be required for prepared foods sold at supermarkets, grocery and convenience stores, and entertainment venues (e.g., movie theaters and amusement parks). Calorie counts will have to be listed on menus and menu boards for all standard items, including alcoholic drinks and salad bar items. Prior to the federal rule, state and local menu labeling regulations had resulted in a patchwork of labeling requirements, making compliance challenging for chain food establishments. Several restaurant chains (e.g., McDonald's, Panera Bread, and Starbucks) had moved forward with nationwide nutrition labeling prior to FDA's final rule, expressing support for a federal menu labeling standard. Opponents of the final menu labeling regulation have questioned FDA's interpretation of the ACA provision, arguing that the final rule is more stringent than the regulation initially proposed by FDA or intended by Congress. For example, as mentioned above, the final rule requires grocery stores and delivery establishments (e.g., pizza places) to meet the labeling requirements. Opponents of the extension have argued that many chains are successfully complying with the labeling requirements and that consumers want menu labeling. This rule takes effect May 7, 2018, and some have asked FDA for additional guidance to address opponents' concerns.

Introduction An estimate of the quantity and type of offset projects that might be available in a cap-and-trade system would provide for a more informed debate over the design elements of a cap-and-trade system. (See text box below, "What is a Cap-and-Trade System?") An offset is a measurable reduction, avoidance, or sequestration of GHG emissions from a source not covered by an emission reduction program. From a climate change perspective, the location of the reduction, avoidance, or sequestration does not matter: a ton of CO 2 (or its equivalent in another GHG) reduced in the United States and a ton sequestered in another nation would have the same result on the atmospheric concentration of GHGs. If a cap-and-trade program includes offsets, covered sources would have to submit offsets (in lieu of emission allowances) to meet compliance obligations. Offset projects vary by the quantity of emission credits they could generate and the implementation complexity they present. In general, agriculture and forestry activities offer the most potential, but these projects often pose multiple implementation challenges. These contrasting attributes may create a tension for policymakers, who might want to include the offset projects that provide the most emission reduction opportunities, while minimizing the use of offset projects that pose more implementation complications, or have the potential to be invalid. If Congress enacts a greenhouse gas (GHG) emission reduction program, such as a cap-and-trade system, the treatment of offsets would be a critical design element. Economic models of cap-and-trade legislation have generally demonstrated that different offset scenarios—for example, unlimited offsets versus no offsets allowed—lead to significant variances in program costs. However, offsets have fueled considerable debate, primarily for the concern that illegitimate offsets could undermine the ultimate objective of a cap-and-trade program: emission reduction. How many offsets would be available as a compliance option if Congress enacted a cap-and-trade program? Although economic models have generated estimates of offsets developed and used in a cap-and-trade system, the estimates are rife with uncertainty. This report examines the multiple variables that help shape offset supply. Factors Affecting Offset Supply It is difficult to estimate the supply of offsets that might be available in a cap-and-trade system, because the supply is determined by many variables, including policy choices. Figure 1 illustrates the various inputs and variables that would affect the potential supply of offsets in a cap-and-trade program. These factors—mitigation potential, policy choices, economic factors, emission allowance price, and other factors—are each discussed below. As Figure 1 indicates, the factors do not act in isolation, but interact in a complex manner. Mitigation Potential Mitigation potential is not synonymous with offset supply potential ( Figure 1 ). Some of the activities included in mitigation potential estimates would likely not qualify as offsets in a cap-and-trade system. A striking example is biofuel production, which has been projected by some studies to play a substantial role in GHG mitigation in later years. By placing a price on carbon, a cap-and-trade program is expected to increase biofuel and biomass production. If a power plant substitutes a carbon-intensive fuel (e.g., coal) with a less carbon-intensive fuel (e.g., biomass, such as switchgrass), the plant's GHG emissions would decrease. These emission reductions would be counted directly by the power plant. The increased biofuel use would mitigate GHG emissions, but would not count as an offset in a cap-and-trade program, because the reductions (from the fuel substitution) would be made directly by covered sources. Mitigation potential estimates are often used as inputs for economic models of cap-and-trade legislation. For example, EPA's 2009 mitigation potential estimates were used in the EPA and Energy Information Administration's (EIA) analyses of H.R. 2454 . Both of these analyses generated estimates of the number and type of offsets that would be used by covered sources for compliance purposes. However, these offset supply estimates are imperfect, because the underlying data—mitigation potential estimates—contain considerable uncertainty. Elements of Uncertainty Modelers derive estimates of mitigation potential by assigning a price for GHG emissions and sequestration. Under the widely used Forest and Agriculture Sector Optimization Model (FASOM), for example, "landowners would receive annual payments for increasing sequestration and reducing emissions relative to their base case (additionality), but face the cost of having to make payments for increasing emissions or reducing sequestration." As with all models, the mitigation potential simulations include numerous assumptions, including behavioral responses to economic incentives and disincentives. For example, actors (e.g., farmers) are assumed to have "perfect foresight." Perfect foresight assumes that "agents, when making decisions that allocate resources over time (e.g., investments), know with certainty the consequences of those actions in present and future time periods." EPA recognizes that this assumption, which the agency states is used by most of the climate economic modeling community, does not reflect reality. The use of this assumption likely yields an overestimation of mitigation potential: in reality, market participants make imperfect judgments and leave some financial opportunities on the table. Mitigation potential models must necessarily include certain technical assumptions, such as sequestration rates of various activities. Different models often use different underlying assumptions to generate results. Indeed, there is often disagreement within the modeling community, particularly for forestry sequestration simulations, over the use of various modeling inputs. In addition to the above limitations—which are generally inherent to some degree with all economic modeling—a critical factor for agriculture and forestry mitigation opportunities is land availability. More projects would become economically competitive as the emission allowance price rises. At certain price levels, one mitigation activity may replace another. For example, agricultural soil sequestration projects (e.g., conservation tillage practices) are expected to present cost-effective opportunities at relatively low prices. As the allowance price rises, afforestation projects are expected to become (1) cost effective in more places and (2) more cost effective than ongoing soil sequestration activities. Thus, lands that once generated soil sequestration, while growing traditional commodities, may be replaced with afforestation projects (tree farms). Other activities—preservation, recreation, fuel production—may compete for limited land resources. Some activities may preclude options for resource use, such as traditional crop production or afforestation. In other cases, more than one practice that reduces or sequesters CO 2 may be possible. For example, conservation tillage may be conducted in concert with biofuel production. It is very difficult for most modeling tools to keep track of these competing or compatible activities, although some models may have the capability to account for some of these interactions. Thus, different analyses will produce varying results. Estimates from Agriculture and Forestry Activities Over the past decade, several studies, including reports from EPA (2005 and 2009) and USDA (2004), have produced estimates of mitigation potential from agriculture and forestry activities. The estimates from these studies vary, in some cases considerably. For example, Table 1 lists the different results between EPA's 2005 and 2009 models. As the table indicates, the estimates of mitigation potential from the agriculture and forestry sectors decreased substantially in the 2009 model. In particular, estimates of agricultural soil sequestration activities decreased by 100% (or almost 100%) at several price scenarios. The explanation for these varied estimates is complex and beyond the scope of this report: for a comprehensive discussion of these estimates, see CRS Report R40236, Estimates of Carbon Mitigation Potential from Agricultural and Forestry Activities , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. In short, the different estimates reflect different modeling assumptions, such as emission/sequestration baselines (or business-as-usual scenarios). The dramatic differences between the 2005 and 2009 estimates ( Table 1 ) highlight the uncertainty that pervades mitigation estimates. Regardless, both models demonstrate the influence of price. And both models indicate relative differences between the project types, with forestry projects providing much of the potential, particularly at higher price scenarios. Estimates from Other Activities Other potential mitigation activities—for example, methane abatement from landfills or the natural gas sector—are generally considered less complicated in terms of measurement than agriculture and forestry projects. In addition, these types of mitigation projects are typically not subject to competition for land resources. However, these estimates are only mitigation potential, not potential offset supply. Other factors, identified in Figure 1 and discussed below, would likely constrain or exclude their development as offsets. For instance, some of the activities identified below would be covered under the cap of some legislative proposals. Several of the mitigation activities in Table 2 are projected to occur at $0/mtCO 2 -e. EPA states that these figures "represent mitigation options that are already cost-effective given the costs and benefits considered (and are sometimes referred to as "no-regret" options) yet have not been implemented because of the existence of nonmonetary barriers." These are discussed below in " Other Factors ." The fact that parties are not acting in the most economically efficient manner at $0/mtCO 2 -e, calls into question the estimates for higher prices and further demonstrates the uncertainty contained in mitigation potential estimates. Policy Choices Policy decisions from Congress, U.S. states, and foreign governments would directly and indirectly affect the supply of offsets in a cap-and-trade program. The primary factor would be the design of the cap-and-trade system. Other policies would also help shape the pool of offsets that could be used for compliance purposes. These policy choices are discussed below. Design of the Cap-and-Trade Program Programmatic design elements could affect offset supply in several ways, from the overall structure of the cap (e.g., which sources are covered) to specific logistical details (e.g., monitoring and measuring protocols), including which agency or agencies would be responsible for developing the logistical details. Another critical element would be the program's use of set-aside allowances. Scope of the Cap The wider the scope of the cap, the smaller the offset universe. In other words, as more source categories are subject to the cap, the fewer the number of uncapped sources, thus the number of eligible offset project types decreases. Similarly, H.R. 2454 would set emission performance standards for CH 4 emissions from landfills and coal mines, reducing the opportunities for offsets from these categories. Eligible Offset Types Policymakers may choose to restrict the types and locations (domestic versus international) of offsets eligible for use by a regulated entity. Biological sequestration generally offers the most potential, but these projects present substantial challenges. In some legislative proposals, the project types allowed are not specified in the text, but would be subsequently determined by an implementing agency. In addition, the degree to which international offsets are allowed would have considerable impact on domestic offsets. Offset Protocols The protocol established for measuring and verifying offsets would affect supply. A more stringent protocol would likely reduce supply. Offsets that are questionable—for instance, in terms of their additionality—would likely be excluded or discounted (also reducing supply). Additionality determinations (i.e., would the project have happened anyway) typically require some subjectivity in the decision process. A protocol with more constraints could remove some of the subjectivity, which, if left in place, could lead to an influx of questionable offsets. Some protocols may include more conservative parameters for measuring tons of CO 2 sequestered for a particular project type. For example, one protocol may stipulate that carbon saturation for a given plant or tree species occurs in a shorter time frame, thus fewer offsets would be produced through the project. Moreover, the stringency of the protocols would likely affect the costs of developing, implementing, and verifying an offset project. These costs might be described as transaction costs. For example, a protocol that required independent, third-party verification would entail higher costs for offset projects. If transaction costs increase, the number of cost-effective offset projects would decrease. The proposed (and enacted) systems of measurement and verification vary. In many cases, legislative proposals direct various agencies to develop the protocols. In these cases, the level of protocol stringency would be uncertain at the bill's passage. Set-Asides If a cap-and-trade program provides set-aside allowances for specific activities, these activities would impact the potential supply of offsets. Recent cap-and-trade proposals would give emission allowances (set-asides) to non-covered entities to promote various objectives, including biological sequestration. Set-aside allowances are taken from within the cap, so if the set-aside allowances do not lead to further emission reductions, abatement, or sequestration, the cap remains intact. Indeed, one strategy for policymakers is to allot set-asides for activities whose emission reductions, abatement, or sequestration may carry more uncertainty than other potential offset activities. However, a project that receives a set-aside cannot also qualify as an offset. Thus, set-aside allowances would reduce the pool of offsets available for compliance with the cap. Actions in Other Nations or U.S. States As other nations or U.S. states establish emission controls or climate-related policies, the pool of offsets would shrink. International offsets, particularly in the developing nations, are projected in models to provide numerous opportunities for compliance. However, these projections assume that these nations are decades away from requiring GHG emission reductions or other regulations (e.g., technology standards) that would exclude these projects as offsets. Climate-related policies in U.S. states may also affect offset supply. A number of states have taken actions that directly address GHG emissions. For example, 23 states have joined 1 of the 3 regional partnerships that would require GHG (or just CO 2 ) emission reductions. A state or regional emissions cap might cover more sources than a federal program, thus disqualifying emissions from these sources as potential offset opportunities. However, it is uncertain how these state actions would interact—for example, whether or not they would be pre-empted—with a federal cap-and-trade program. Regardless of whether state and regional emission caps are subsumed into a federal cap-and-trade program, other state policies could play a role. For example, California recently developed methane emission performance standards for landfills. Methane captured from California landfills in response to this standard would not be available to qualify as offsets in a federal program. Other Policy Influences Policies not directly related to a cap-and-trade program could also affect the potential supply of offsets. A comprehensive review of policies that could affect offset supply is beyond the scope of this report. However, several federal policy options stand out. As mentioned above, Congress has enacted energy legislation requiring certain levels of biofuel use in transportation sector. This policy affects the amount of land potentially available for agriculture and forestry offset projects. If enacted by Congress, a federal renewable portfolio standard (RPS) or a renewable electricity standard (RES) would affect offset supply. Such a federal standard would stimulate the production of biomass for electricity generation. As discussed above, biomass for electricity generation would not qualify as an offset, but would instead compete with other offset projects for land resources. Economic Factors The potential supply of offsets would ultimately be affected by how the economy responds to a federal cap-and-trade program. Such a complex analysis is beyond the scope of this report. A critical factor is the development and market penetration of low- and/or zero-carbon technologies. These technologies could lower the costs of the cap-and-trade program. Federal policies—for example, funding or tax incentives—could stimulate these technologies. If these technologies are available earlier than predicted (by models), the " Emission Allowance Price " (discussed below) would likely decrease, making fewer offset projects cost effective. Emission Allowance Price The supply and type of offsets available would largely depend on the emission allowance price in a cap-and-trade system. The market price—sometimes referred to as the price of carbon—of a tradeable emission allowance would be influenced by several factors, discussed above. The central factor would be the structure of the emission reduction program, particularly the program's scope (which sources are covered) and stringency (the amount and timing of required emission reductions). In addition to the core structural design of the cap-and-trade program, the allowance price would be dependent on the program's treatment of offsets: which types would be allowed; whether international offsets could be used; whether covered sources would be limited (e.g., as a percentage of their allowance submission) in their use of offsets. As mentioned above, multiple analyses indicate that different offset treatments yield a substantial range in emission allowance prices. The supply of offsets would fluctuate as the allowance price changes. If the allowance price is relatively low—that is, $1 to $5/mtCO 2 -e—only the "low-hanging fruit" projects would be financially viable. If the allowance price is higher, more offset projects would become economically competitive. It is impossible to predict with confidence what an allowance price would be in a cap-and-trade system. Although multiple studies have provided—through economic modeling—estimates of allowance prices under cap-and-trade proposals, the results vary considerably among studies. For more information on these issues, see CRS Report R40809, Climate Change: Costs and Benefits of the Cap-and-Trade Provisions of H.R. 2454 , by [author name scrubbed] and [author name scrubbed]. Other Factors An EPA study stated that "other non-price factors, such as social acceptance, tend to inhibit mitigation option installation in many sectors." For example, farmers engaged in dairy operations for many generations may be hesitant to convert their land to forests, even if this would be the most profitable use of the land. In addition, institutional factors have been observed in the forestry sector, which was initially expected to play a much larger role in the CDM. A report from the Intergovernmental Panel on Climate Change (IPCC) stated that although the forestry sector can make a "very significant contribution to a low-cost mitigation portfolio ... this opportunity is being lost in the current institutional context and lack of political will to implement and has resulted in only a small portion of this potential being realized at present." Information dissemination may play a role. Many of the emission abatement and sequestration opportunities, particularly in the agricultural sectors, may be widely dispersed and under the control of relatively small operations (e.g., family farms). Similarly, many of the agriculture and forestry offset projects may present technical challenges, depending on requirements to measure emissions and verify projects. To generate offsets at these locations, parties would need to know that opportunities exist and are financially viable (based on the carbon price). In addition, the smaller operations may need technical support in order to initiate, measure, and verify the projects. In addition, transaction costs may impact offset development. The definition of transaction costs can vary widely, but in general transaction costs would likely include (1) administrative costs, such as project registration or document preparation (e.g., project petitions) needed for compliance; and (2) measuring, monitoring, and verifying costs. Transaction costs would likely involve upfront, one-time costs to get the project up and running as well as annual or periodic costs to assure the project is performing as intended. Different offset project types could have radically different transaction costs. These differences could affect the types and quantity of offsets developed in a cap-and-trade system. For example, agricultural soil sequestration projects would likely require annual monitoring, possibly at several sites, depending on the size of the project. In contrast, afforestation might need only periodic monitoring, perhaps every five years, to assure that carbon sequestration is occurring. In addition, afforestation carbon is above ground and can be estimated rather simply, with measurements of tree height and diameter. Soil carbon would likely require soil samples to be taken and analyzed, with the number of samples depending on the heterogeneity of the soils on the site.

If allowed as a compliance option in a greenhouse gas (GHG) emission reduction program (e.g., a cap-and-trade system), offsets have the potential to provide considerable cost savings and other benefits. However, offsets have generated considerable controversy, primarily over the concern that illegitimate offsets could undermine the ultimate objective of a cap-and-trade program: emission reduction. An offset is a measurable reduction, avoidance, or sequestration of GHG emissions from a source not covered by an emission reduction program. An estimate of the quantity and type of offset projects that might be available as a compliance option would provide for a more informed debate over the design elements of a cap-and-trade program. It is difficult to estimate the supply of offsets that might be available in a cap-and-trade system, because the supply is determined by many variables, including: Mitigation potential. Mitigation potential estimates are the raw data that feed into models estimating offset use in a cap-and-trade program. Recent estimates contain considerable uncertainty. Policy choices. The design of the cap-and-trade system would be critical to offset supply. Particularly relevant design choices include which sources are covered; which types of offset projects are allowed; whether or not offset use is limited; and the degree to which set-aside allowances are allotted to activities that may otherwise qualify as offsets. Policymakers' treatment of international offsets would play a major role. Economic factors. The development and market penetration of low- and/or zero-carbon technologies would likely have substantial effects. These technologies could lower the costs of the cap-and-trade program, making fewer offset projects cost effective. Emission allowance price. The allowance price would determine the supply and type of offsets that would be economically competitive in a cap-and-trade system. As the price increases, more (and different types of) projects would become cost effective. Allowance price estimates are difficult to predict, as they are dependent on numerous variables, including offset treatment. Other factors. Non-market factors, such as social acceptance, may influence offset use. In addition, information dissemination would likely be an issue, because some of the offset opportunities exist at smaller operations, such as family farms. Although economic models have generated estimates of offsets that would be developed and used in a cap-and-trade system, the estimates are rife with uncertainty. This report examines the multiple variables that would help shape offset supply.

Introduction On September 9, 2015, the Senate Committee on Energy and Natural Resources reported S. 2012 , the Energy Policy Modernization Act, a major energy bill with provisions addressing energy efficiency, critical infrastructure, energy supplies (fossil, renewable, and nuclear), energy financing and markets, and critical minerals, among other topics. The Senate passed S. 2012 on April 20, 2016. On May 25, 2016, the House passed an amended version of S. 2012 which contains the text of H.R. 8 , as well as the text of several other energy and natural resources-related bills. The following day, the House moved to insist upon its amendment, and to appoint conferees to resolve the differences in S. 2012 . On July 12, the Senate agreed to the request for a conference, and appointed conferees. In addition to energy policy provisions, both versions of S. 2012 contain many natural resources and environmental provisions including provisions on fish and wildlife recreation and federal land conveyances. The Senate version includes permanent reauthorization of the Land and Water Conservation Fund and reauthorization of EPA's Brownfields Program, while the House version includes provisions on National Forest management and drought relief. The House-passed bill would have eliminated restrictions on the export of U.S.-produced crude oil. However, this provision was included in the FY2016 Consolidated Appropriations Act ( P.L. 114-113 ). The House-passed bill also includes provisions on the physical security of the electric grid. Two of these provisions—on critical electric infrastructure security and a strategic transformer reserve—were included in the Fixing America's Surface Transportation (FAST) Act ( P.L. 114-94 ). This report provides a side-by-side table identifying comparable and non-comparable provisions in the House and Senate-passed versions of S. 2012 , provisions that may be addressed in conference. The first part of the table lists the provisions in the Senate version of S. 2012 in section order in the left column, with any comparable House provisions in the right column. The second part of the table (beginning on page 16) lists the provisions from the House version in section order in the right column, with any comparable Senate provisions in the left column. For a discussion of key energy and natural resources topics in the two bills, see CRS Report R44291, Energy Legislation: Comparison of Selected Provisions in H.R. 8 and S. 2012 . Comparable Provisions

Congress most recently enacted major energy legislation in the Energy Independence and Security Act of 2007 (P.L. 110-140). The 114th Congress is currently considering new legislation to address broad energy issues. On April 20, 2016, the Senate passed an amended version of S. 2012, the Energy Policy and Modernization Act. On December 3, 2015, the House passed an amended version of H.R. 8, the North American Energy Security and Infrastructure Act of 2015. On May 25, 2016, the House passed an amended version of S. 2012 which contains the text of H.R. 8, as well as the text of several other energy and natural resources-related bills. The following day, the House moved to insist upon its amendment, and to appoint conferees to resolve the differences in S. 2012. On July 12, the Senate agreed to the request for a conference, and appointed conferees. Both versions of S. 2012 would address a variety of energy topics, including Energy efficiency in federal buildings, data centers, manufacturing, and schools; Water conservation/efficiency; Electric grid cybersecurity; Nuclear energy and carbon sequestration research and development; Amendments to hydropower licensing provisions; Liquefied natural gas exports; and Energy workforce development. The House version also contains provisions on Electric grid physical security; A North American energy security plan; and A study of wholesale electricity markets. The Senate version also includes provisions on Review of the Strategic Petroleum Reserve; Geothermal energy development on federal lands; Vehicle research and development; Electric grid energy storage; Renewable energy supply and incentives; and Loan programs. Both versions of S. 2012 also contain major non-energy provisions including fish and wildlife recreation and federal land conveyances. Differences include permanent authorization of the Land and Water Conservation Fund (LWCF) (Senate); reauthorization of the EPA Brownfields Program (Senate); National Forest management (House); and drought relief (House). This report provides a side-by-side table identifying comparable and non-comparable provisions in the House and Senate-passed versions of S. 2012.

The IS Crisis and the U.S. Response In 2014, the armed offensive of the Islamic State (also known as ISIL, ISIS, or Daesh) in northern and western Iraq and northeastern Syria raised significant concerns for the United States. After first ordering multiple deployments of U.S. troops to Iraq to provide security to diplomatic personnel and facilities, advise Iraqi security forces, and conduct intelligence gathering and reconnaissance, President Obama began ordering U.S. military airstrikes on IS forces in Iraq in August 2014. Later in September, after laying out plans for expanded use of military force against the Islamic State in a televised speech to the American people, the President ordered U.S. military airstrikes in Syria against both IS forces and forces of the "Khorasan Group," identified by the President as part of Al Qaeda. In 2015, the President ordered new deployments to Iraq, and the Administration announced deployment of a small number of special operations forces to Syria to conduct military operations that involve advising regional partner armed forces but also can include "unilateral" U.S. operations. The intensified U.S. military engagement has raised numerous questions in Congress and beyond about the President's authority to use military force against the Islamic State. Some efforts began near the end of the 113 th Congress to consider enactment of a new authorization for use of military force targeting the Islamic State, and have continued into the 114 th Congress; the issue, however, remains contentious. In addition, the President provided Congress a new authorization proposal in February 2015, and in his 2016 State of the Union address again called on Congress to enact a new AUMF targeting the Islamic State. In 2016, both U.S. military operations and deployments of U.S. Armed Forces increased to continue the campaign against the Islamic State, and hostilities are ongoing. Presidential Authority to Use Military Force Against the Islamic State President Obama in his August 2014 notifications to Congress of deployments and airstrikes in Iraq indicated his powers as Commander in Chief and Chief Executive under Article II of the Constitution gave him authority to undertake such action. Obama Administration officials and the President Obama's September 2014 notifications to Congress for airstrikes and other actions in Iraq and Syria, however, stated that two enacted authorizations for use of military force (AUMFs), the Authorization for Use of Military Force (2001 AUMF; P.L. 107-40 ), and the Authorization for Use of Military Force Against Iraq Resolution of 2002 (2002 AUMF; P.L. 107-243 ), provide authorization for certain U.S. military strikes against the Islamic State in Iraq and Syria, as well as the Khorasan Group of Al Qaeda in Syria. After these notifications, however, President Obama indicated on November 5, 2014, that he intended to enter into discussions with congressional leaders to develop a new AUMF specifically targeting the Islamic State, in order to "right-size and update whatever authorization Congress provides to suit the current fight, rather than previous fights" authorized by the 2001 and 2002 AUMFs. President Obama called on Congress to enact a new AUMF targeting the Islamic State in his January 2015 State of the Union address, and transmitted a draft AUMF to Congress on February 11, 2015. 2001 Post-9/11 Authorization for Use of Military Force In response to the 9/11 terrorist attacks, Congress enacted the AUMF authorizing the President to use military force against "those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons.... " Although the Islamic State does not appear to fall within that language, it is possible that the executive branch regards it as one of the "associated force s " fighting alongside Al Qaeda and the Taliban that it asserts are also targetable under the 2001 AUMF. The Obama Administration had stated previous to the latest action against the Islamic State and the Khorasan Group that it will use force against such associated forces under the 2001 AUMF only when they are lawful military targets that "pose a continuing, imminent threat to U.S. persons.... " Due to Al Qaeda's February 2014 disavowal of any remaining ties with the Islamic State, some question whether the Islamic State can be considered an associated force under the 2001 AUMF. During his Administration, President Obama stated that the Islamic State can be targeted under the 2001 AUMF because its predecessor organization, Al Qaeda in Iraq, communicated and coordinated with Al Qaeda; the Islamic State currently has ties with Al Qaeda fighter and operatives; the Islamic State employs tactics similar to Al Qaeda; and the Islamic State, with its intentions of creating a new Islamic caliphate, is the "true inheritor of Osama bin Laden's legacy." 2002 Authorization for Use of Military Force Against Iraq Congress enacted the 2002 AUMF prior to the 2003 U.S. invasion of Iraq that toppled the government of Saddam Hussein, with U.S. military deployments to and operations in Iraq continuing until December 2011. The 2002 AUMF authorizes the President to use U.S. Armed Forces to enforce relevant United Nations Security Council resolutions and to "defend the national security of the United States against the continuing threat posed by Iraq.... " Although the 2002 AUMF has no sunset provision and Congress has not repealed it, one view is that after the establishment of a new Iraqi government, the restoration of full Iraqi sovereignty, and the U.S. withdrawal from Iraq, the 2002 AUMF no longer has force. During the Obama Administration, executive branch officials voiced support for repealing the 2002 AUMF, reflecting that Administration's belief that it was no longer needed. Conversely, another view asserts that, although its preamble focuses on the Saddam Hussein regime and its WMD programs, the 2002 AUMF's authorization language is broad, referring only to a "continuing threat" from Iraq, and that the 2002 AUMF could provide authority to defend against threats to Iraq as well as threats posed by Iraq. Indeed, 2002 AUMF authority was the basis for the U.S. military presence in Iraq from the fall of Saddam Hussein and completion of the WMD search to its 2011 withdrawal, a span of over eight years, a period that could be characterized as dealing with threats to Iraq rather than threats from Iraq. The IS threat in Iraq could therefore be seen as breathing new life into 2002 AUMF authority. In addition, former supporters of Saddam Hussein reportedly provide support to the Islamic State, possibly forming a link between the original aims of the 2002 AUMF and any future actions taken against the Islamic State. Presidential Authority Under Article II of the Constitution Article II of the Constitution makes the President Commander in Chief of the U.S. Armed Forces, and gives the President certain foreign affairs powers. It is debated to what extent Article II authorizes the President to unilaterally use military force, especially given Congress's Article I war powers, including the power to declare war. The President's authority to use force to defend the United States, its personnel, and citizens against ongoing or imminent attack has been generally accepted, while employing such force simply to further foreign policy or general national security goals is more controversial. In Iraq, the President would seem to have substantial authority to use force to defend U.S. personnel, the U.S. embassy in Baghdad, and any other U.S. facilities and property. President Obama's August 2014 notifications of airstrikes in Iraq, however, also cited as justification furthering U.S. national security and foreign policy interests, and described uses of force to provide humanitarian assistance, and to aid Iraqi security forces in their fight against the Islamic State. In addition, President Obama's stated strategy for degrading and destroying the Islamic State, as well as his September 2014 notifications to Congress of airstrikes and other actions in Iraq and Syria, were not based primarily on immediate protection of the United States, its personnel, or citizens. Thus, it can be argued that Article II alone might not provide sufficient authorization for the use of military force against IS and Khorasan Group forces in Iraq and Syria. December 2016 Legal Framework Report on Use of Military Force President Obama issued a report in December 2016 entitled, "Report on the Legal and Policy Frameworks Guiding the United States' Use of Military Force, and Related National Security Operations." Among other matters, the Report deals with the legal justification for the United States' ongoing use of military force against the Islamic State, which according to the Report has taken place in the form of airstrikes, military advising and training of Iraqi security forces and Syrian rebel groups, and military activities of U.S. special operations forces in Iraq, Syria, and Libya. The Report asserts that such use of force is authorized by the 2001 AUMF, arguing certain factors as determinative: 1. The 2001 AUMF authorizes the President to use military force "in order to prevent any future acts of international terrorism against the United States by such nations, organizations, or persons" who perpetrated or harbored those who perpetrated the September 11, 2001 terror attacks against the United States. 2. Al Qaeda was identified as the primary organization responsible for the September 11, 2001 attacks. 3. Organized, armed groups that are co-belligerent with Al Qaeda against the United States are targetable under the 2001 AUMF pursuant to the law of international armed conflicts as "associated forces." 4. With specific regard to the Islamic State, the United States determined in 2004 that Al Qaeda in Iraq (AQI), the predecessor organization of the Islamic State, was either part of Al Qaeda itself or an associated force in 2004 and has used force against the group under 2001 AUMF authority since that time, including after AQI changed its name to the Islamic State (or ISIL or ISIS). 5. The fact that the Islamic State has asserted a split between itself and Al Qaeda does not divest the President of his previous authority to use force against the Islamic State, as the Islamic State's conflict with the United States and its allies has continued. 6. Congress has supported military action against the Islamic State by specifically funding the military campaign and providing authority to assist groups fighting the Islamic State in Iraq and Syria. The Report does not reference the 2002 AUMF as authority for the use of military force against the Islamic State. Generally speaking, it does argue that President may use military force without congressional authorization under his Commander in Chief and Chief Executive powers in Article II of the Constitution, with a limitation such action when it would constitute a "war" as contemplated in the Constitution's Article I Declaration of War Clause. It is not clear whether the Report links any past or planned action against the Islamic State to this assertion of Article II authority. Calls for a New AUMF and Congressional Action in the 113th Congress Although the Obama Administration claimed 2001 AUMF and 2002 AUMF authority for its recent and future actions against the Islamic State, these claims have been subject to debate. Some contend that U.S. military operations against the Islamic State also fall outside the President's Article II powers. Concerned with Congress's constitutional role in the exercise of the war power, perceived presidential overreach in that area of constitutional powers, and expansion of the use of military force in Iraq and Syria, several Members of Congress have continued to express the view that continued use of military force against the Islamic State requires congressional authorization. Members have differed on whether such authorization is needed, given existing authorities, or whether such a measure should be enacted. Near the end of the 113 th Congress, a number of Members proposed new authorization proposals (several of these are examined in greater detail in Appendix B ). In December 2014, the Senate Foreign Relations Committee conducted a hearing and considered an IS AUMF proposed by Committee Chairman Robert Menendez. Prior to the committee's markup of the proposal on December 11, the committee held a hearing on December 9 with Secretary of State John Kerry to discuss the Obama Administration's views on enactment of a new IS AUMF. Senator Menendez's IS AUMF proposal, as amended and reported favorably out of committee on December 13 ( S.J.Res. 47 ), would have authorized the use of U.S. Armed Forces against the Islamic State and "associated persons or forces," prohibited "ground combat operations" with limited exceptions, repealed the 2002 AUMF, and sunset the authorization in the 2001 AUMF and the IS AUMF itself three years after enactment. At the hearing, Secretary Kerry reiterated President Obama's earlier-stated position that the Administration supported enactment of a new AUMF targeting the Islamic State. The Secretary stated that the Administration agreed with the three-year sunset of the authorization contained in Senator Menendez's proposal, "subject to provisions for extension" of that authorization. He stated the Administration's view, however, that such authority "should give the President the clear mandate and flexibility he needs to successfully prosecute the armed conflict against [the Islamic State]," and thus the Administration opposed limitation on the use of ground combat forces, and geographic restriction limiting operations to Iraq and Syria. The 113 th Congress did not ultimately enact a new IS authorization bill, and many Members called upon the President to submit his own proposal. For a comparison of multiple IS AUMFs proposed in the 113 th Congress and issues raised by their provisions, see Appendix B . IS AUMF-Related Proposals in the 114th Congress During the 114 th Congress, several proposals for a new IS AUMF or repeal of existing AUMFs were introduced and considered. Appendix A provides a comparison of IS AUMF proposals introduced or announced during the 114 th Congress, including President Obama's February 15, 2015, proposal. The below section discusses key elements and related issues concerning these proposals, as well as other proposals that aim to alter existing legislation or presidential action regarding military action against the Islamic State. IS AUMF Proposals On February 2, 2015, Representative Adam Schiff introduced the Authorization for Use of Military Force Against ISIL Resolution ( H.J.Res. 27 ). Pursuant to this proposal, the President would have been authorized to use U.S. Armed Forces against the Islamic State, but limited solely to operations in Iraq and Syria, except for U.S. Armed Forces "engaged in training of indigenous Syrian or regional military forces for the purpose of combating" the Islamic State. The resolution stated that the authorization does not include "deployment of ground forces in a combat role," except "special operations forces or other forces that may be deployed in a training, advisory, or intelligence capacity." The resolution would have terminated the new authority provided by the resolution, as well as repealed the 2001 AUMF, three years after the resolution's enactment. The proposed resolution would have repealed the 2002 AUMF immediately upon enactment. Representative Adam Kinzinger introduced the Authorization for Use of Military Force against the Islamic State of Iraq and the Levant ( H.J.Res. 33 ) on February 13, 2015. The proposal would have authorized the President "to use the Armed Forces of the United States as the President determines to be necessary and appropriate against the Islamic State of Iraq and the Levant ('ISIL') or associated persons or forces.... " The proposal defined the term "associated persons or forces" as "individuals and organizations fighting for, on behalf of, or alongside ISIL or any closely-related successor entity in hostilities against the United States or its coalition partners." It would have required the President to report on activities undertaken pursuant to the authorization every three months, and it would have repealed the 2002 AUMF. Senators Tim Kaine and Jeff Flake introduced another proposed IS AUMF ( S. 1587 ) on June 16, 2015. The bill contained a similar authorization provision to that of H.J.Res. 33 , authorizing the President to use military force as he deems "necessary and appropriate" against the Islamic State and associated persons or forces. S. 1587 defined "associated persons or forces," however, as not only those "fighting for, on behalf of, or alongside" the Islamic State, but also any "individual or organization that presents a direct threat to members of the United States Armed Forces, coalition partner forces, or forces trained by the coalition, in their fight against ISIL." The proposal stated the authorization's purpose is to protect U.S. citizens and provide military support to the campaign of "regional partners" to defeat the Islamic State, and that the use of "significant United States ground troops" is "not consistent with such purpose," except to protect U.S. citizens. The bill provided that the authorization would have terminated three years after enactment, repealed the 2002 AUMF, and stated that the new authorization constitutes "the sole statutory authority for United States military action against the Islamic State of Iraq and the Levant and associated persons or forces, and supersedes" other authorizations. On December 11, 2015, Representatives Scott Rigell and Peter Welch introduced an identical proposal ( H.R. 4208 ) in the House. On December 3, 2015, Senator Lindsey Graham introduced S.J.Res. 26 , which would have authorized the President to "to use all necessary and appropriate force in order to defend the national security of the United States against the continuing threat posed by the Islamic State of Iraq and the Levant, its associated forces, organizations, and persons, and any successor organizations." No other operative, interpretive, or limiting provisions were included. Representative Schiff announced on December 10, 2015, that he was circulating another draft IS AUMF, the Consolidated Authorization for Use of Military Force Resolution of 2015. The proposal would have repealed the 2001 and 2002 AUMFs, replacing their authorizations with a new one authorizing the President to "use all necessary and appropriate force against ... Al Qaeda, the Islamic State of Iraq and the Levant (ISIL), and the Afghan Taliban," as well as groups associated with these entities that are "co-belligerent ... in hostilities against the United States." This authority would have terminated three years after enactment. Instead of including definitions, limitations, and prohibitions circumscribing the scope of the authority granted, the proposal would have required the President to notify, and report certain information to, the "appropriate congressional committees" when the authority was exercised, namely the entities targeted under the authorization (also to be published in the Federal Register ); the reasons for concluding that a listed targeted entity other than those named is associated and co-belligerent with a named entity; and details of deployments of "ground forces in a combat role" under the authorization, with limited exceptions. If a notification of the deployment of ground forces were made, the proposal stated that any joint resolution to modify or repeal the authority contained in the proposed IS AUMF should have been considered under the expedited procedure provisions in the War Powers Resolution. On January 20, 2016, Senator Mitch McConnell introduced S.J.Res. 29 , which contained provisions that were nearly identical to S.J.Res. 26 , discussed above, including authorizing the President to "to use all necessary and appropriate force in order to defend the national security of the United States against the continuing threat posed by the Islamic State of Iraq and the Levant, its associated forces, organizations, and persons, and any successor organizations." Unlike other IS AUMF proposals introduced during the 114 th Congress, however, S.J.Res. 29 was not referred to committee, but instead bypassed committee consideration and was placed on the Senate legislative calendar on January 21, 2016. No further action was taken on the resolution. Although it is not an IS-specific authorization, on March 2, 2016, Representative Scott Perry introduced the Authorization for Use of Military Force Against Islamist Extremism ( H.J.Res. 84 ) that would have authorized the use of military forces against a number of named terrorist and extremist groups, including the Islamic State. The resolution was referred to the House Foreign Affairs Committee and no further action was taken. Repeal or Limitations on Use of Existing AUMFs A number of proposals were made in the 114 th Congress that would have repealed existing authorizations without enacting a new authorization targeting the Islamic State. On February 10, 2015, Representative Barbara Lee introduced the Comprehensive Solution to ISIL Resolution ( H.J.Res. 30 ), which did not include a new authorization for the use of military force, but would have repealed the 2001 and 2002 AUMFs and placed new requirements on the President concerning the campaign against the Islamic State. Repeal of the 2001 and 2002 AUMFs would have become effective 60 days after enactment. The proposal stated that the policy of the United States is to work through the United Nations and to carry out relevant U.N. Security Council resolutions, support regional efforts to counter the Islamic State, and to ensure U.S. foreign assistance is provided only to Iraqi and Syrian groups subjected to human rights vetting. It would have required the President to develop a comprehensive strategy, including strategy for non-military activities, to "degrade and dismantle the Islamic State in Iraq and the Levant (ISIL) and submit to Congress a report that contains the strategy." The President would have been required to update the report every 90 days. Senator Ben Cardin introduced Sunset of the 2001 Authorization for Use of Military Force Act ( S. 526 ) on February 12, 2015. The bill would have repealed the 2001 AUMF three years upon enactment. On March 4, 2015, Representative Barbara Lee introduced a bill ( H.R. 1303 ) that would have repealed the 2001 AUMF 180 days after enactment, which included a provision stating that the 2001 AUMF has been used to "justify a broad and open-ended authorization for the use of military force," and that "such an interpretation is inconsistent with the authority of Congress to declare war.... " Representative Lee on the same day introduced a bill that would have repealed the 2002 AUMF upon enactment ( H.R. 1304 ). In June 2015, Representative Lee introduced two amendments to a house version of the FY2016 Defense Department appropriations bill ( H.R. 2685 ) that would have prohibited the use of FY2016 appropriated funds pursuant to the 2002 AUMF, and would have prohibited the use of such funds pursuant to the 2001 AUMF after December 31, 2015 ( H.Amdt. 484 and H.Amdt. 482 to H.R. 2685 ). Both amendments were not agreed to. Representative Schiff proposed an amendment to the same bill that would have prohibited the use of appropriated funds for the use of military force against the Islamic State through Operation Inherent Resolve after March 31, 2016 ( H.Amdt. 479 ). This amendment also failed passage. Similarly, Representative James McGovern proposed an amendment concerning the use of military force against the Islamic State in a version of the FY2017 Defense Department appropriations bill ( H.R. 5293 ) to prohibit appropriated funds being obligated for combat operations in Iraq or Syria unless a new IS-specific AUMF was enacted ( H.Amdt. 1215 ). Representative Lee proposed a separate amendment to the bill in order to prohibit the use of funds to carry out the 2001 AUMF after April 30, 2017 ( H.Amdt. 1216 ). Both failed passage. Disapproval Measure Pursuant to War Powers Resolution In addition, the House considered a concurrent resolution ( H.Con.Res. 55 ), introduced on June 4, 2015, by Representatives Jim McGovern, Walter Jones, and Barbara Lee, to direct the President to remove U.S. Armed Forces deployed to Iraq and Syria on or after August 7, 2014 (the date on which the President began using military force against the Islamic State), within 30 days after the resolution's adoption. Under the proposal, the deadline could have been extended until December 31, 2015, at the latest, if the President determined it is not safe to withdraw such Armed Forces within the 30-day deadline. This resolution was introduced pursuant to Section 5(c) of the War Powers Resolution, which states that at any time after a President deploys U.S. Armed Forces into hostilities without congressional authorization, Congress may direct withdrawal of such forces by concurrent resolution. Although the resolution does not explicitly refute the President's reliance on the 2001 and 2002 AUMFs for authority to strike the Islamic State, the invocation of Section 5(c) indicates rejection of such interpretation of those authorizations. H.Con.Res. 55 was treated in accordance with Section 6 of the War Powers Resolution, providing for expedited consideration of a concurrent resolution disapproving the use of military force without congressional authorization. The House Foreign Affairs Committee considered and reported the resolution favorably to the House within 15 days of its introduction, and the House ordered by unanimous consent that it would without procedural delay consider the resolution with two hours of debate divided equally between the majority and minority if requested by Chairman Ed Royce of the House Foreign Affairs Committee. Chairman Royce made such request on June 17, 2015, and after two hours of debate the resolution failed to pass by a vote of 139-288. IS AUMF-Related Proposals in the 115th Congress Early in the 115 th Congress, the issue of a new IS-specific AUMF remains of interest to many Members of Congress. One new AUMF has been proposed as of the date of this report. Identical to the joint resolution he introduced in the 114 th Congress ( H.J.Res. 33 ), Representative Adam Kinzinger introduced the Authorization for Use of Military Force against the Islamic State of Iraq and the Levant ( H.J.Res. 63 ) on February 3, 2017. The proposal would authorize the President "to use the Armed Forces of the United States as the President determines to be necessary and appropriate against the Islamic State of Iraq and the Levant ('ISIL') or associated persons or forces.... " The proposal defines the term "associated persons or forces" as "individuals and organizations fighting for, on behalf of, or alongside ISIL or any closely-related successor entity in hostilities against the United States or its coalition partners." It requires the President to report on activities undertaken pursuant to the authorization every three months, and it would repeal the 2002 AUMF. President Obama's February 2015 IS AUMF Proposal On February 11, 2015, President Obama provided Congress with a draft proposal for a new IS AUMF, stating in an accompanying letter that he "can think of no better way for the Congress to join [the President] in supporting our Nation's security than by enacting this legislation, which would show the world we are united in our resolve to counter the threat posed by ISIL." The President's proposal would have authorized the use of U.S. Armed Forces that he deems "necessary and appropriate" against the Islamic State and associated persons or forces. In the proposed authorization, "the term 'associated persons or forces' means individuals and organizations fighting for, on behalf of, or alongside ISIL or any closely-related successor entity in hostilities against the United States or its coalition partners." The authorization did not include authority for the use of U.S. Armed Forces for "enduring offensive ground combat operations." The proposal's authorization would have terminated three years after enactment, and contained a provision repealing the 2002 AUMF upon enactment. The President would have been required to report to Congress at least every six months on actions taken under the proposed IS AUMF. The President's proposal raised a number of issues for Congress and its role in authorizing the use of military force: First, the proposal would have prohibited "enduring offensive ground combat operations," instead of specifically prohibiting the use of ground combat forces, or execution of ground combat operations, with exceptions for certain types of units or operations, as some of the previous IS AUMF proposals have. It is not clear what that limitation, expressed as it is, would mean in practice, although the President's letter states that it is designed to allow the same excepted units and/or operations. Second, the proposal did not include any geographical limitation, possibly enabling the use of military force in countries other than Iraq and Syria. Third, the definition of "associated persons or forces," especially the inclusion of the phrase "fighting ... on behalf of ... ISIL," might be considered lacking in precision, leading to confusion in the future interpretation of what constitutes a lawfully targeted entity. Fourth, the proposal, unlike many of the previous IS AUMF proposals, did not provide a purpose or objective for the use of U.S. Armed Forces against the Islamic State in the authorization language itself. This could lead to concerns that the authorization does not sufficiently direct the President's actions or provide a definition of victory, and therefore authorizes military operations without an endpoint or measurable goal. Fifth, the proposal did not contain a provision that repeals or sunsets that measure, unlike most of the IS AUMF proposals previously introduced. Finally, the reporting requirement was for a basic periodic "actions taken" report, and would have been similar to certain reporting requirements already in place concerning deployed U.S. Armed Forces. This is in contrast to other past IS AUMF proposals, which have required information concerning all targeted entities, specific reports on operations and effectiveness of those operations, and the budget effects of operations. President Obama, in his December 6, 2015, address to the nation after the killings in San Bernardino, CA, by individuals who pledged support for the Islamic State, renewed his call for Congress to enact a new authorization for use of force against the Islamic State: [I]f Congress believes, as I do, that we are at war with ISIL, it should go ahead and vote to authorize the continued use of military force against these terrorists. For over a year, I have ordered our military to take thousands of airstrikes against ISIL targets. I think it's time for Congress to vote to demonstrate that the American people are united, and committed, to this fight. President Obama made similar comments in his State of the Union address on January 12, 2016, stating, "If this Congress is serious about winning this war, and wants to send a message to our troops and the world, authorize the use of military force against ISIL. Take a vote." As in previous statements, however, President Obama did not link enactment of a new IS AUMF to the source of current presidential authority to direct the use of military force against the Islamic State, and indicated that military action against the group would continue regardless: "[T]he American people should know that with or without congressional action, ISIL will learn the same lessons as terrorists before them." Selected Types of Proposed IS AUMF Provisions and Related Issues In general, language in a new AUMF targeting the Islamic State and other groups (IS AUMF) could either broaden the purpose of military force to include unspecified U.S. national security interests, or narrow the scope of authorization to specific objectives related to the Administration's stated goal of "degrading and ultimately destroying" the Islamic State. Congress could limit the IS AUMF's geographic scope, authorizing force only in Iraq and/or Syria. With continued uncertainty surrounding the Iraqi government, Congress might include authorization to use U.S. Armed Forces in Iraq in furtherance of political stability objectives. Provisions in any IS AUMF targeting the Islamic State might address the possible effect that targeting the Islamic State in Syria and Iraq could have on the ongoing conflict in Syria. Congress might also include a prohibition on the use of appropriated funds for the use of military force outside the scope of the specified authorization. Proposals for a new IS AUMF might contain provisions to limit presidential authority to use military force against the Islamic State as to scope and duration, and in some cases to sunset or repeal the existing authority in the 2001 and 2002 AUMFs. President Obama stated that an IS authorization should provide the flexibility to carry out "not just our strategy [for the military campaign against the Islamic State] over the next two or three months, but our strategy going forward." It could be argued, however, that even if limitations are enacted and perceived later to have a deleterious effect on the U.S. campaign against the Islamic State, such limitations could be removed or modified through subsequent legislative action if the need arises. Such limitations and an overall lack of flexibility in any IS AUMF, however, might be difficult to change legislatively if Members of Congress cannot agree to changes; neither the 2001 nor 2002 AUMF has been amended, for example, despite the stated need for amendments by observers and Members over the lifespan of those two measures. The following sections address some specific aspects of an AUMF that have or might come under debate in the 114 th Congress. Authorization Purpose and Scope Some observers and Members of Congress have argued that recent open-ended, broadly worded authorizations can empower a President to continue military operations outside of Congress's intent. An IS AUMF could include language in the authorizing provision identifying the specific purpose for and scope of the President's use of U.S. military force, narrowing or broadening the President's flexibility. An authorization that authorizes force to defend "U.S. national security" against the threat posed by the Islamic State would seem to provide a broad "national security" basis for possible long-term, open-ended military operations. Authorizing force to protect U.S. "interests" generally would seem to provide even wider authority to the President, while including the goal of protecting both the United States and U.S. allies could expand the range of purposes for military action. As to scope, many past AUMFs include language stating that the President can use all "necessary and appropriate" force to achieve the purpose of the authorization. While this could provide the President with the flexibility he needs to effectively employ U.S. Armed Forces, such language leaves the determination of the form and extent of U.S. military force generally to the President. Congress could decide to place limitations and conditions on any broader purpose and scope provisions in an attempt to shape the President's use of U.S. military force. (See " Limitations and Conditions ," below.) Identifying Targeted Entities Any new IS AUMF would be expected to name the Islamic State (or one of its other monikers, including ISIS, ISIL, or Daesh) as the primary entity to be targeted by authorized U.S. military force. As evidenced by the implementation of the 2001 AUMF, however, a number of issues arise in determining exactly who can be lawfully targeted under such a provision, and the extent to which Congress desires to define and/or limit the universe of lawful targets in an IS AUMF. First, while specifically targeting the Islamic State provides a basic starting point for determining authorized targets, in many cases it might be unclear whether individuals are in fact part of the Islamic State, are part of groups fighting alongside the Islamic State, or are merely part of non-aligned groups also fighting in the region, either against the United States and its allies or otherwise. Congress might also wish to include language providing for future iterations of the structure of the Islamic State group. The Islamic State might splinter at multiple points in time into several new entities with different names and different affiliations, or combine with other groups to form new entities. Indeed, the Islamic State itself was formerly known, among other things, as Al Qaeda in Iraq (AQI), and its former close relationship and subsequent reported split with Al Qaeda has complicated determinations of whether the 2001 AUMF could be applied against it. An IS AUMF could include language that extends the authority to use military force against any successor entities of the Islamic State. Perhaps the aspect of identifying lawful targeted entities considered most fraught is the matter of "associated forces." One of the central criticisms of the application of authority in the 2001 AUMF has been the expansion of military force to target entities that successive Administrations have designated "co-belligerent" with Al Qaeda and the Taliban. In the context of the current campaign against the Islamic State, the Obama Administration has asserted that the Islamic State can be targeted as it can be considered a branch or in some ways a successor to Al Qaeda. It can be argued that this opens the possibility of military force being used now and in the future against a number of groups associated with the Islamic State, further expanding the universe of targeted entities, possibly in countries other than Iraq and Syria. Some recent IS AUMF proposals have attempted to better define what constitutes "associated forces," or requires presidential reporting on or certification of newly designated associated forces, in an attempt to circumscribe the number of lawfully targeted entities and ensure congressional input into any expansion of such entities. The term "associated forces" would seem to apply to forces that are not part of IS forces but are fighting in concert with such forces. Some proposals, however, such as President Obama's IS AUMF proposal, include language that seems to define both IS and associated forces, stating the term means "individuals and organizations fighting for, on behalf of, or alongside ISIL.... " This language might be seen as overly broad and vague; Members of Congress may desire to more precisely define the term, ensuring that only those forces that are determined to directly engage in military operations in cooperation with IS forces are lawfully targeted under any IS AUMF. On the other hand, given the continued U.S. policies of defending U.S. national security, stabilizing and maintaining a democratic Iraq, and supporting moderate Syrian groups fighting the Syrian forces of the Asad government, an IS AUMF could eschew the "associated forces" term in favor of targeting the Islamic State and any other individuals or groups that pose a threat to those policies. Limitations and Conditions In considering any proposals to limit the authority of an IS AUMF, for example, by prohibiting the use of ground forces or constraining operations to a certain geographic area, Congress must weigh competing interests. The President's proposal would not allow "enduring offensive ground combat operations," while several previous IS AUMF proposals prohibited the use of ground combat forces or operations with specific carve-outs regarding special forces and training, among other units/operations. Understanding the expected effect of these different provisions would likely be key to Congress's decision on including them into a finalized IS AUMF. The limitation on the use of ground forces or prohibiting ground combat operations might, as some argue, significantly restrict the ability of the President and U.S. military leadership to prosecute conflict against the Islamic State in the manner they feel is most effective. Some in Congress might consider such restriction acceptable, however, if it is determined to avoid the involvement of the U.S. Armed Forces in another large-scale ground conflict following so closely upon the end of two such conflicts in Iraq and Afghanistan. A geographic limitation might hinder the President's ability to strike IS and associated forces in countries other than Iraq and Syria, despite these forces' proven ability to cross state borders when it suits their purposes. In addition, as more groups pledge to fight alongside the Islamic State, or identify themselves as parts of the Islamic State itself, in countries such as Egypt, Libya, Algeria, Saudi Arabia, and Yemen, it could be reasonably expected that the President might determine that U.S. military operations should expand outside Iraq and Syria in the future. Congress, however, might wish to include such a limitation to prevent a similar geographic expansion of military operations to the President's expansion under the 2001 AUMF's authority to several countries other than Afghanistan. Repealing Previous AUMFs and Sunset Provisions The President's proposal includes a three-year sunset provision automatically terminating the IS-specific authorization; past proposals like H.J.Res. 27 (114 th Cong.) would have terminated the new authorization and repealed the 2001 AUMF after three years; Representative Schiff's December 2015 draft IS AUMF proposal would have repealed the 2001 and 2002 AUMFs immediately, replacing them with a comprehensive authorization against the Islamic State, Al Qaeda, and the Afghan Taliban. There is concern that Congress placing time limitations on the campaigns against the Islamic State, as well as Al Qaeda and other terrorist groups targeted under the 2001 AUMF, would send the wrong message to such targeted groups and the world about U.S. resolve to defeat these groups. On the other hand, a sunset on authority to use military force could be utilized to ensure that the IS and 2001 AUMF authorizations are not interpreted to authorize the use of military force in perpetuity, and in a manner that some perceive as outside the scope and intent of the original authorizations. Given the executive branch's continuing reliance on that authorization to conduct the current campaign against the Islamic State, for example, leaving the 2001 AUMF in place without amendment might be a continuing source of confusion and contention concerning presidential authority to use military force against the Islamic State, and in Iraq, Syria, and the Middle East/North Africa region in general. In any case, some argue, automatic terminations of authority might force Congress to reconsider previous AUMFs and their provisions in light of changed circumstances, amending and reauthorizing as Congress sees necessary. Reporting and Certification Although the executive branch has provided information both publicly and in briefings to Members of Congress concerning the campaign against the Islamic State, Congress may decide to require the President to report to Congress both before a new authorization can enter into effect, and at regular intervals as the campaign moves forward. Ensuring Congress is being presented with substantive, up-to-date information might serve to mitigate concerns over unchecked expansion of the scope and duration of military operations taken under any IS AUMF. President Obama's proposal would have required general reporting on the actions taken under the authorization every six months, which is in line with the existing reporting requirements in the War Powers Resolution. Previous IS AUMF proposals have contained more frequent and detailed reporting requirements. Representative Schiff's December 2015 draft IS AUMF proposal sought to replace limiting provisions defining targetable associated forces and circumscribing the geographic and operational scope of the new authorization, instead creating specific congressional reporting requirements on those issues. Members of Congress might wish to have clear strategy presented before agreeing to authorize military force, requiring a report explaining such a strategy to Congress (such as the report required in H.J.Res. 30 ), and make it a condition of authorization. Periodic reporting could require updated information on the effectiveness of previously stated strategy, and the extent to which strategic goals are being achieved. Appendix A. Comparison of IS AUMF Proposals from the 114 th Congress As discussed in the main text of this report, there have been several new proposals for authorizations to use military force against the Islamic State during the 114 th Congress, both from Members of Congress and the President (see Table A-1 ). Table B-2 , below, provides a breakdown of these seven proposals by type of provision. S. 1587 and H.R. 4208 contain identical provisions, and are treated as one proposal in the table. S.J.Res. 26 and S.J.Res. 29 contain substantially similar provisions, but some are not identical, and thus the resolutions are treated separately. Appendix B. Comparison of IS AUMF Proposals from the 113 th Congress Near the end of the 113 th Congress, a number of Members proposed several new authorizations to use military force against the Islamic State: The analysis provided below compares similar types of provisions included in IS AUMF proposals from the 113 th Congress and issues related to those provisions. Table B-2 provides a breakdown of seven out of eight of these proposals by type of provision. Treatment of S.J.Res. 47 is included in the section entitled " Calls for a New AUMF and Congressional Action in the 113th Congress " in the main text of this report.

Since the United States embarked on a strategy to counter the Islamic State (also known as ISIL or ISIS) in 2014, some Members of Congress have raised concerns about the President's underlying authority to engage in anti-IS military operations. In the 114th Congress, both houses of Congress took steps to revisit the possibility of considering legislation to provide authority for the use of military force (AUMF) against the Islamic State. Interest has continued into the first session of the 115th Congress and with the start of the Trump Administration. In 2014, the armed offensive of the Islamic State in northern and western Iraq and northeastern Syria raised significant concerns for the United States. After first ordering multiple deployments of U.S. troops to Iraq to provide security to diplomatic personnel and facilities, advise Iraqi security forces, and conduct intelligence gathering and reconnaissance, President Obama began ordering U.S. military airstrikes on IS forces in Iraq in August 2014. Later in September, after laying out plans for expanded use of military force against the Islamic State in a televised speech to the American people, the President ordered U.S. military airstrikes in Syria against both IS forces and forces of the "Khorasan Group," identified by the President as part of Al Qaeda. In 2015, the President ordered new deployments to Iraq, and the Administration announced deployment of a small number of special operations forces to Syria to conduct military operations that involve advising regional partner armed forces but also can include "unilateral" U.S. operations. In 2016, both U.S. military operations and deployments of U.S. Armed Forces increased to continue the campaign against the Islamic State. As military action against the Islamic State has evolved and increased, many observers, including a number of Members of Congress, have raised numerous questions and concerns about the President's authority to use military force against the Islamic State. Some efforts began near the end of the 113th Congress to consider enactment of a new authorization for use of military force targeting the Islamic State, and have continued into the 114th Congress; the issue, however, remains contentious. The President provided Congress a new authorization proposal in February 2015, and in his 2016 State of the Union address again called on Congress to enact a new authorization for use of military force (AUMF) targeting the Islamic State. The Obama Administration's official position on presidential authority to use force against the Islamic State, however, has remained consistent, relying on the previous 2001 AUMF against those who perpetrated the September 11, 2001, terror attacks (and, to a lesser extent, the 2002 AUMF against the Saddam Hussein regime in Iraq). This report focuses on the several proposals for a new AUMF specifically targeting the Islamic State made during the 113th and 114th Congresses as well as those made thus far in the 115th Congress. It includes a brief review of existing authorities and AUMFs, as well as a discussion of issues related to various provisions included in existing and proposed AUMFs that both authorize and limit presidential use of military force. Appendices provide a comparative analysis of similar provisions in the numerous AUMFs proposed in the 113th and 114th Congresses. This report will be updated to reflect congressional activity. For more information on the Islamic State, see CRS Report R43612, The Islamic State and U.S. Policy, by Christopher M. Blanchard and Carla E. Humud.

Introduction Lying, or making a false statement, is a federal crime under a number of circumstances. It is a federal crime to make a material false statement in a matter within the jurisdiction of a federal agency or department. Perjury is also a federal crime. Perjury is a false statement made under oath before a federal tribunal or official. Moreover, some false certifications are punishable as perjury by operation of a federal statute. Subornation of perjury is inducing someone else to commit perjury. It, too, is a federal crime if the perjury induced is a federal crime. Finally, conspiracy to commit any these underlying crimes is also a separate federal crime. Moreover, a defendant under investigation or on trial for some other federal offense may find upon conviction his sentence for the underlying offense enhanced as a consequence of a false statement he made during the course of the investigation or trial. This is an overview of federal law relating to the principal false statement and to the three primary perjury statutes. False Statements (18 U.S.C. § 1001) The principal federal false statement statute, 18 U.S.C. § 1001, proscribes false statements, concealment, or false documentation in any matter within the jurisdiction of any of the three branches of the federal government. It applies generally within the executive branch. Within the judicial branch, it applies to all but presentations to the court by parties or their attorneys in judicial proceedings. Within the legislative branch, it applies to administrative matters such as procurement, as well as to "any investigations and reviews, conducted pursuant to the authority of any committee, subcommittee, commission, or office of the Congress consistent with applicable rules of the House or Senate." In outline form, Section 1001(a) states: I. Except as otherwise provided in this section, II. whoever, III. in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, IV. knowingly and willfully— V. a. falsifies, conceals, or covers up by any trick, scheme, or device a material fact; b. makes any materially false, fictitious, or fraudulent statement or representation; or c. makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry; shall be fined under this title, imprisoned not more than 5 years or, if the offense involves international or domestic terrorism (as defined in section 2331), imprisoned not more than 8 years, or both. If the matter relates to an offense under chapter 109A [sexual abuse], 109B [sex offender registration], 110 [sexual exploitation], or 117 [transportation for illicit sexual purposes], or section 1591 [sex trafficking], then the term of imprisonment imposed under this section shall be not more than 8 years. Elements Whoever The Dictionary Act provides that "in determining the meaning of any Act of Congress, unless the context indicates otherwise … the word[] … 'whoever' include[s] corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals … ." "Includes" is usually a "but-not-limited-to" word. As a general rule, use of the word "includes" means that the list that it introduces is illustrative rather than exclusive. The government has convicted corporations under Section 1001 which confirms that the section's prohibitions are not confined to individuals, that is, the section is not one where "the context indicates otherwise." Within the Jurisdiction A matter is within the jurisdiction of a federal entity when it involves a matter "confided to the authority of a federal agency or department ... A department or agency has jurisdiction, in this sense, when it has power to exercise authority in a particular situation. Understood in this way, the phrase 'within the jurisdiction' merely differentiates the official, authorized functions of an agency or department from matters peripheral to the business of that body." Several courts have held that the phrase contemplates coverage of false statements made to state, local, or private entities relating to matters that involve federal funds or regulations. Section 1001(b) creates an exception, a safe harbor for statements, omissions, or documentation presented to the court by a party in judicial proceedings. The exception covers false statements made to the court even if they result in the expenditure of executive branch efforts. The exception also includes false statements of indigency filed by a defendant seeking the appoint of counsel, and perhaps a defendant's false statement in a probation officer's presentence report, but not false statements made by one on supervised release to a probation officer. Section 1001's application to matters within the jurisdiction of the legislative branch is confined to two categories of false statements. One proscribes false statements in matters of legislative branch administration and reaches false statements made in financial disclosure statements. The other proscribes false statements in the course of congressional investigations and reviews, but does not reach false statements made concurrent to such investigations or reviews. Knowingly and Willfully Section 1001 requires the government to prove that the defendant acted "knowingly and willfully." It requires the government to show the defendant knew or elected not to know that the statement, omission, or documentation was false and that the defendant presented it with the intent to deceive. The phrase "knowingly and willfully" refers to the circumstances under which the defendant made his statement, omitted a fact he was obliged to disclose, or included within his documentation, that is, "that the defendant knew that his statement was false when he made it or – which amounts in law to the same thing – consciously disregarded or averted his eyes from the likely falsity." Although the offense can only be committed "knowingly and willfully," that is, with the knowledge that it was unlawful, the prosecution need not prove that the defendant knew that his conduct involved a "matter within the jurisdiction" of a federal entity, nor that he intended to defraud a federal entity. Materiality Prosecution for a violation of Section 1001 requires proof of materiality, as does conviction for perjury, and the standard is the same: the statement must have a "natural tendency to influence, or be capable of influencing the decisionmaking body to which it is addressed." There is no need to show that the decision maker was in fact diverted or influenced. Concealment, False Statements, and False Writings Section 1001's false statement element is in fact three alternative elements that encompass concealment, false statements and false writings. Subsection 1001(a)(1)(concealment) applies to anyone who "falsifies, conceals, or covers up by any trick, scheme, or device a material fact." Although the requirement does not appear on the face of the statute, prosecutions under Subsection 1001(a)(1) for concealment must also prove the existence of a duty or legal obligation not to conceal. A federal employee's general ethical obligation to "disclose waste, fraud, abuse, and corruption to appropriate authorities," however, will "not support a conviction under § 1001(a)(1)." Subsection 1001(a)(2)(false statements) applies to anyone who "makes any material false, fictitious, or fraudulent statement or representation." Conviction requires that the defendant knew that his statement or documentation was false, that is, it was not true. It follows that a defendant's response to a question that is so fundamentally ambiguous cannot provide the basis for a conviction under Subsection 1001(a)(2). Section 1001(a)(2) recognizes few defenses other than the government's failure to prove one or more of its elements. For instance, "there is no safe harbor for recantation or correction of a prior false statement that violates [Section] 1001." Under an earlier version of Section 1001, several lower federal courts recognized an "exculpatory no" doctrine under which Section 1001 did not reach a defendant's simple false denial to a law enforcement officer's incriminating question. The Supreme Court repudiated the doctrine "[b]ecause the plain language of [then] § 1001 admits of no exception for an 'exculpatory no … ." Defendants have been largely unable to bring about recognition of an exculpatory no doctrine under Section 1001's current language, although the section's breadth occasionally seems to cause judicial discomfort. Section 1001(a)(3)(written false statements) covers written false statements and applies to anyone who "makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry." In order to establish a violation of Subsection 1001(a)(3), the government must prove the defendant "rendered a statement that: (1) is false, (2) is material, (3) is knowingly and willfully made, and (4) concerns a matter within the jurisdiction of a federal" entity. Perjury Generally (18 U.S.C. § 1621) Testimonial Perjury Generally (18 U.S.C. § 1621(1)) As noted earlier, there are three primary perjury statutes. Each involves a statement or writing offered under oath or its equivalent. One proscribes two forms of perjury generally. A second proscribes perjury before a court or grand jury. A third proscribes subornation of perjury that consists of arranging for someone else to commit perjury. Section 1621 is the first of these and consists of two offenses, one for testimony and the other written statements. The testimonial proscription provides: I. Whoever having taken an oath II. before a competent tribunal, officer, or person, III. in any case in which a law of the United States authorizes an oath to be administered, IV. a. that he will i. testify, ii. declare, iii. depose, or iv, certify truly, or b. that any written i. testimony, ii. declaration, iii. deposition, or iv. certificate by him subscribed, is true, V. willfully and contrary to such oath VI. a. states or b. subscribes any material matter which he does not believe to be true; or is guilty of perjury and shall, except as otherwise expressly provided by law, be fined under this title or imprisoned not more than five years, or both. This section is applicable whether the statement or subscription is made within or without the United States. The courts generally favor an abbreviated encapsulation such as the one the Supreme Court provided in United States v. Dunnigan : "A witness testifying under oath or affirmation violates this section if she gives false testimony concerning a material matter with the willful intent to provide false testimony, rather than as a result of confusion, mistake, or faulty memory." Whoever The term "whoever" ordinarily encompasses individuals as well as entities, such as corporations, unless the context of the statute in which the term is used suggests a contrary congressional intent. As a general rule, a corporation is liable for the crimes of its employees, officers, or agents committed within the scope of their authority and at least in part for the benefit of the corporation. Corporations have been convicted for false statements under Section 1001, as noted earlier, but rarely if ever under Section 1621(1). Willfully Conviction under Section 1621(1) requires not only that the defendant knew his statement was false ("which he does not believe to be true"), but that his false statement is "willfully" presented. There is but scant authority on precisely what "willful" means in this context. The Supreme Court in dicta has indicated that willful perjury consists of " deliberate material falsification under oath." Other courts have referred to willful perjury as acting with an "intent to deceive" or as acting "intentionally." In the case of a violation of Section 1001, one court has pointed to the general statement from the Supreme Court that "willfully" means the defendant acted with the knowledge his conduct was unlawful. Be that as it may, the prosecution must show that the defendant believed that his statement was not true in order to convict him of Section 1621(1) perjury. Having Taken An Oath Section 1621(1), in so many words ("whoever having taken an oath"), reaches sworn written or oral testimony presented to a federal tribunal, officer, or person. False Truth and Ambiguity Perjury under Section 1621(1) condemns testimony that is false. The Supreme Court in Bronston v. United States explained that testimony that is literally true, even if deceptively so, cannot be considered perjury for purposes of a prosecution under Section 1621(1). Bronston testified at a bankruptcy hearing at which he was asked if he had a Swiss bank account. He truthfully answered that he did not. Then, he was asked if he had ever had a Swiss bank account, which he had. He answered, however, that his company had had such an account at one time, which was true but not responsive to the question of had he ever had an account. Yet, he was convicted for violating Section 1621(1) on the basis of that answer. The Supreme Court's final comment in the decision that threw out the conviction observed, "It may well be that [Bronston's] answers were not guileless but were shrewdly calculated to evade. Nevertheless, … any special problems arising from the literally true but unresponsive answer are to be remedied through the 'questioner's acuity' and not by a federal perjury prosecution." The Court's comment suggests that Section 1621(1) perjury may not be grounded on an ambiguous question. The lower federal appellate courts have not always been willing to go that far. True, "when a line of questioning 'is so vague as to be fundamentally ambiguous, the answers associated with the questions posed may be insufficient as a matter of law to support a perjury conviction.'" Yet, as one court stated, "our Court has 'eschewed a broad reading of Bronston, ' noting instead that, 'as a general rule, the fact that there is some ambiguity in a falsely answered question will not shield the respondent from a perjury … prosecution." Moreover, the line between permissible ambiguity and impermissible fundamental ambiguity is not easily drawn. Some courts have concluded that "to precisely define the point at which a question becomes fundamentally ambiguous … is impossible." Two-Witness Rule Section 1621(1) requires compliance with the common law "two-witness rule" to establish that a statement is false. Under the rule, "the uncorroborated oath of one witness is not sufficient to establish the falsity of the testimony of the accused as set forth in the indictment as perjury." Thus, conviction under Section 1621(1) compels the government to "establish the falsity of the statement alleged to have been made by the defendant under oath, by the testimony of two independent witnesses or one witness and corroborating circumstances." If the rule is to be satisfied with corroborative evidence, the evidence must be trustworthy and support the account of the single witness upon which the perjury prosecution is based. Materiality "To be guilty of perjury under 18 U.S.C. § 1621(1), a defendant's false statement must be material." A false statement is "material in a criminal prosecution for perjury under § 1621(a) if it is material to any proper matter of the decisionmaker's inquiry," that is, "if it is capable of influencing the tribunal on the issue before it." A false statement is no less material because the decisionmaker was not taken in by the statement. Defenses Although a contemporaneous correction of a false statement may demonstrate the absence of the necessary willful intent to commit perjury, the crime is completed when the false statement is presented to the tribunal. Without a statute such as that found in Section 1623, recantation is no defense nor does it bar prosecution under Section 1621(1). False Writings as Perjury Generally (18 U.S.C. § 1621(2)) Congress added Section 1621(2) to the general perjury statute in 1976 in order to dispense with the necessity of an oath for various certifications and declarations. Section 1621(2) states: I. Whoever II. in any a. declaration, b. certificate, c. verification, or d. statement under penalty of perjury as permitted under [Section] 1746 of title 28, United States Code, III. willfully subscribes as true IV. any material matter V. which he does not believe to be true is guilty of perjury and shall, except as otherwise expressly provided by law, be fined under this title or imprisoned not more than five years, or both. This section is applicable whether the statement or subscription is made within or without the United States. As in the case of violations under Section 1621(1), Section 1621(2) proscriptions apply in theory with equal force to corporations and other entities as well as to individuals, but in practice prosecutions appear to be confined to individuals. Section 1621(2) operates as an enforcement mechanism for Section 1746, which affords an under-penalty-of-perjury option wherever a federal statute or regulation requires a written statement under oath. Section 1746 is available regardless of whether the triggering statute or regulation seeks to ensure the validity of a written statement or the identity of its author. Section 1621(2) only proscribes material false statements in unsworn writings, i.e., a statement "capable of influencing or misleading a tribunal on any proper matter of inquiry." Perjury in a Judicial Context (18 U.S.C. § 1623) Congress enacted Section 1623 to avoid some of the common law technicalities embodied in the more comprehensive perjury provisions found in Section 1621 and thus "to facilitate perjury prosecutions and thereby enhance the reliability of testimony before federal courts and grand juries." Unlike Section 1621, Section 1623 permits a conviction in the case of two mutually inconsistent declarations without requiring proof that one of them is false. It recognizes a limited recantation defense. It dispenses with the so-called two-witness rule. And, it employs a "knowing" mens rea standard rather than the more demanding "willfully" standard used in Section 1621. Parsed into elements, Section 1623 declares that: I. Whoever II. a. under oath or b. in any i. declaration, ii. certificate, iii. verification, or iv. statement under penalty of perjury as permitted under [Section] 1746 of title 28, United States Code III. in any proceeding before or ancillary to a. any court or b. grand jury of the United States IV. knowingly V. a. makes any false material declaration or b. makes or uses any other information, including any i. book, ii. paper, iii. document, iv. record, v. recording, or vi. other material, VI. knowing the same to contain any false material declaration, shall be fined under this title or imprisoned not more than five years, or both. In most cases, the courts abbreviate their description of the elements and state in one form or another that to prove perjury the government must establish that "the defendant (1) knowingly made a (2) false (3) material declaration (4) under oath (5) in a proceeding before or ancillary to any court or grand jury of the United States." Whoever Again, the Dictionary Act defines the term "whoever" to encompass individuals as well as entities, such as corporations, unless the context of the statute in which the term is used suggests a contrary congressional intent. A corporation, as a general matter, is liable for the crimes of its employees, officers, or agents committed within the scope of their authority and at least in part for the benefit of the corporation. Corporations have been convicted for false statements under Section 1001, as mentioned earlier, but rarely if ever under Section 1623. Under Oath or Its Equivalent: Court or Grand Jury Section 1623 reaches both false statements under oath and those offered "under penalty of perjury" by operation of 28 U.S.C. § 1746. The allegedly perjurious statement must be presented in a "proceeding before or ancillary to any court or grand jury of the United States." An interview in an attorney's office in preparation for a judicial hearing cannot be considered such an ancillary proceeding, but the phrase "proceedings ancillary to" court or grand jury proceedings does cover proceedings to take depositions in connection with civil litigation, as well as a variety of proceedings in criminal cases, including habeas proceedings, bail hearings, venue hearings, supervised release revocation hearings, and suppression hearings. False or Inconsistent The Supreme Court's observation that a statement that is misleading but literally true cannot support a conviction under Section 1621 because it is not false applies with equal force to perjury under Section 1623. Similarly, perjury cannot be the product of confusion, mistake, or faulty memory, but must be a statement that the defendant knows is false, although this requirement may be satisfied with evidence that the defendant was deliberately ignorant or willfully blind to the fact that the statement was false. On the other hand, "[a] question that is truly ambiguous or which affirmatively misleads the testifier can never provide a basis for a finding of perjury, as it could never be said that one intended to answer such a question untruthfully." Yet ambiguity will be of no avail if the defendant understands the question and answers falsely nevertheless. Subsection 1623(c) permits a perjury conviction simply on the basis of two necessarily inconsistent material declarations rather than a showing that one of the two statements is false. Conviction does require a showing, however, that the two statements were made under oath; it is not enough to show that one was made under oath and the other was made in the form of an affidavit signed under penalty of perjury. Moreover, the statements must be so inherently contradictory that one of them of necessity must be false. Some years ago, the Supreme Court declined to reverse an earlier ruling that "[t]he general rule in prosecutions for perjury is that the uncorroborated oath of one witness is not enough to establish the falsity of the testimony of the accused set forth in the indictment." Because the two-witness rule rests on the common law rather than on a constitutional foundation, it may be abrogated by statute without offending constitutional principles. Subsection 1623(e) permits a perjury conviction without compliance with this traditional two-witness rule. Materiality Materiality is perhaps the most nettlesome of perjury's elements. It is usually said that a statement is material "if it has a natural tendency to influence, or is capable of influencing, the decision of the decisionmaking body to whom it is addressed." This definition is not easily applied when the precise nature of the underlying inquiry remains somewhat undefined such as in grand jury proceedings or in depositions at the discovery stage of a civil suit. On the civil side, the lower federal courts appear divided between the view (1) that a statement in a deposition is material if a "truthful answer might reasonably be calculated to lead to the discovery of evidence admissible at the trial of the underlying suit" and (2) that a statement is material "if the topic of the statement is discoverable and the false statement itself had a tendency to affect the outcome of the underlying civil suit for which the deposition was taken." In the case of perjury before the grand jury, rather than articulate a single standard, the courts have described several circumstances under which false testimony may be considered material. In any event, a statement is no less material because it did not or could not divert the decisionmaker. The courts seem to have had less difficulty dealing with a materiality issue characterized as the "perjury trap" doctrine. The doctrine arises where a witness is called for the sole purpose of eliciting perjurious testimony from him. Under such circumstances it is said the tribunal has no valid purpose to which a perjurious statement could be considered material. The doctrine poses no bar to prosecution in most cases, however, because the government is usually able to identify some valid reason for the grand jury's inquiries. Defenses Most of the other subsections of Section 1623 are designed to overcome obstacles that the common law placed in the path of a successful perjury prosecution. Subsection 1623(d), in contrast, offers a defense unrecognized at common law. The defense is stated in fairly straightforward terms, "[w]here in the same continuous court or grand jury proceeding in which a declaration is made, the person making the declaration admits such declaration to be false, such admission shall bar prosecution under this section if, at the time the admission is made, the declaration has not substantially affected the proceeding, or it has not become manifest that such falsity has been or will be exposed." Although phrased in different terms, the courts seem to agree that repudiation of the false testimony must be specific and thorough. There is some disagreement whether a recanting defendant must be denied the defense if both the substantial impact and imminent exposure conditions have been met or if the defense must be denied if either condition exists. Most courts have concluded that the presence of either condition dooms the defense. Early construction required that a defendant establish both that his false statement had not substantially affected the proceeding before his recantation and that it had not become manifest that his false statement would be exposed. One more recent appellate decision, however, concluded that the defense should be available to a witness who could show a want of either an intervening adverse impact or of likely exposure of his false statement. Even without the operation of subsection 1623(d), relatively contemporaneous corrections of earlier statements may negate any inference that the witness is knowingly presenting false testimony and thus preclude conviction for perjury. Subornation of Perjury (18 U.S.C. § 1622) Section 1622 outlaws procuring or inducing another to commit perjury: "Whoever procures another to commit any perjury is guilty of subornation of perjury, and shall be fined under this title or imprisoned for not more than five years, or both." The crime consists of two elements – (1) an act of perjury committed by another (2) induced or procured by the defendant. Perjury under either Section 1621 or Section 1623 will support a conviction for subornation under Section 1622, but proof of the commission of an act of perjury is a necessary element of subornation. Although the authorities are exceptionally sparse, it appears that to suborn one must know that the induced statement is false and that at least to suborn under Section 1621 one must also knowingly and willfully induce. Subornation is only infrequently prosecuted as such perhaps because of the ease with which it can now be prosecuted as an obstruction of justice under either 18 U.S.C. §§ 1503 or 1512 which, unlike Section 1622, do not insist upon suborner success as a prerequisite to prosecution. Conspiracy (18 U.S.C. § 371) Section 371 outlaws conspiring to commit another federal offense, including making a false statement in violation of Section 1001, perjury under Sections 1621 and 1623, and subornation of perjury under Section 1622. As a general matter, conspiracy requires the agreement of two or more people to commit a federal crime and for one of the parties to commit some affirmative act in furtherance of the scheme. Conspiracy under Section 371 is punishable by imprisonment for not more than five years. Conspiracy is a separate crime, and offenders may be punished for conspiracy, as well as for the commission of the crime that is the object of the offense, and for any crime committed in the foreseeable furtherance of the crime. Perjury as a Sentencing Factor (U.S.S.G. § 3C1.1) Perjury, subornation of perjury, and false statements are each punishable by imprisonment for not more than five years. They are also punishable by a fine of not more than $250,000 (not more than $500,000 if the defendant is an organization). When the defendant is convicted of a crime other than perjury or false statements, however, perjury or false statements during the investigation, prosecution, or sentencing of the defendant for the underlying offense will often be treated as the basis for enhancing his sentence by operation of the obstruction of justice guideline of the U.S. Sentencing Guidelines (U.S.S.G. §3C1.1). Federal sentencing begins with, and is greatly influenced by, the calculation of the applicable sentencing range under the Sentencing Guidelines. The Guidelines assign federal felony offenses a base offense level to which they add levels for various aggravating factors. Obstruction of justice is one of those factors. Each of the final 43 offense levels is assigned to one of six sentencing ranges, depending on the extent of the defendant's past crime history. For example, a final offense level of 15 means a sentencing range of from 18 to 24 months in prison for a first time offender (criminal history category I) and from 41 to 51 months for a defendant with a very extensive criminal record (criminal history category VI). Two levels higher, at a final offense level of 17, the range for first time offenders is 24 to 30 months; and 51 to 63 months for the defendant with a very extensive prior record. Depending on the final offense level otherwise applicable to a particular crime, the impact of a 2-level increase spans from no impact at the lowest final offense levels to a difference of an additional 68 months at the highest levels. Section 3C1.1 instructs sentencing courts to add 2 offense levels in the case of an obstruction of justice: If (1) the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice with respect to the investigation, prosecution, or sentencing of the instant offense of conviction, and (2) the obstructive conduct related to (A) the defendant's offense of conviction and any relevant conduct; or (B) a closely related offense, increase the offense level by 2 levels. The accompanying commentary explains that the section "is not intended to punish a defendant for the exercise of a constitutional right." More specifically, a "defendant's denial of guilt (other than a denial of guilt under oath that constitutes perjury), refusal to admit guilt or provide information to a probation officer, or refusal to enter a plea of guilty is not a basis for application of this provision." Early on, the Supreme Court made it clear that an individual's sentence might be enhanced under Section 3C1.1, if he committed perjury during the course of his trial. Moreover, the examples provided elsewhere in the section's commentary and the cases applying the section confirm that it reaches perjurious statements in a number of judicial contexts and to false statements in a number of others. The examples in the section's commentary cover conduct: (B) committing, suborning, or attempting to suborn perjury, including during the course of a civil proceeding if such perjury pertains to conduct that forms the basis of the offense of conviction; (F) providing materially false information to a judge or magistrate; (G) providing a materially false statement to a law enforcement officer that significantly obstructed or impeded the official investigation or prosecution of the instant offense; (H) providing materially false information to a probation officer in respect to a presentence or other investigation for the court; [and] (I) other conduct prohibited by obstruction of justice provisions under Title 18, United States Code ( e.g. , 18 U.S.C. §§1510, 1511). The courts have concluded that a sentencing enhancement under the section is appropriate, for instance, when a defendant has (1) given perjurious testimony at his suppression hearing; (2) made false statements to the probation officer for the presentence report; (3) given perjurious, exculpatory testimony at the separate trial of his girl-friend; (4) made false statements in connection with a probation officer's bail report; (5) made false statements to the court in an attempt to change his guilty plea; (6) made false statements to federal investigators; (7) encouraged a witness to lie to the police or on the stand; (8) made false statements to state investigators relating to conduct for which the defendant was ultimately convicted; or (9) given preposterous, perjurious testimony during his own trial. The lower federal appellate courts are divided over the question of whether an obstruction of justice enhancement may be based on a defendant's false statement of indigence in order to secure appointment of counsel. When perjury provides the basis for a sentencing enhancement under the section, the court must find that the defendant willfully testified falsely with respect to a material matter. Thus, the court must find that "the defendant consciously act[ed] with the purpose of obstructing justice." When based upon a false statement not under oath, the statement must still be material, that is, it must "tend to influence or affect the issue under determination." Even then, false identification at the time of arrest only warrants a sentencing enhancement under the section when the deception significantly hinders the investigation or prosecution.

Federal courts, Congress, and federal agencies rely upon truthful information in order to make informed decisions. Federal law therefore proscribes providing the federal courts, Congress, or federal agencies with false information. The prohibition takes four forms: false statements; perjury in judicial proceedings; perjury in other contexts; and subornation of perjury. Section 1001 of Title 18 of the United States Code, the general false statement statute, outlaws material false statements in matters within the jurisdiction of a federal agency or department. It reaches false statements in federal court and grand jury sessions as well as congressional hearings and administrative matters but not the statements of advocates or parties in court proceedings. Under Section 1001, a statement is a crime if it is false, regardless of whether it is made under oath. In contrast, an oath is the hallmark of the three perjury statutes in Title 18. The oldest, Section 1621, condemns presenting material false statements under oath in federal official proceedings. Section 1623 of the same title prohibits presenting material false statements under oath in federal court proceedings, although it lacks some of Section 1621's traditional procedural features, such as a two-witness requirement. Subornation of perjury, barred in Section 1622, consists of inducing another to commit perjury. All four sections carry a penalty of imprisonment for not more than five years, although Section 1001 is punishable by imprisonment for not more than eight years when the offense involves terrorism or one of the various federal sex offenses. The same five-year maximum penalty attends the separate crime of conspiracy to commit any of the four substantive offenses. A defendant's false statements in the course of a federal criminal investigation or prosecution may also result in an enhanced sentence under the U.S. Sentencing Guidelines for the offense that was the subject of the investigation or prosecution. This report is available in abbreviated form—without footnotes, quotations, or citations—as CRS Report 98-807, False Statements and Perjury: A Sketch of Federal Criminal Law.

Most Recent Developments On June 29, 2006, the Senate Committee on Appropriations reported H.R. 5427 , the Energy and Water Appropriations bill for FY2007 ( S.Rept. 109-274 ). This bill includes funding for the Department of Energy (DOE) Renewable Energy Program, which is conducted by the Office of Energy Efficiency and Renewable Energy (EERE). Compared with House-passed funding, the FY2007 Senate Appropriations Committee recommendation seeks an increase of $66.1 million (5%). Table 3 shows other differences, most notably those for Biomass & Biorefinery, Geothermal, Hydro, and Weatherization programs. Compared with FY2006 funding, the Senate Committee recommends an increase of $240.4.8 million for R&D and deployment programs. This reflects support for the Advanced Energy Initiative, including increases for Hydrogen ($34.2 million), Biomass/Biorefineries ($59.3 million), and Solar ($65.3 million). The main cuts include the Weatherization program (-$42.6 million), Facilities (-$20.2 million), Industrial programs (-$9.3 million), and Program Management (-$9.9 million). (The renewable energy provisions in the Energy Policy Act of 2005 [ P.L. 109-58 , H.R. 6 ] and other bills of the 109 th Congress are discussed in the " Renewables in the 109 th Congress " and " Legislation " sections below. A list of all renewable energy bills introduced in the 109 th Congress is provided in CRS Report RL32860, Energy Efficiency and Renewable Energy Legislation in the 109 th Congress , by [author name scrubbed].) Background Renewable Energy Concept Renewable energy is derived from resources that are generally not depleted by human use, such as the sun, wind, and water movement. These primary sources of energy can be converted into heat, electricity, and mechanical energy in several ways. There are some mature technologies for conversion of renewable energy such as hydropower, biomass, and waste combustion. Other conversion technologies, such as wind turbines and photovoltaics, are already well developed, but they have not achieved the technological efficiency and market penetration that many expect they will ultimately reach. Although geothermal energy is produced from geological rather than solar sources, it is often included as a renewable energy resource (and is treated as such in this report). Commercial nuclear power is not generally considered to be a renewable energy resource. Contribution to National Energy Supply According to the Energy Information Administration's (EIA's) Annual Energy Outlook 2006 , renewable energy resources (excluding wood used for home heating) supplied about 5.7 Q (quadrillion Btu's, or quads) of the 99.7 Q the nation used in 2004, or about 6.0% of national energy demand. More than half of renewable energy production takes the form of electricity supply. Of this, most is provided by large hydropower. However, from 1998 through 2001, a drought-driven decline in hydroelectric availability led to a major drop in national renewable energy use. Industrial use of renewables, supplied primarily by biofuels, accounts for most of the remaining contribution. Some note that renewable energy, after more than 25 years of federal support, has achieved neither a high level of market penetration nor a growing market share among other energy sources. A 1999 review of renewable energy studies by Resources for the Future ( Renewable Energy: Winner, Loser, or Innocent Victim? ) concludes that the lower-than-projected market penetration and flat market share were due primarily to declining fossil fuel and electricity prices during most of that period. In contrast, however, it notes that the costs for renewable energy technologies have declined by amounts equal to or exceeding those of earlier projections. Nevertheless, the costs are still higher than those for conventional energy. Even wind energy, which has a much lower cost than solar energy technologies, owes its recent commercial success to support from the federal renewable energy production tax credit and the renewable portfolio standard (RPS) that many states have put in place. EIA's Annual Energy Outlook 2006 projects that current policies would yield a 1.8% average annual increase in renewable energy production to 9.0 Q through 2030, resulting in a 57% total increase. This would amount to about 6.7% of the projected 134 Q total demand in 2030. Role in Long-Term Energy Supply Our Common Future , the 1987 report of the United Nations World Commission on Environment and Development, found that "energy efficiency can only buy time for the world to develop 'low-energy paths' based on renewable sources." Though many renewable energy systems are in a relatively early stage of development, they offer "a potentially huge primary energy source, sustainable in perpetuity and available in various forms to every nation on Earth." The report suggested that a research, development, and demonstration (RD&D) program of renewable energy projects is required to attain the level of primary energy now obtained from a mix of fossil, nuclear, and renewable energy resources. The Agenda 21 adopted at the 1992 United Nations Conference on Environment and Development (UNCED, "Earth Summit") concluded that mitigating urban air pollution and the adverse impact of energy use on the atmosphere—such as acid rain and climate change—requires an emphasis on "clean and renewable energy sources." The U.N. Division on Sustainable Development oversees implementation of Agenda 21. The 2002 U.N. World Summit on Sustainable Development (Johannesburg Earth Summit) adopted a Political Declaration and a Plan of Implementation , which includes "Clean Energy" as one of five key policy actions. Subsequently, in 2003, the U.S. Department of State implemented a $42 million Clean Energy Initiative and the European Union committed to a $700 million energy partnership. Nevertheless, EIA estimates that renewable energy's share of global energy consumption through 2030 will remain limited to less than 9% for the next two to three decades. History The oil embargo of 1973 sparked a quadrupling of energy prices, major economic shock, and the establishment of a comprehensive federal energy program to help with the nation's immediate and long-term energy needs. During the 1970s, the federal renewable energy program grew rapidly to include basic and applied R&D and federal participation with the private sector in demonstration projects, commercialization, and information dissemination. In addition, the federal government instituted market incentives, such as business and residential tax credits, and created a utility market for nonutility-produced electric power through the Public Utility Regulatory Policies Act ( P.L. 95-617 ). The subsequent failure of the oil cartel and the return of low oil and gas prices in the early 1980s slowed the federal program. Despite Congress's consistent support for a broader, more aggressive renewable energy program than any Administration, federal spending for these programs fell steadily through 1990. Until 1994, Congress led policy development and funding through legislative initiatives and close reviews of annual budget submissions. FY1995 marked a noteworthy shift, with the 103 rd Congress for the first time approving less funding than the Administration had requested. The 104 th Congress approved 23% less than the Clinton Administration request for FY1996 and 8% less for FY1997. However, funding turned upward again during the 105 th and 106 th Congresses, and stayed relatively flat through the 107 th and 108 th Congresses and the first session of the 109 th Congress. From FY1978 through FY2005, the DOE spent about $13.4 billion (in 2005 constant dollars) for renewable energy R&D. Renewable energy R&D funding grew from less than $1 million per year in the early 1970s to more than $1.4 billion in FY1979 and FY1980, then declined steadily to $148 million in FY1990. By FY2005, it reached $380 million in 2005 constant dollars. This spending history can be viewed within the context of DOE spending for the three major energy supply R&D programs: nuclear, fossil, and energy efficiency R&D. From FY1948 through FY1977 (in 2005 constant dollars), the federal government spent about $42.6 billion for nuclear (fission and fusion) energy R&D and about $14.1 billion for fossil energy R&D. From FY1978 through FY2005, the federal government spent $33.9 billion for nuclear (fission and fusion), $21.1 billion for fossil, $13.4 billion for renewables, and $12.4 billion for energy efficiency. Thus, total energy R&D spending from FY1948 to FY2005, in 2005 constant dollars, reached $140.0 billion, including $76.5 billion, or 55%, for nuclear; $35.2 billion, or 25%, for fossil; $13.4 billion, or 10%, for renewables; and $12.4 billion, or 9%, for energy efficiency. In FY2006, as part of a restructuring of the appropriations committees, Congress merged appropriations accounts for the DOE Energy Efficiency Program, which previously had been under the Department of Interior and Related Agencies Appropriations Bill, with the appropriations accounts for the DOE Renewable Energy Program under the Energy and Water Development Appropriations Bill. As a result, appropriations for some subprograms of the Renewable Energy Program, such as Hydrogen and Program Management, are commingled with those for the Energy Efficiency Program and are no longer reported separately. In place of the former totals for the Renewable Energy Program, this report now shows a subtotal of appropriations for all of the renewable energy technology subprograms, namely Biomass and Biorefinery, Solar, Wind, Geothermal, and Small Hydro subprograms (see Table 3 ). The total for these subprograms was $242.5 million for FY2005 and $236.2 million for FY2006. Tax Credits The Energy Tax Act of 1978 ( P.L. 95-618 ) created residential solar credits and residential and business credits for wind energy installations; it expired on December 31, 1985. However, business investment credits were extended repeatedly through the 1980s for solar, geothermal, and ocean thermal energy technologies. Section 1916 of the Energy Policy Act of 1992 ( P.L. 102-486 ) extended the 10% business tax credits for solar and geothermal equipment indefinitely. Also, Section 1914 created a "production" tax credit (PTC) of 1.5 cents/kwh (adjusted annually for inflation) for electricity produced by wind and closed-loop biomass. P.L. 106-170 expanded this credit to include poultry waste. The JOBS Act ( P.L. 108-357 ) expanded the PTC (adding solar, geothermal, and open-loop biomass, landfill gas, trash combustion, and certain small hydro) and extended it through the end of 2005. In August 2005, the Energy Policy Act of 2005 (EPACT, P.L. 109-58 ) made the PTC retroactively effective to the beginning of 2005 and extended it through the end of 2007. In addition, P.L. 96-223 created an income tax credit for alcohol fuels; section 9003(a)(3) of P.L. 105-178 extended the 40-60 cents/gallon credit through December 31, 2007. Further, the Energy Tax Act created a 4.0 cents/gallon federal excise tax exemption for gasohol (gasoline blended with alcohol). The JOBS Act ( P.L. 108-357 ) reformed this subsidy, converting the exemption to an equivalent tax credit, which now stands at 5.1 cents/gallon for a 10% ethanol blend. Public Utility Regulatory Policies Act The Public Utilities Regulatory Policies Act (PURPA, P.L. 95-617 ) required electric utilities to purchase power produced by qualified renewable power facilities. Under PURPA, the Federal Energy Regulatory Commission (FERC) established rules requiring that electric utilities purchase power from wind farms and other small power producers at an "avoided cost" price based on energy and capacity costs that the utility would otherwise incur by generating the power itself or purchasing it elsewhere. However, Section 1253 of P.L. 109-58 terminated the mandatory purchase and sale requirements for a new renewable power facility, provided that FERC finds that the new facility has access to wholesale power markets and transmission services. State and Local Government Roles State and local governments have played a key role in renewable energy development. For example, in the early 1980s, a generous state investment tax credit for wind energy in California combined with PURPA and the federal tax credit to stimulate industry development of the first wind farms. California and New York have invested some state funds in renewable energy R&D. Recently, Texas and about 20 other states have used a regulatory tool, the renewable energy portfolio standard (RPS), to encourage renewable energy. Also, in 2001, the city of San Francisco enacted a $100 million revenue bond (Proposition B, "Vote Solar") to support solar and wind energy implementation. In 2004, the city of Honolulu approved a $7.85 million solar and energy efficiency bond. Renewables in the 109th Congress Action in the Second Session DOE Budget, FY2007 On February 6, 2006, President Bush issued the Administration's budget request for FY2007. The DOE request seeks $359.2 million for renewables, which is $84.0 million, or 30.5%, more than the FY2006 appropriations (excluding inflation). The Administration's request includes funding for an Advanced Energy Initiative (AEI) as part of its American Competitiveness Initiative (ACI), which includes accelerated funding for the Solar America and Biorefinery initiatives under DOE's Renewable Energy Program. For more budget details, see "DOE Budget, FY2007" and Table 3 . The House Appropriations Committee report ( H.Rept. 109-474 ) includes several policy directives to the Office of Energy Efficiency and Renewable Energy (EERE). First, it says (pp. 72-73) that EERE could have avoided employee layoffs at the National Renewable Energy Laboratory (NREL) through better management of uncosted balances, and directs EERE to report by January 31, 2007, on steps taken to identify prior year balances and account for all out-year commitments. Second, the report directs (p. 73) EERE to report by January 31, 2007, on the progress of implementing the Inspector General's recommendations (IG audit report DOE/IG-0689) to improve the management of cooperative agreements. Further, the report directs (pp. 74-75) EERE to fully fund a biomass R&D grant to Natureworks LLC, strengthen recruiting from Historically Black Colleges and Universities, and to prepare a report on solar water heaters by January 31, 2007, that covers potential energy savings, market impediments, and deployment strategy. Also, one DOE-wide directive that would directly affect EERE involves funding for the Asia Pacific Partnership (APP), which would support clean, energy-efficient technologies. The report directs (pp. 67-68) DOE to submit a reprogramming request if it intends to support APP with FY2006 funds and to submit a detailed budget justification (which would be considered by the conference committee) if it proposes to use FY2007 funds. The Senate Appropriations Committee report ( S.Rept. 109-274 ) on Energy and Water Development Appropriations for FY2007 includes several policy directives to EERE for the Renewable Energy Program. First, it recommends (p. 116) that DOE complete unfinished awards for biorefineries before funding new ones. It urges that DOE focus on cellulosic ethanol to reduce oil imports, and directs DOE to recommend ways to implement the cellulosic biomass production incentive in EPACT ( P.L. 109-58 , §942). Second, the Committee joins with the House in requiring (p. 117) a report on solar water heaters. Third, it urges (p. 117) DOE to focus on non-silicon materials and directs DOE to prepare a report by March 31, 2007, on short- and long-term silicon market conditions and the potential impact on the photovoltaic market. Fourth, it recommends (p. 117) a $9 million increase to support deployment of a solar-hydrogen pilot plant that would fulfill certain sections of EPACT. Fifth, the Committee directs (p. 117) that funding for a 1 MW solar thermal facility can only be used for deployment in New Mexico. Sixth, it requests (pp. 117-118) that EERE and the Office of Electricity (OE) provide a report by March 2007 that identifies the most promising locations for wind resources and the best opportunities for integrating these potential power generation facilities into the electric grid. Seventh, it encourages (p. 118) DOE to form an interagency group to promote renewable energy use in all aspects of federal agency operations, especially those on federal lands. In particular, this group should address the issue of wind energy project delays due to Department of Defense concerns about radar interference. Eighth, it recommends (p. 118) that $2.4 million be provided as a competitive award for development of a 2 MW permanent magnet motor wind turbine, which has the potential to eliminate the need for gearboxes. Ninth, it directs (p. 118) that funding for Hydropower include a study of advanced techniques for ocean energy, including an assessment of locations for demonstration plants, with a report by May 1, 2007. Tenth, it directs (pp. 118-119) DOE to study possible impacts of plug-in hybrids on electricity supply and distribution networks, including urban areas, and to study environmental aspects of fuel-switching. Eleventh, it directs (p. 119) DOE to provide a strategy to accelerate the development of zero energy buildings by five to seven years. U.S. Department of Agriculture (USDA) and Other Appropriations Action, FY2007 At least three other appropriations bills include some funding for renewable energy programs. These actions are summarized in Table 1 , below, and program descriptions follow. First, the Farm Security Act of 2002 (§9006) created the USDA Renewable Energy Program to provide grants and loans to agriculture producers and rural small businesses for renewable energy systems and energy efficiency improvements. Second, under the Department of State, the Clean Energy program was created to support the use of renewable energy and energy efficiency to reduce greenhouse gas emissions in developing countries. In addition, the Clean Energy Technology Exports Initiative (CETEI) was created by language in the conference report on the FY2004 Energy and Water Development Appropriations bill. Further, in January 2006, the Bush Administration announced that it would seek $50 million in FY2007 for the Asia Pacific Partnership on Clean Development and Climate. Third, the Defense Appropriations Bill would fund a wind turbine demonstration project at a military base. Offshore Wind Farms and the Cape Wind Issue Major commercial wind farm developments in the United States and some European nations have expanded from land-based operations to offshore coastal areas. Offshore wind farms have grown rapidly in Europe, especially in the coastal areas of Germany, the United Kingdom, and Ireland. In the United States, proposals have been made primarily for offshore areas near Texas and the mid-Atlantic and northeast states. A major issue erupted over the Cape Wind Associates proposal for a $1 billion offshore development that would install 450 megawatts (millions of watts) of wind turbine capacity in federal waters, the Horseshoe Shoal area, near Cape Cod in Massachusetts. Cape Wind made the initial project application to the U.S. Army Corps of Engineers in November 2001. The development would include 130 wind turbines, each rated at 3.6 megawatts, reaching 420 feet high (with the hub 260 feet above the surface of the water), and spread over a 24 square-mile area about six miles offshore. The Corps of Engineers prepared a draft environmental impact statement that was released in November 2004. In August 2005, the Energy Policy Act (EPACT, §388) shifted regulatory responsibility to the Minerals Management Service at the Department of Interior. Cape Wind Associates and other proponents say the project is a safe, clean way to develop renewable energy and create jobs. Cape Wind lists supporters that include local towns and citizen groups, renewable energy groups, labor organizations (including the Seafarers International Union), academic and scientific leaders, and college organizations. Other proponents include national environmental groups, such as the Natural Resources Defense Council (NRDC) and the Union of Concerned Scientists. In regard to energy development, they claim that the project would reduce air pollutants and greenhouse gases that would otherwise be generated by conventional power plants. Regarding jobs, they contend that dozens of construction jobs will be created for an 18-month period, with spin-off benefits to local businesses, and that afterwards, year-round jobs will be created to monitor, operate, and maintain the wind farm. In regard to the environment, they claim that from the shore, there will be only a minimal impact on the viewshed. Regarding the tourism industry, they argue that new opportunities will be created for up-close, "majestic views" of the wind towers, which will only be possible from tour boats. Further, they argue that charter fishing boats, sailboat tours, and scenic cruises may include the wind farm as part of the Cape Cod experience. Opponents of the Cape Wind project have collaborated to create the Alliance to Protect Nantucket Sound, which includes several local towns, business and tourism organizations, commercial fishing groups, recreational fishing and boating groups, and boating safety and navigation organizations. The opponents say that the proposed development poses dangers to the area's ecosystem, maritime navigation, and the Cape Cod tourism-based economy. Regarding the viewshed, the Alliance notes that many land-based landmarks smaller than the wind turbines—including a light house, radio antenna, and water towers—are easily seen from the project site. In regard to birds, it stresses that the area is one of the most important migratory staging areas on the East Coast, providing habitat for some endangered species. Regarding fishing, it says that it is one of the richest fishing grounds on the East Coast, many local fishermen make 60% of their income on Horseshoe Shoal, and no fishing or boating group supports the project. The Alliance cites a study that found tourist-related spending would be cut by nearly $200 million per year. Also, the group reports that commercial ferry lines see serious navigation hazards, local airport commissions see safety concerns, and the wind turbines may interfere with radar systems. Under its new authority, MMS became the lead federal agency regulating the development of the proposed Cape Wind project. As directed by EPACT (§388), MMS is preparing an environmental impact statement (EIS). As part of the EIS activity, MMS is considering potential alternatives to the Cape Wind proposal, such as modifying the size of the development, phasing it, reconfiguring it, and relocating it to alternative sites. Section 414 of the Coast Guard and Maritime Transportation Act of 2006 ( P.L. 109-241 , H.R. 889 ) directs the Commandant of the Coast Guard to "specify the reasonable terms and conditions the Commandant determines to be necessary to provide for navigational safety" for the proposed Cape Wind energy facility in Nantucket Sound. Further, it directs MMS to incorporate these terms and conditions into any lease, easement, or right-of-way for the facility. Wind Disruption of Radar Issue There is a concern that tall wind turbines may create false signals that would be picked up by military and civilian radar. Section 358 of the Defense Authorization Act for FY2006 ( P.L. 109-163 , H.R. 1815 ) requires the Department of Defense (DOD) to submit a report to Congress on ... the effects of windmill farms on military readiness, including an assessment of the effects on the operations of military radar installations ... and of technologies that could mitigate any adverse effects on military operations identified. The law was enacted on January 6, 2006, and Section 358 specifies that the report is due 120 days after enactment, which would have occurred in early May 2006. As of the date of this CRS report, the DOD report had not been issued. On March 21, 2006, the DOD and the Department of Homeland Security (DHS) issued an Interim Policy on Proposed Windmill Farm Locations , which states that [t]he DOD/DHS Long Range Radar Joint Program Office Interim Policy is to contest any establishment of windmill farms within radar line of site of the National Air Defense and Homeland Security Radars. This is to remain in effect until the completion of the study and publishing of the Congressional Report. The American Wind Energy Association (AWEA) contends that many wind farm projects have received a Notice of Presumed Hazard from the Federal Aviation Administration (FAA) and have halted development. This, it says, includes projects in Wisconsin, Illinois, North Dakota, South Dakota, and Minnesota. Defense and FAA officials say the "proposed hazard" letters do not prohibit wind farms, they just delay them until any risks to military operations can be assessed and resolved. However, the wind industry is anxious about any delay in construction because the renewable energy production tax credit is set to expire at the end of 2007. On June 2, six Senators from Illinois, Wisconsin, and North Dakota sent letters of concern to DOD about the interim policy of halting wind farms classified as within "radar line of sight" while the study is being completed. On June 28, the Sierra Club filed suit against DOD for delaying the study of wind farm impact on radar mandated by the Defense Authorization Act. The British Department of Trade and Industry (DTI) has supported studies of the radar problem for wind farms in the United Kingdom. A 2003 DTI study found that there is a potential for wind turbines to significantly affect the performance of air traffic control radar. The two general categories of effects are reports of false targets (aircraft) to the radar operator and a reduction in the likelihood of detecting aircraft. This study recommended that the problem could be addressed by modifying the design and installation of both the turbines and the radar systems. A 2005 DTI study modeled the use of radar absorbent materials (RAM) in wind turbine blades. It found that RAM materials can be developed with minimal structural impact, and recommended that a turbine outfitted with such materials be field-tested. Also, DTI formed a partnership with the British Wind Energy Association (BWEA) to fund research on an advanced digital tracker to mitigate the radar problem. Both the Ministry of Defence and the National Air Traffic Services began planning flight trials in late 2005. In 2006, the two agencies decided to conduct tests with Royal Air Force (RAF) aircraft in a location in Wales near four working wind farms. Energy Policy Act of 2005 (EPACT, H.R. 6, P.L. 109-58) Renewable Energy Portfolio Standard (RPS) For retail electricity suppliers, an RPS sets a minimum requirement (often a percentage) for electricity production from renewable energy resources or for the purchase of tradable credits that represent an equivalent amount of production. A growing number of states have enacted an RPS, currently including 19 states and the District of Columbia. The Senate Committee on Energy and Natural Resources held a hearing on RPS on March 8, 2005. Regional differences in the availability of renewable resources, particularly resource availability in the southeastern United States, was a key issue of the discussion. In the markup of a committee print (to be incorporated into H.R. 6 ) by the House Committee on Energy and Commerce, an amendment to add an RPS (1% in 2008, increasing by 1% annually through 2027) was rejected (17-30). Proponents noted a growing number of states with an RPS and that EIA reports show an RPS could reduce electricity bills. Opponents raised concerns about the exclusion of existing hydropower facilities and resource limits for the southeastern United States. There was no RPS provision in the House version of H.R. 6 . The Senate version had a 10% RPS provision. During the conference, there was an idea put out to compromise by including nuclear and hydropower facilities. Nevertheless, RPS was dropped in conference. Renewable Energy Production Tax Credit (PTC) The House version of H.R. 6 had no PTC extension, the Senate version had a three-year extension, and the enacted law (§1301) extends the PTC for two years, through the end of calendar year 2007. For claims against 2005 taxes, the credit is valued at about 1.9 cents per kilowatt-hour (kwh) for electricity produced by facilities that use wind, closed-loop biomass, poultry waste, geothermal energy, or solar energy. Also, half credit (valued at about 0.9 cents/kwh in 2005) is available for electricity produced by facilities that use open-loop biomass, incremental hydropower, municipal solid waste (landfill gas), or small irrigation water flows. Renewable Energy Production Incentive (REPI) Parallel to the PTC, there is a renewable energy production "incentive" (REPI) for state and local governments and nonprofit electrical cooperatives. This 1.5 cent/kwh incentive was created by the Energy Policy Act of 1992 ( P.L. 102-486 ) §1212 and is funded by appropriations to DOE. Eligible facilities currently include solar, wind, biomass (except municipal solid waste), and geothermal energy (except certain types of dry steam geothermal energy). The Energy Policy Act of 2005 (§202) expands REPI to include ocean and wave energy and extends the authorization through FY2016. Renewable Fuel Standard (RFS) P.L. 109-58 ( H.R. 6 , §1501) defines "renewable fuel" to include ethanol, biodiesel, and natural gas produced from landfills, sewage treatment plants, and certain other sources. Ethanol is the renewable motor fuel produced in greatest quantity. In 2004, about 3.9 billion gallons of ethanol were blended with gasoline. In 2005, about 75 million gallons of biodiesel were used. In the House version of H.R. 6 , the RFS provision called for renewable fuels (primarily ethanol) production to reach 3.1 billion gallons a year in 2005, and then increase stepwise to 5.0 billion gallons a year by 2012. In the Senate version of H.R. 6 , the RFS called for 4.0 billion gallons in 2006, rising to 8.0 billion gallons in 2012. The enacted version (§1501) set a standard starting at 4.0 billion gallons in 2006 and rising to 7.5 billion gallons by 2012. Further, an increased incentive would encourage the use of cellulosic and waste-derived ethanol to help fulfill the RFS target. The previous incentive was created by crediting 1.0 gallon of cellulosic or waste-derived ethanol as equivalent to 1.5 gallons of renewable fuel. Under EPACT, it becomes equivalent to 2.5 gallons of renewable fuel. Renewable Hydrogen P.L. 109-58 ( H.R. 6 , §933) would create a program to produce hydrogen from a variety of sources, including renewable energy and renewable fuels, as part of a broader effort to develop hydrogen fuels, vehicles, and infrastructure. The provision includes a focus on distributed energy that uses renewable sources. Another section (§812) also calls for use of renewable hydrogen as part of a hydrogen fueling and infrastructure demonstration program. Renewables Tax Revenue Effect Table 2 shows the estimated 11-year revenue effect of renewable energy tax provisions in the House version of H.R. 6 ( H.R. 1541 ), the Senate version of H.R. 6 , and the enacted law. Other Renewables Provisions P.L. 109-58 ( H.R. 6 ) covers additional areas of renewable energy policy, resources, and technology, including distributed energy, federal purchases, federal lands, Indian energy, net metering, alternative fuels (alcohol, biofuel, biodiesel), biopower/biomass, geothermal, hydropower, solar, and wind. Renewable Energy Production Electricity Production from Renewables The Public Utility Regulatory Policies Act (PURPA) was a key to the growth of electric power production from renewable energy facilities. After 1994, state actions to restructure the electric utility industry dampened PURPA's effect. At the same time, however, the renewable energy production tax credit (PTC) grew in importance as a major incentive, helping to spur the development of independent wind energy power producers. In the 109 th Congress, P.L. 109-58 (§1253) includes a conditional repeal of the mandatory renewables purchase requirement in Section 210 of PURPA. Renewables Under Electric Industry Restructuring To encourage a continued role for renewable energy under restructuring, some states and utilities have enacted measures such as a renewable energy portfolio standard (RPS), public benefits fund (PBF), and/or "green" pricing and marketing of renewable power. The above section on "Renewable Portfolio Standard" summarizes the RPS action in H.R. 6 , including a Senate proposal that was rejected in conference committee. Since the enactment of P.L. 109-58 , several bills with an RPS provision have been introduced, including H.R. 4384 (§205), H.R. 5331 (§504), H.R. 5642 (§4), S. 2435 (§6b), S. 2571 (§504), and S. 2747 (§301). Green Power The term "green power" generally refers to electricity supplied in whole or in part from renewable energy sources. Green power marketing (retail or wholesale) is underway in California, Illinois, Massachusetts, New Jersey, New York, Pennsylvania, and Texas. Green pricing is an optional utility service that allows electricity customers who are willing to pay a premium for the environmental benefits of renewable energy to purchase green power instead of conventional power. Utility green pricing programs are available to more than one-third of the nation's consumers. Distributed Energy Distributed energy involves the use of small, modular electricity generators sited close to the customer load that can enable utilities to defer or eliminate costly investments in transmission and distribution system upgrades, and provide customers with quality, reliable energy supplies that may have less environmental impact than traditional fossil fuel generators. Technologies for distributed electricity generation use wind, solar, bioenergy, fuel cells, gas microturbines, hydrogen, combined heat and power, and hybrid power systems. A DOE study, Structural Vulnerability of the North American Power Grid , suggests that adding more distributed power generation could help reduce grid vulnerability. Another DOE study, Homeland Security: Safeguarding America ' s Future with Energy Efficiency and Renewable Energy Technologies , provides a broad look at the potential to address vulnerabilities. Net Metering Net metering allows customers with generating facilities to "turn their electric meters backwards" when feeding power into the grid; they receive retail prices for the excess electricity they generate. This encourages customer investment in distributed generation, which includes renewable energy equipment. About 40 states have some form of net metering in place. P.L. 109-58 (§1251) provides for net metering. Natural Gas and Renewables In January 2005, the Senate Energy and Natural Resources Committee held a natural gas conference. Some participants described the potential for renewable energy to augment gas supplies, reduce gas demand, and thereby help reduce natural gas prices. Some of these statements referred to a 2005 DOE study entitled Easing the Natural Gas Crisis: Reducing Natural Gas Prices through Increased Deployment of Renewable Energy and Energy Efficiency. Biomass-Generated Synthetic Natural Gas (Syngas) Continuing high natural gas prices have created interest in using renewables to dampen natural gas demand. Renewable energy (mainly biomass) can be used to produce methane (the main component of natural gas), which could possibly substitute directly for natural gas. DOE projects that by 2020, biomass and energy crops could produce 15% of natural gas needs. A 2005 Harvard University study, The National Gasification Strategy , cites a Princeton University study, A Cost-Benefit Assessment of Biomass Gasification Power Generation in the Pulp and Paper Industry , that says that biomass-generated "black liquor" and wood waste could produce enough syngas to support 25 billion watts (gigawatts) of natural gas-fired power plant capacity by 2020. Substituting Electricity from Renewables for Gas-Fired Generation Also, a variety of renewables can generate electricity that indirectly displaces natural gas use for power generation. For many utilities, the peak demand (often supported with natural gas peak-load plants) occurs during hot summer afternoons. In many regions, solar and wind energy reach high levels during summer peak periods. The American Wind Energy Association (AWEA) says that at the end of 2005, wind farms were saving more than 0.5 billion cubic feet (Bcf) of natural gas per day. DOE's 2000 report Scenarios for a Clean Energy Future projects that, with some federal policy changes, biomass-based power production could be greatly accelerated through 2010. Transportation Fuels Produced from Renewables Corn Ethanol In the United States, ethanol is produced mainly from corn and is most frequently used as a 10% blend with gasoline. Historically, high cost has been a key barrier to commercial use, which has been addressed mainly by a 51-cent per gallon tax credit for fuel use. Due primarily to the use of fertilizer, which has natural gas as a key ingredient, there has been a debate over the net energy benefit of using corn ethanol. The perception that ethanol use has significantly lower emissions of some air pollutants than gasoline helps maintain support for its incentives. However, compared with gasoline, ethanol can have higher emissions of volatile organic compounds (VOCs) per mile traveled. Assuming that the net energy benefit of ethanol is clearly positive, then its carbon dioxide emissions are significantly lower than those for gasoline. National ethanol production was estimated at 4.0 billion gallons in 2005. Due to ethanol's lower heat content, this is equivalent to about 2.7 billion gallons of gasoline that year, or about 170,000 barrels of oil per day. In comparison, in 2005, U.S. transportation oil use averaged 13.82 million barrels per day (mb/d) and total U.S. oil use averaged 20.7 mb/d. Thus, in 2005, ethanol production accounted for about 1.2% of transportation fuel use and about 0.8% of total oil use. EPACT ( P.L. 109-58 , §1501) established a renewable fuel standard that sets a target to increase renewable fuel production to 7.5 billion gallons per year by 2012. This target is expected to be met primarily with ethanol, and it would be equivalent to about 330,000 barrels of oil per day (b/d). Further, EIA estimates ethanol production may reach 700,000 b/d by 2030. This would be equivalent to about 470,000 b/d of oil use. In comparison, EIA estimates that total U.S. oil use will reach about 25 mb/d. Using these estimates suggests that ethanol would displace about 1.9% of total oil use in 2030. Cellulosic Ethanol Corn and other starches and sugars are only a small fraction of biomass that can be used to make ethanol. Advanced bioethanol technology could allow fuel ethanol to be made from cellulosic (plant fiber) biomass, such as agricultural and forestry wastes, industrial waste, municipal solid waste (organic material), trees, and grasses. Cellulosic ethanol can be made through gassification, thermochemical, and microbial processes. In the microbial process, cellulosic ethanol is made by breaking apart the cellulose (fiber) in plant cell walls into component sugar molecules, which microbes then convert to ethanol. In particular, ethanol can be produced from dedicated fuel crops, such as fast-growing trees and switchgrass. The latter is a native grass that grows well on cropland and marginal lands, needing little water and no fertilizer. Because fertilizer is not needed, the net energy production is much higher than that for corn ethanol. Due to its capacity for production on marginal lands, the potential growing area for switchgrass is much larger than that for corn. A provision in the Farm Security Act of 2002 ( P.L. 107-171 ) encourages use of the Conservation Reserve Program lands for development of such biomass resources. Although cellulosic feedstocks may be cheaper and more plentiful than corn, they require more extensive processing that makes the conversion to ethanol more costly. Both DOE and USDA are conducting research to improve this technology and reduce costs. In particular, DOE is studying the use of enzymes and heat as catalysts to reduce the cost of the conversion process. Both the United States and Canada have pilot facilities for producing cellulosic ethanol, and Canada has the only commercial-scale plant in operation. The Administration's Biorefinery Initiative, part of its Advanced Energy Initiative (AEI), aims to increase funding for cellulosic ethanol development with the goal of accelerating its commercial use. In response to the AEI, DOE set a goal of using biofuels to displace 30% of national transportation fuel use (at the 2004 level) by 2030. In July 2006, DOE announced a partnership between EERE and the Office of Science to pursue use of biotechnology to produce cellulosic ethanol. A report on the research strategy of the partnership says that the United States could produce up to 60 billion gallons of biofuels per year, which would be equivalent to about 2.6 million barrels of oil per day. The research plan is focused on achieving breakthroughs in biotechnology to increase the quantity of biomass (e.g., corn plant waste and switchgrass) per acre and breeding the plants to have less lignin and more cellulose. The plan also aims to achieve biorefinery breakthroughs that would reduce the number of steps in the conversion process and shift the process focus from chemical steps to biological steps in order to reduce waste byproducts and cut costs. Biodiesel Biodiesel has been produced and used in stationary applications (heat and power generation) for nearly a century, but its use as a transportation fuel is recent. DOE notes that this alternative to petroleum-based diesel fuel is a domestically produced, renewable fuel that can be manufactured from vegetable oils, animal fats, or recycled restaurant greases. Further, DOE says biodiesel is safe and biodegradable and reduces air pollutants such as particulates, carbon monoxide, hydrocarbons, and air toxics; but it also notes that biodiesel tends to increase emissions of nitrous oxides. Blends of 20% biodiesel (B20) with 80% petroleum diesel can generally be used in unmodified diesel engines. Biodiesel can also be used in its pure form (B100), but it may require certain engine modifications to avoid maintenance and performance problems and may not be suitable for wintertime use. Other challenges include resource availability and the establishment of a retail distribution network. Biodiesel appears to have a net energy production much higher than that for corn ethanol and slightly higher than that for petroleum diesel. U.S. biodiesel production has increased from less than 1 million gallons in 1999 to an estimated 75 million gallons in 2005. The latter figure is equivalent to about 5,000 barrels of oil per day and is less than 1% of total diesel fuel use for transportation. EIA projects that biodiesel production could reach the equivalent of 20,000 barrels of oil per day by 2030. The American Jobs Creation Act of 2004 ( P.L. 108-357 , §301) created an excise tax credit for biodiesel fuel blending. The credit is set at $1.00 per gallon of biodiesel used. Because the credit is fixed on a volume (per gallon) basis, a 20% biodiesel blend (B20) would be eligible for a 20 cent per gallon credit, and a 100% biodiesel fuel (B100) would be eligible for a $1.00 per gallon credit. EPACT (§1344) extended this credit through the end of 2008. Further, EPACT (§1501) created a renewable fuel standard (RFS), which allows for biodiesel production to contribute to achievement of the standard. Climate Change and Renewables Because in most cases renewable energy appears to release less carbon dioxide (CO 2 ) than fossil fuels, renewables are seen as a key long-term resource that could substitute for fossil energy sources used to produce vehicle fuels and electricity. The percentage of renewable energy substitution depends on technology cost, market penetration, and the use of energy efficiency measures to control energy prices and demand. DOE's November 2005 report U.S. Climate Change Technology Programs—Technology Options for the Near and Long Term compiles information from multiple federal agencies on more than 80 technologies. For these end-use and supply technologies, the report describes President Bush's initiatives and R&D goals for advancing technology development, but it does not estimate emissions saving potentials, as some previous DOE reports on the topic had presented. Climate Action Report—2002 describes federal renewable energy programs aimed at reducing greenhouse gas emissions. In Climate Change 2001: Mitigation , the Intergovernmental Panel on Climate Change looks at the role that renewables could play in curbing global CO 2 emissions. Since 1988, the federal government has accelerated programs that study the science of global climate change and has initiated programs aimed at mitigating fossil fuel-generated CO 2 and other human-generated emissions. The federal government funds programs for renewable energy as a mitigation measure at DOE, USDA, the Environmental Protection Agency (EPA), the Agency for International Development (AID), and the World Bank. The latter two agencies have received funding for renewable energy-related climate actions through Foreign Operations appropriations bills. Because CO 2 contributes the largest greenhouse gas emission impact, the reduction of CO 2 has been the focus of studies of the potential for reducing emissions through renewable energy and other means. Except for biofuels and biopower, wherever renewable energy equipment displaces fossil fuel use, it will also reduce carbon dioxide (CO 2 ) emissions, as well as pollutants that contribute to water pollution, acid rain, and urban smog. In general, the combustion of biomass for fuel and power production releases CO 2 at an intensity that may rival or exceed that for natural gas. However, the growth of biomass material, which absorbs CO 2 , offsets this release. Hence, net emissions occur only when combustion is based on deforestation. In a "closed loop" system, biomass combustion is based on rotating energy crops, there is no net release, and its displacement of any fossil fuel, including natural gas, reduces CO 2 emissions. Legislation In the 109 th Congress, more than 260 bills with provisions for renewable energy or energy efficiency have been introduced. A general description of the renewable energy provisions in these bills, including those enacted into law, is available in CRS Report RL32860, Energy Efficiency and Renewable Energy Legislation in the 109 th Congress , by [author name scrubbed]. The report also groups the bills by policy and issue areas, provides a table that identifies recent action on the bills, and discusses recent action on a month-by-month basis. Appropriations Bills in the Second Session H.R. 5384 (Bennett) Agriculture, Rural Development, Food and Drug, Administration, and Related Agencies Appropriations Bill, 2007. Under Title III, Rural Development Programs, the bill would provide funding for the USDA Renewable Energy Program. The House approved $20 million and the Senate Appropriations Committee recommends $25 million. The Senate report language (p. 113) includes earmark recommendations. House Committee on Appropriations reported ( H.Rept. 109-463 ) May 12, 2006, and reported Part II on May 16. Passed House, amended, May 23. Senate Committee on Appropriations reported ( S.Rept. 109-266 ) June 22. H.R. 5427 (Hobson) Energy and Water Development Appropriations Act, 2007. Provides funding for DOE Renewable Energy Program. The details of House and Senate action are shown in Table 3 . House Committee on Appropriations reported ( H.Rept. 109-474 ) May 19, 2006, with amendments. Passed House, amended, May 24. Senate Committee on Appropriations reported ( S.Rept. 109-274 ) June 29. H.R. 5522 (McConnell) Department of State, Foreign Operations, and Related Programs Appropriations Bill, 2007. In the Senate version of the bill, under Title III, Bilateral Economic Assistance, the program for Development Assistance would include three types of support for renewable energy. First, the program for Energy, Biodiversity, and the Environment would, according to the Committee report (p. 65), provide $180 million "to support policies and programs in developing countries that promote energy efficiency, renewable energy, and cleaner energy technologies...." Also, $3 million would be provided for the U.S. Agency for International Development (USAID) partnership with DOE for the hydropower Clean Energy Technology Exports Initiative (CETEI). Second, under the USAID Development Assistance program, about $160 million would be provided (p. 59-60) for Energy, Biodiversity, and Other Environment programs for Africa ($73 million), East Asia/Pacific ($28 million), Near East ($2 million), South Asia ($18 million), and Western Hemisphere ($52 million). Third, under Other Bilateral Economic Assistance, the bill would provide $26 million for the Asia Pacific Partnership, and further specifies (p. 73) that the "... Partnership activities will be coordinated with existing efforts to promote clean energy export and market development initiatives." House Committee on Appropriations reported ( H.Rept. 109-486 ) June 5, 2006, with amendments. Passed House, amended, June 9. Senate Committee on Appropriations reported ( S.Rept. 109-277 ) July 10. H.R. 5631 (Jerry Lewis) Department of Defense Appropriations Bill, 2007. The House version of this bill would provide $6.3 million to the Office of the Secretary of Defense (OSD) for a wind energy demonstration project. House Committee on Appropriations reported ( H.Rept. 109-504 ) June 16, 2006. Passed House, amended, June 20. Senate Committee on Appropriations reported ( S.Rept. 109-292 )) July 25. Energy Policy Act of 2005 (EPACT, P.L. 109-58) Title II has several renewable energy provisions: Section 202 reauthorizes the renewable energy production incentive (REPI), Title II (Subtitle C) authorizes increased hydropower at existing dams, Section 203 sets a goal for renewables use in federal facilities and fleets, and Section 206 establishes a residential renewable energy rebate program. Section 812 creates a program for using solar energy to produce hydrogen. Title IX provides funding reauthorizations for renewable energy R&D programs. Section 1253 would, under certain conditions, terminate PURPA cogeneration and small (renewable) power requirements. Title XIII has several tax incentives for renewables: Section 1301 extends the renewable energy production tax credit (PTC) for two years, Section 1303 creates $800 million in renewable energy bonds, Section 1335 creates a 30% residential solar investment credit for two years, Section 1337 increases the business solar investment credit from 10% to 30% for two years, and Sections 1345, 1346, 1347, and 1348 create or extend credits for ethanol and biodiesel fuels. Title XV (Subtitle A) has several renewable fuels provisions covering ethanol, biofuels, cellulosic biodiesel, and municipal waste. In particular, Section 1501 sets a renewable fuels standard of 7.5 billion gallons per year by 2012 for increased use of ethanol and biodiesel. Title XVII empowers DOE to provide loan guarantees for certain innovative renewable energy technology projects. Section 1826 requires a study of passive solar energy. Conference reported ( H.Rept. 109-190 ) July 27, 2005. Signed into law August 8. Other Public Laws of the 109th Congress P.L. 109-148 ( H.R. 2863 ) Department of Defense Appropriations Bill, 2006. Title II, regarding Operation and Maintenance, includes $4.25 million for a wind power demonstration project on an Air Force base. Conference Committee reported ( H.Rept. 109-359 , p. 5) December 18, 2005. Signed into law December 30, 2005. P.L. 109-171 ( S. 1932 ) Deficit Reduction Act of 2005. Section 1301 amends section 9006(f) of the Farm Security Act of 2002 to set a limit of $3 million in FY2007 funding for the USDA Commodity Credit Corporation to carry out renewable energy and energy efficiency projects. Section 1402 terminates FY2007 funding authorization for the USDA Value-Added Producer Program (created by section 6401 of the Farm Security Act of 2002) to provide grants to renewable energy and energy efficiency projects. Conference reported ( H.Rept. 109-362 ) December 19, 2005. Signed into law February 8, 2006. Note: Three other public laws make appropriations for renewable energy programs. P.L. 109-97 ( H.R. 2744 ), the Agriculture Appropriations Bill for FY2006, includes $23 million for USDA's renewable energy grant and loan program; P.L. 109-102 ( H.R. 3057 , Section 585[a]), the Department of State's Appropriations Bill for FY2006, provides $100 million for clean (renewable) energy and energy efficiency programs that seek to reduce greenhouse gas emissions in developing countries; and P.L. 109-103 ( H.R. 2419 ) makes appropriations for the DOE renewable energy programs. P.L. 109-59 ( H.R. 3 ) Transportation Equity Act: A Legacy for Users (SAFETEA-LU). Section 1113 has a volumetric excise tax credit for alternative fuels. Section 1121 on High-Occupancy Vehicle (HOV) Lanes includes provisions for alternative-fueled vehicles. Section 1208 on High-Occupancy Vehicle (HOV) Lanes includes provisions for alternative-fueled vehicles and energy-efficient vehicles. Section 3010 on Clean Fuels Formula Grant Program includes provisions for biodiesel, alcohol fuels, and fuel cells. Section 3044 supports clean fuels, and Section 6015 supports clean fuel school buses. Conference reported ( H.Rept. 109-203 ) July 28. Signed into law August 10. References Congressional Hearings, Reports, and Documents U.S. Congress. Senate. Committee on Energy and Natural Resources. United States—India Energy Cooperation. Hearing held July 18, 2006. http://energy.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=1578 U.S. Congress. Senate. Committee on Energy and Natural Resources. Geothermal Energy. Hearing held July 11, 2006. http://energy.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=1576 U.S. Congress. Senate. Committee on Energy and Natural Resources. Energy Efficiency (S. 2747). Hearing held June 22, 2006. http://energy.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=1568 U.S. Congress. Senate. Committee on Energy and Natural Resources. Renewable Fuel Standards. Hearing held June 19, 2006. http://energy.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=1565 U.S. Congress. Senate. Committee on Environment. Global Climate Change. Hearing held May 25, 2006. [Not available on Committee website.] U.S. Congress. Senate. Committee on Commerce, Science, and Transportation. Corporate Average Fuel Economy (CAFE) Standards. Hearing held May 9, 2006. http://commerce.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=1756 U.S. Congress. Senate. Committee on Energy and Natural Resources. Climate Change. Conference held April 4, 2006. (S. Hrng. 109-420) http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_senate_hearings&docid=f:28095.pdf U.S. Congress. Senate. Committee on Energy and Natural Resources. Power Generation Resource Incentives & Diversity Standards. Hearing held March 8, 2005. http://energy.senate.gov/hearings/witnesslist.cfm?id=1403 (A more extensive list appears in CRS Report RL32860, Energy Efficiency and Renewable Energy Legislation in the 109 th Congress , by [author name scrubbed].) For Additional Reading Tables showing DOE Renewable Energy R&D Funding trends back to FY1978 (current and constant) are available from the author of this report. American Solar Energy Society. Renewable Hydrogen Forum . April 10-11, 2003. Barry, Courtney. "Winds of Change in Texas." Public Utilities Fortnightly , v. 141, no. 7, April 1, 2003. pp. 27-31. Blankinship, Steve. "A Sunny Outlook for Grid-Connected PV." Power Engineering , v. 107, no. 1, May 2003. pp. 32-40. Cato Institute. Policy Analysis. Evaluating the Case for Renewable Energy: Is Government Support Warranted? 2002. Energy Future Coalition. Challenge and Opportunity: Charting a New Energy Future, Report of the Bioenergy and Agriculture Working Group. 2003. http://www.energyfuturecoalition.org/ European Commission. Directorate General for Research. European Research Spending for Renewable Energy Sources. 2004. (European Union) http://ec.europa.eu/research/energy/pdf/res_spending_en.pdf International Energy Agency. Renewables Information 2005. September 2005. http://library.iea.org/w/bookshop/add.aspx?id=68 National Research Council. The Hydrogen Economy: Opportunities, Costs, Barriers, and R&D Needs. 2004. Owens, Brandon. "Does the PTC Work?" Standard and Poor ' s. September 2004. Popular Science. "Wind Power Reconsidered." November 2004. pp. 43-44. http://www.popsci.com/popsci/technology/generaltechnology/72959aa138b Schimmoller, Brian K. "Renewables Get Into the Mix." Power Engineering , January 2004. pp. 22-30. Sklar, Scott and Sheinkopf, Kenneth. Consumer Guide to Solar Energy: New Ways to Lower Utility Costs, Cut Taxes, and Take Control of Your Energy Needs. 2002. The White House. State of the Union. The Advanced Energy Initiative. January 31, 2006. http://www.whitehouse.gov/news/releases/2006/01/20060131-6.html U.S. Department of Energy. Interlaboratory Working Group. Scenarios for a Clean Energy Future . 2000. http://www.ornl.gov/sci/eere/cef/ ——. Energy Information Administration. Federal Financial Interventions and Subsidies in Energy Markets 1999: Primary Energy. (SR/OIAF/99-03). 1999. ——. Federal Energy Regulatory Commission. The Interconnection of Wind Energy and Other Alternative Technologies . January 24, 2005. http://www.ferc.gov/industries/electric/indus-act/gi/wind.asp . ——. Lawrence Berkeley National Laboratory. Balancing Cost and Risk: The Treatment of Renewable Energy in Western Utility Resource Plans. [Mark Bolinger and Ryan Wiser] August 2005. http://eetd.lbl.gov/ea/ems/re-pubs.html ——. National Renewable Energy Laboratory. Near-Term Practical and Ultimate Technical Potential for Renewable Resources . [Draft] January 16, 2006. 7 p. ——. National Renewable Energy Laboratory. Domestic Energy Scenarios . 2003. http://www.nrel.gov/docs/fy03osti/32742.pdf ——. National Renewable Energy Laboratory. Projected Benefits of Federal Energy Efficiency and Renewable Energy Programs: FY2006 Budget Request . May 2005. http://www.nrel.gov/docs/fy05osti/37931.pdf ——. National Renewable Energy Laboratory. Power Technologies Energy Data Book . April 2005. http://www.nrel.gov/docs/fy03osti/32742.pdf ——. Oak Ridge National Laboratory. Biomass as Feedstock for a Bioenergy and Bioproducts Industry: The Technical Feasibility of a Billion-Ton Annual Supply . [DOE/USDA Biomass Feedstock Gate Review Meeting] March 2005. http://feedstockreview.ornl.gov/pdf/perlack_stokes/session1_perlack_stokes.pdf ——. Office of Science. Basic Research Needs for Solar Energy Utilization . August 2005. http://www.sc.doe.gov/bes/reports/files/SEU_rpt.pdf ——. Enhancing Homeland Security Through Renewable Energy—Richard Truly ' s Remarks to the National Press Club . March 14, 2002. ——. Status Report to Congress on Current and Proposed Activities under the Clean Energy Technology Exports (CETE) Initiative. 2001. http://www.pi.energy.gov/library/cete2001 st atusreport.html#pdf ——. The Clean Air Act and Renewable Energy: Opportunities, Barriers, and Options. (NREL/CP-620-29654). 2001. U.S. Department of the Interior. Bureau of Land Management. Solar Energy Development Policy . [Instruction Memo No. 2005-006] October 20, 2004. http://www.blm.gov/nhp/efoia/wo/fy05/im2005-006.htm U.S. Environmental Protection Agency. Climate Action Report: The United States of America ' s Third National Communication under the United Nations Framework Convention on Climate Change. 2002. http://yosemite.epa.gov/oar/globalwarming.nsf/content/ResourceCenterPublicationsUSClimateActionReport.html U.S. Executive Office of the President. Office of Science and Technology Policy. Domestic Policy Council. American Competitiveness Initiative. February 2006. 23 p. http://www.ostp.gov/html/ACIBooklet.pdf U.S. Government Accountability Office (GAO). Renewable En ergy: Wind Power ' s Contribution  to Electric Power Generation and Impact on Farms and Rural Communities. [GAO-04-756] 2004. http://www.gao.gov/docsearch/abstract.php?rptno=GAO-04-756 Worldwatch Institute. Mainstreaming Renewable Energy in the 21 st Century . May 2004. http://www.worldwatch.org/pubs/paper/169/ CRS Reports CRS Report RL32712, Agriculture-Based Renewable Energy Production , by [author name scrubbed]. CRS Report RL33564. Alternative Fuels and Advanced Technology Vehicles: Issues in Congress , by Brent Yacobucci. CRS Report RL33523, Arctic National Wildlife Refuge (ANWR): Controversies for the 109 th Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RS21563, Biodiesel Fuel and U.S. Agriculture , by [author name scrubbed]. CRS Report RL33294, DOE Budget Earmarks: A Selective Look at Energy Efficiency and Renewable Energy R&D Programs , by [author name scrubbed]. CRS Report RL31033, Energy Efficiency and Renewable Energy Fuel Equivalents to Potential Oil Production from the Arctic National Wildlife Refuge (ANWR) , by [author name scrubbed] (pdf). CRS Report RL32860, Energy Efficiency and Renewable Energy Legislation in the 109 th Congress , by [author name scrubbed]. CRS Report RL33578, Energy Tax Policy: History and Current Issues , by [author name scrubbed]. CRS Report RL33290, Fuel Ethanol: Background and Public Policy Issues , by [author name scrubbed]. CRS Report RS21442, Hydrogen and Fuel Cell Vehicle R&D: FreedomCAR and the President ' s Hydrogen Fuel Initiative , by [author name scrubbed]. CRS Report RL32865, Renewable Fuels and MTBE: A Comparison of Provisions in the Energy Policy Act of 2005 (P.L. 109-58 and H.R. 6) , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Websites American Council for Renewable Energy. http://www.acore.org/ American Solar Energy Society. http://www.ases.org/ American Wind Energy Association (AWEA). http://www.awea.org/ California Energy Commission. http://www.energy.ca.gov/renewables/index.html Database of State Incentives for Renewable Energy (IREC). http://www.dsireusa.org/ Databook of Renewable Energy Power Technologies. http://www.nrel.gov/analysis/power_databook/ Earthtrack (Database of Energy Subsidies). http://www.earthtrack.net/ Edison Electric Institute. http://www.eei.org/ Electric Power Research Institute (EPRI) and EPRI Journal Online. http://www.epri.com/ Eleventh Session of the Conference of Parties to the United Nations Framework Convention on Climate Change (Montreal, COP-11 and COP/MOP 1). November 28 - December 9, 2005. http://unfccc.int/meetings/cop_11/items/3394.php National Association of Regulatory Utility Commissioners. http://www.naruc.org/ Renewable Energy Policy Project. http://www.crest.org/ Renewable Energy/Information Center. International Energy Agency (IEA). http://www.iea.org/dbtw-wpd/Textbase/subjectqueries/index.asp Solar Electric Power Association (SEPA). http://www.solarelectricpower.org/ Solar Energy Industries Association (SEIA). http://www.seia.org/ Tax Incentives Assistance Project. http://www.energytaxincentives.org/ U.S. Department of Energy. Energy Efficiency and Renewable Energy Network. http://www.eere.energy.gov/ U.S. Department of Energy. Green Power Network Clearinghouse. http://www.eere.energy.gov/greenpower/ U.S. Department of Energy. National Renewable Energy Laboratory (NREL). http://www.nrel.gov/ U.S. Department of Energy. Alternative Fuels Data Center. http://www.eere.energy.gov/afdc/index.html U.S. Environmental Protection Agency. Clean Energy Site. http://www.epa.gov/cleanenergy/ Vote Solar Initiative. San Francisco's $100 Million Solar Revenue Bond Initiative. http://www.votesolar.org/sf.html .

High gasoline and natural gas prices have rekindled interest in the role that renewable energy may play in producing electricity, displacing fossil fuel use, and curbing demand for power transmission equipment. Also, worldwide emphasis on environmental problems of air and water pollution and global climate change, the related development of clean-energy technologies in western Europe and Japan, and technology competitiveness may remain important influences on renewable energy policymaking. The Bush Administration's FY2007 budget request for the Department of Energy's (DOE's) Renewable Energy Program seeks $359.2 million, which is $84.0 million, or 30.5%, more than the FY2006 appropriation. In support of the President's proposal for an Advanced Energy Initiative (AEI), the request includes major funding increases for solar energy (to support the Solar America initiative) and biomass (to support the Biorefinery Initiative). The main increases are for Solar Photovoltaics ($79.5 million) and Biomass ($59.0 million). Some significant cuts were also proposed, and the request sought to eliminate earmarks. Appropriations actions by the House and the Senate Appropriations Committee have approved most of the requested FY2007 funding increases for AEI and greatly reduced earmark funding. Compared with House-passed funding, the Senate Appropriations Committee recommendation seeks an increase of $66.1 million (5%). Table 3 shows other differences, most notably those for Biomass & Biorefinery, Geothermal, Hydro, and Weatherization programs. Important regulatory issues have surfaced for wind energy. A major debate has erupted over the safety and economic and environmental aspects of a proposal by Cape Wind Associates to develop an offshore wind farm near Cape Cod, Massachusetts. The parties to the debate are waiting for the results of a Department of Interior (DOI) environmental impact statement and a Coast Guard study of navigational safety aspects. Also, concern that large wind turbines may disrupt radar systems led to federal actions to halt several wind farm developments, pending the results of a study by the Department of Defense (DOD) that was due in early May 2006. In late June 2006, the Sierra Club filed suit to compel completion of the DOD radar study. An agency of the United Kingdom has studied modifications to turbines and radar systems that may help solve the problem. Also, high gasoline prices have stimulated a DOE proposal for aggressive development of cellulosic ethanol as an alternative to gasoline and corn-based ethanol. The focus is on using biotechnology to simplify processes and reduce costs. This report will be updated as events warrant.

Introduction Foreign nationals (i.e., aliens) not already legally residing in the United States who wish to come to the United States generally must obtain a visa to be admitted. Under current law, three departments—the Department of State (DOS), the Department of Homeland Security (DHS) and the Department of Justice (DOJ)—play key roles in administering the law and policies on the admission of aliens. DOS's Bureau of Consular Affairs (Consular Affairs) is responsible for issuing visas, DHS's Citizenship and Immigration Services Bureau (USCIS) is charged with approving immigrant petitions, DHS's Immigration and Customs Enforcement (ICE) operates the Visa Security Program in selected embassies abroad, and DHS's Customs and Border Protection Bureau (CBP) is tasked with inspecting all people who enter the United States. DOJ's Executive Office for Immigration Review (EOIR) has a significant policy role through its adjudicatory decisions on specific immigration cases. The case of Umar Farouk Abdulmutallab, who allegedly attempted to ignite an explosive device on Northwest Airlines Flight 253 on December 25, 2009, refocused attention on the responsibilities of the Departments of State and Homeland Security for the visa process. He was traveling on a multi-year, multiple-entry tourist visa issued to him in June 2008. State Department officials have acknowledged that Abdulmutallab's father came into the Embassy in Abuja, Nigeria, on November 19, 2009, to express his concerns about his son, and that those officials at the Embassy in Abuja sent a cable to the National Counterterrorism Center. State Department officials maintain they had insufficient information to revoke his visa at that time. In the aftermath of the Abdulmutallab case, policymakers explored what went wrong and whether statutory and procedural revisions were needed. The 112 th Congress continues to be interested in these issues of visa security. The policy questions center on whether immigration law needs to be strengthened, whether funding should be increased, and which agency should take the lead. Overview on Visa Issuances There are two broad classes of aliens that are issued visas: immigrants and nonimmigrants. Humanitarian admissions, such as asylees, refugees, parolees and other aliens granted relief from deportation, are handled separately under the Immigration and Nationality Act (INA). Those aliens granted asylum or refugee status ultimately are eligible to become legal permanent residents (LPRs). Illegal aliens or unauthorized aliens include those noncitizens who entered the United States without an official inspection at a port of entry, entered with fraudulent documents, or who violated the terms of their visas after entering the United States. Immigrant Visas Aliens who wish to come to live permanently in the United States must meet a set of criteria specified in the INA. They must qualify as a spouse or minor child of a U.S. citizen; a parent, adult child, or sibling of an adult U.S. citizen; a spouse or minor child of a legal permanent resident; an employee that a U.S. employer has gotten approval from the Department of Labor to hire; a person of extraordinary or exceptional ability in specified areas; a refugee or asylee determined to be fleeing persecution; winner of a visa in the diversity lottery; or having met other specialized provisions of law. Petitions for immigrant (i.e., LPR) status are first filed with USCIS by the sponsoring relative or employer in the United States. If the prospective immigrant is already residing in the United States, the USCIS handles the entire process, which is called "adjustment of status." If the prospective LPR does not have legal residence in the United States, the petition is forwarded to Consular Affairs in their home country after USCIS has reviewed it. The Consular Affairs officer (when the alien is coming from abroad) and USCIS adjudicator (when the alien is adjusting status in the United States) must be satisfied that the alien is entitled to the immigrant status. Nonimmigrant Visas Aliens seeking to come to the United States temporarily rather than to live permanently are known as nonimmigrants. These aliens are admitted to the United States for a temporary period of time and an expressed reason. There are 24 major nonimmigrant visa categories, and over 70 specific types of nonimmigrant visas are issued currently. Most of these nonimmigrant visa categories are defined in §101(a)(15) of the INA. These visa categories are commonly referred to by the letter and numeral that denotes their subparagraph in §101(a)(15), e.g., B-2 tourists, F-1 foreign students, H-1B temporary professional workers, or J-1 cultural exchange participants. Most visitors, however, enter the United States without nonimmigrant visas through the Visa Waiver Program (VWP). This provision of INA allows the Attorney General to waive the visa documentary requirements for aliens coming as visitors from 35 countries (e.g., Australia, France, Germany, Italy, Japan, New Zealand, and Switzerland). Since aliens entering through VWP do not have visas, CBP inspectors at the port of entry perform the background checks and admissibility reviews. Statutory Basis of Current Visa Policy Today's visa issuance policy dates back to 1924, when Congress first passed legislation assigning consular officers with the responsibility to approve or deny visas. The Immigration Act of 1924 codified a decree in 1917 as a consequence of World War I that proclaimed aliens must present certain documents as a prerequisite to entering the United States. When the Senate Committee on the Judiciary was tasked with investigating the immigration system in 1947, their report offered the following observation: After a study of this problem, the Congress provided in the Immigration Act of 1924 for a double check of aliens by separate independent agencies of the Government, first by consular officers before the visas were issued, and by immigration officers after the aliens reached the port of entry. If a double check was essential 25 years ago to protect the United States against criminals or other undesirables, it is the opinion of the subcommittee that it is even more necessary in the present critical condition of the world to use the double check to screen aliens seeking to enter the United States. This view prevailed in 1952 when Congress codified the various statutes on immigration and nationality into the Immigration and Nationality Act of 1952 (P.L. 82-414), which remains the basis of governing law. Immigration and Nationality Act The powers and duties of the Secretary of State are delineated in §104 of the INA. Most significantly, §104 (a) states: "The Secretary of State shall be charged with the administration and the enforcement of the provisions of this Act and all other immigration and nationality laws relating to (1) the powers, duties and functions of diplomatic and consular officers of the United States, except those powers, duties and functions conferred upon the consular officers relating to the granting or refusal of visas ;.... " The INA specifically gives consular officers the sole authority to issue visas in §221 of the act. Over the years, the courts have held that consular decisions are not appealable. Under proscribed circumstances, the Secretary of State may direct a consular officer to deny a visa to a particular inadmissible alien. Enhanced Border Security and Visa Entry Reform Act of 2002 After the terrorist attacks on September 11, 2001, Congress enacted the Enhanced Border Security and Visa Entry Reform Act of 2002 ( P.L. 107-173 ), which aimed to improve the visa issuance process abroad, as well as immigration inspections at the border. It expressly increased consular officers' access to electronic information needed for alien screening. Specifically, it required the development of an interoperable electronic data system to be used to share information relevant to alien admissibility and removability and the implementation of an integrated entry-exit data system. It also required that all visas issued by October 2004 have biometric identifiers, and DOS met that deadline for biometric visas. In addition to increasing consular officers' access to electronic information needed for visa issuances, it expanded the training requirements for consular officers who issue visas. §428 of the Homeland Security Act of 2002 The Homeland Security Act of 2002 (HSA) contained language stating that DHS is responsible for formulating regulations on visa issuances. In §428, the Secretary of DHS is expressly tasked as follows: ...shall be vested exclusively with all authorities to issue regulations with respect to, administer, and enforce the provisions of such Act, and of all other immigration and nationality laws, relating to the functions of consular officers of the United States in connection with the granting or refusal of visas, and shall have the authority to refuse visas in accordance with law and to develop programs of homeland security training for consular officers (in addition to consular training provided by the Secretary of State), which authorities shall be exercised through the Secretary of State, except that the Secretary shall not have authority to alter or reverse the decision of a consular officer to refuse a visa to an alien ... The HSA also enabled DHS to assign staff to consular posts abroad to advise, review, and conduct investigations, which is discussed more fully below. It further stated that DOS's Consular Affairs continued to be responsible for issuing visas. The HSA required DHS and DOS to reach an understanding on how the details of this division of responsibilities would be implemented. 2003 Memorandum of Understanding On September 28, 2003, then-Secretary of State Colin Powell and then-Secretary of Homeland Security Thomas Ridge signed the memorandum of understanding (MOU) implementing §428 of the HSA. The MOU described each department's responsibilities in the area of visa issuances. Among its major elements, the MOU stated that DOS may propose and issue visa regulations subject to DHS consultation and final approval. It further stated that DHS shall assign personnel to diplomatic posts, but that DOS will determine who, how many, and the scope of their functions. Then-Assistant Secretary of State for Consular Affairs Maura Harty described several key responsibilities that remain with the DOS. The Secretary of State will have responsibility over certain visa decisions, including decisions of a foreign policy nature.... He will also be responsible for establishing visa validity periods and fees based on reciprocity. In the case of visa validity periods, however, he will consult with Homeland Security before lengthening them, and Homeland Security will have authority to determine that certain persons or classes of persons cannot benefit from the maximum validity period for security reasons. The Secretary of State will also exercise all the foreign policy-related grounds of visa denial enumerated in Section 428 and the additional provision, not specifically enumerated, under which we deny visas to persons who have confiscated the property of American citizens without just compensation. She emphasized that the MOU "recognizes that the Secretary of State must have control over officers in his chain of command." She further stated that "DHS officers assigned visa duties abroad may provide input related to the evaluations of consular officers doing visa work, but the evaluations themselves will be written by State Department consular supervisors," and that "direction to consular officers will come from their State Department supervisors, and all officers assigned abroad, including DHS, come under the authority of the Chief of Mission." In congressional testimony during October 2003, C. Stewart Verdery, Jr., as then-DHS Assistant Secretary for Border and Transportation Security Policy and Planning, discussed DHS' role in visa security. Verdery reported that DHS officers were already in Saudi Arabia reviewing all visa applications prior to adjudication (as required by §428(i) of P.L. 107-296 ). He indicated that officers in Riyadh and Jeddah also provided assistance, expert advice and training to consular officers on fraudulent documents, fingerprinting techniques and identity fraud. More specifically, he stated: As part of the review process, DHS officers at home and abroad have full access to a variety of law enforcement databases, including the National Crime Information Center (NCIC); Treasury Enforcement Communication System (TECS); Interagency Border Inspections System (IBIS); National Security Entry Exit System (NSEERS); Student Exchange and Visitor Information System (SEVIS); Biometric 2-print fingerprint system (IDENT); and Advanced Passenger Information System (APIS). They also have access to selected legacy-INS automated adjudications data and certain commercial databases. Visa Security Program Memoranda of Understanding Additionally, §428 of the HSA gave the Secretary of DHS the authority to assign DHS employees to diplomatic and consular posts, which became the statutory basis of the Visa Security Program (VSP). In 2004, DHS and DOS signed a MOU on administrative aspects of assigning personnel overseas as part of the VSP. Among other things, this MOU described administrative support, security, facilities, security awareness training, and information systems for VSP personnel. On January 11, 2011, DHS and DOS signed another MOU which further delineates the roles, responsibilities, and collaboration of VSP agents, consular officers, and diplomatic security officers in daily operations of VSP at posts overseas. The 2011 MOU discusses general collaboration between ICE and State for VSP operations; roles and responsibilities of VSP agents and consular officers and routine interaction between the officers and agents; development of formal, targeted training and briefings by VSP agents for consular officers and other U.S. government officials at post; clarification of the dispute resolution process; and collaboration between diplomatic security officers and VSP agents on visa and passport fraud investigations. Intelligence Reform and Terrorism Prevention Act of 2004 Congress also relied on recommendations made by the National Commission on Terrorist Attacks Upon the United States (also known as the 9/11 Commission) to revise visa security policies. The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) mandated improvements in technology and training to assist consular and immigration officers in detecting and combating terrorist travel. Among other provisions, it required the Secretary of Homeland Security, in consultation with the Director of the National Counter Terrorism Center, to establish a program to oversee DHS's responsibilities with respect to terrorist travel and required the Secretary of State to establish a Visa and Passport Security Program within the Bureau of Diplomatic Security at the Department of State. The Intelligence Reform and Terrorism Prevention Act added requirements for an in-person consular interview of most applicants for nonimmigrant visas between the ages of 14 and 79. It further mandated that an alien applying for a nonimmigrant visa must completely and accurately respond to any request for information contained in his or her application. Consular Screening Procedures Foreign nationals seeking visas must undergo admissibility reviews performed by DOS consular officers abroad. The visa applicant is required to submit his or her photograph and fingerprints, as well as full name (and any other name used or by which he or she has been known), age, gender, and the date and place of birth. Depending on the visa category, certain documents must be certified by the proper government authorities (e.g., birth certificates and marriage licenses). All prospective LPRs must submit to physical and mental examinations, and prospective nonimmigrants also may be required to have physical and mental examinations. These reviews are intended to ensure that aliens are not ineligible for visas or admission under the grounds for inadmissibility spelled out in the INA. These INA §212(a) inadmissibility criteria are health-related grounds, criminal history, security and terrorist concerns, public charge (e.g., indigence), seeking to work without proper labor certification, illegal entrants and immigration law violations, ineligible for citizenship, and aliens previously removed. Consular officers use the Consular Consolidated Database (CCD) to screen visa applicants. Records of all visa applications are now automated in the CCD, with some records dating back to the mid-1990s. Since February 2001, the CCD has stored photographs of all visa applicants in electronic form; since 2007, the CCD has begun storing 10-finger scans. In addition to indicating the outcome of any prior visa application of the alien in the CCD and comments by consular officers, the system links with other databases to flag problems that may have an impact on the issuance of the visa. These databases linked with the CCD include DHS's Automated Biometric Identification System (IDENT) and FBI's Integrated Automated Fingerprint Identification System (IAFIS) results, and supporting documents. The CCD also links to the DHS's Traveler Enforcement Compliance System (TECS), which enables CBP officers at ports of entry to have access to CCD. A limited number of consular officers have recently been granted access to DHS'Arrival Departure Information System (ADIS). ADIS tracks foreign nationals' entries into and most exits out of the United States. DOS credits access to ADIS with its ability to identify previously undetected cases of illegal overstays in the United States. For some years, consular officers have been required to check the background of all aliens in the "lookout" databases, specifically the Consular Lookout and Support System (CLASS) database, which contained over 26 million records in 2009. According to Janice Jacobs, Assistant Secretary of State for Consular Affairs, the CLASS database grew by approximately 400% after September 11, 2001. This increase in the quantity and quality of CLASS records is largely the result of improved data sharing between the Department of State and the law enforcement and intelligence communities. In 2001, only 25 percent of records in CLASS came from other government agencies. Now, almost 70 percent of CLASS records come from other agencies. The Security Advisory Opinion (SAO) system requires a consular officer abroad to refer selected visa cases for greater review by intelligence and law enforcement agencies. The current interagency procedures for alerting officials about foreign nationals who may be suspected terrorists, referred to in State Department nomenclature as Visa Viper, began after the 1993 World Trade Center bombing and were institutionalized by enactment of the Enhanced Border Security and Visa Entry Reform Act of 2002. If consular officials receive information about a foreign national that causes concern, they send a Visa Viper cable (which is a dedicated and secure communication) to the NCTC. In 2009, consular posts sent approximately 3,000 Visa Viper communications to NCTC. In a similar set of SAO procedures, consular officers send suspect names, identified by law enforcement and intelligence information (originally certain visa applicants from 26 predominantly Muslim countries), to the Federal Bureau of Investigation (FBI) for a name check program called Visa Condor. There is also the "Terrorist Exclusion List" (TEL), which lists organizations designated as terrorist-supporting and includes the names of individuals associated with these organizations. Visa Revocation After a visa has been issued, the consular officer as well as the Secretary of State has the discretionary authority to revoke a visa at any time. A consular officer must revoke a visa if the alien is ineligible under the INA §212(a) grounds of inadmissibility to receive such a visa, or was issued a visa and overstayed the time limits of the visa; the alien is not entitled to the nonimmigrant visa classification under INA §101(a)(15) definitions specified in such visa; the visa has been physically removed from the passport in which it was issued; or the alien has been issued an immigrant visa. The Foreign Affairs Manual (FAM) instructs: "in making any new determination of ineligibility as a result of information which may come to light after issuance of a visa, the consular officer must seek and obtain any required advisory opinion." This applies, for example, to findings of ineligibility under "misrepresentation," "terrorist activity" or "foreign policy." FAM further instructs: "pending receipt of the Department's advisory opinion, the consular officer must enter the alien's name in the CLASS under a quasi-refusal code, if warranted." According to DOS officials, they sometimes prudentially revoke visas (i.e., they revoke a visa as a safety precaution). When a consular officer suspects that a visa revocation may involve U.S. law enforcement interests, FAM instructs the consular officer to consult with law enforcement agencies at post and inform the State officials of the case, to permit consultations with potentially interested entities before a revocation is made. The rationale for this consultation is that there may be legal or intelligence investigations that would be compromised if the visa were revoked and that law enforcement and intelligence officials may prefer to monitor the individual to further investigate their actions and associates. Visa revocation has been a ground for removal in the INA §237(a)(1)(B) since enactment of P.L. 108-458 in December 2004. That provision (§5304 of P.L. 108-458 ) permits limited judicial review of removal if visa revocation is the sole basis of the removal. New Visa Revocation Regulations On April 27, 2011, the DOS promulgated regulations that broadened the revocation authority. (a) Grounds for revocation by consular officers. A consular officer, the Secretary, or a Department official to whom the Secretary has delegated this authority is authorized to revoke a nonimmigrant visa at any time, in his or her discretion. (b) Provisional revocation. A consular officer, the Secretary, or any Department official to whom the Secretary has delegated this authority may provisionally revoke a nonimmigrant visa while considering information related to whether a visa holder is eligible for the visa. Provisional revocation shall have the same force and effect as any other visa revocation under INA 221(i). (c) Notice of revocation. Unless otherwise instructed by the Department, a consular officer shall, if practicable, notify the alien to whom the visa was issued that the visa was revoked or provisionally revoked. Regardless of delivery of such notice, once the revocation has been entered into the Department's Consular Lookout and Support System (CLASS), the visa is no longer to be considered valid for travel to the United States. The date of the revocation shall be indicated in CLASS and on any notice sent to the alien to whom the visa was issued. (d) Procedure for physically canceling visas. A nonimmigrant visa that is revoked shall be canceled by writing or stamping the word ``REVOKED" plainly across the face of the visa, if the visa is available to the consular officer. The failure or inability to physically cancel the visa does not affect the validity of the revocation. These new regulations seek to address a series of concerns that have been raised in recent years about the visa revocation process, especially relating to the timely transmission of information among federal agencies. DHS Visa Security Program As mentioned above, §428 of the HSA gave the Secretary of DHS the authority to assign DHS employees to diplomatic and consular posts. The duties of these DHS employees were delineated in §428 as provide expert advice and training to consular officers regarding specific security threats relating to the adjudication of individual visa applications or classes of applications; review any such applications, either on the initiative of DHS or upon request by a consular officer or other person charged with adjudicating such applications; and, conduct investigations with respect to consular matters under the jurisdiction of the Secretary of DHS. This statutory language established what is currently known as the Visa Security Program (VSP). The ICE Office of International Affairs (OIA) operates the VSP in high-risk consular posts. As described by DHS, the VSP sends ICE special agents with expertise in immigration law and counterterrorism to diplomatic posts overseas to perform visa security activities, which aim to complement the DOS visa screening process with law enforcement resources not available to consular officers. The first VSP units were established in Saudi Arabia, as required by §428. In October 2005, VSP units were set up in: Manila, Philippines; Abu Dhabi and Dubai in the United Arab Emirates; and Islamabad, Pakistan. By the end of 2007, there were VSP units in: Cairo, Egypt; Caracas, Venezuela; Montreal, Canada; Hong Kong, China; and Casablanca, Morocco. That year, the VSP proposed a five-year expansion plan, which proposed to concentrate expansion to the highest risk posts with the goal of covering 75% of the highest risk visa activity by 2013. One of the major tasks of the VSP agents is to screen visa applicants to determine the applicant's risk profile. Unlike consular officers, VSP agents have access to DHS's Traveler Enforcement Compliance System (TECS), a substantial database of law enforcement and border inspection information. The ICE agent further vets visa applicants who are possible matches, performing additional research and investigation of the visa applicant (e.g., in-depth searches in law enforcement databases and other information systems, examining documents, and consulting with consular, law enforcement, or other officials). VSP agents are supposed to engage in informal discussions with consular officers, as well as develop formal, targeted training and briefings to inform consular officers and others about threats to the visa process. They "identify and monitor the threat environment and trends in the visa applicant pool specific to their post and host country... Examples of topics covered in these briefings include fraud trends in specific visa categories and how to identify fraudulent documents and imposters." Aimed at improving VSP integration in the SAO process, Congress appropriated $5 million to establish an SAO review unit within VSP headquarters in FY2007. Current Issues Competing Interests Some have expressed the view that DOS retains too much power and control over visa issuances. They maintain the Homeland Security Act intended DHS to be the lead department and that DOS was to merely administer the visa process. They warn that consular officers are too concerned about facilitating tourism and trade to scrutinize visa applicants thoroughly. Some argue that visa issuance is the real "front line" of homeland security against terrorists and that the principal responsibility should be in DHS, which does not have competing priorities of diplomatic relations and reciprocity with foreign governments. Not long after the attempted bombing of Flight 253, the Chairman of the Senate Committee on Homeland Security and Governmental Affairs, Senator Joseph Lieberman, stated: "I believe, incidentally, that we ought to take a look at taking the visa application and admission responsibility from the State Department. It doesn't really fit with foreign policy anymore." The Chairman continued, "And in an age of terrorism, I think the Department of Homeland Security ought to be handling visas abroad." Others are recommending further deliberation before changing the law, observing that today's visa security policies grew out of lessons learned from the September 11, 2001, terrorist attacks. The Chairman of the Senate Committee on the Judiciary, Senator Patrick Leahy, stated "After Congress passed major legislation in 2004 to implement the 9/11 Commission's recommendations, and after the country invested significant resources to upgrade security systems and reorganize our intelligence agencies, the near tragedy on Christmas Day compels us to ask what went wrong and what additional reforms are needed." Proponents of the current division of responsibilities argue that it strikes the proper balance between the two departments and reflects the bifurcation envisioned in the Homeland Security Act. They maintain that it plays off the strengths of the two departments and allows for refinement of the implementation in the future. Proponents of DOS playing the lead role in visa issuances assert that only consular officers in the field have the country-specific knowledge to make decisions about whether an alien is admissible and that staffing approximately 250 diplomatic and consular posts around the world would stretch DHS beyond its capacity. The House Committee on the Judiciary has reported legislation ( H.R. 1741 ) that would give the Secretary of Homeland Security "exclusive authority to issue regulations, establish policy, and administer and enforce the provisions of the Immigration and Nationality Act (8 U.S.C. 1101 et seq.) and all other immigration or nationality laws relating to the functions of consular officers of the United States in connection with the granting and refusal of a visa." The markup of H.R. 1741 , which was introduced by House Judiciary Chairman Lamar Smith, occurred on June 23, 2011. Several amendments, notably one clarifying the Secretary of State's authority to direct a consular officer to refuse or revoke a visa if it is necessary or advisable to U.S. interests, were approved at that time. Broadening Visa Revocation Authority As discussed above, the INA gives the authority to revoke a visa at any time to the Secretary of State and consular officers, but the Secretary of Homeland Security does not have the authority to revoke visas. As consequence, a re-occurring issue is whether the Secretary of Homeland Security should have the authority to revoke visas and to immediately remove a foreign national whose visa has been revoked. Legislation to amend the INA to give such authority in DHS has been introduced in recent congresses, and H.R. 1741 in the 112 th Congress would do so. Some have maintained that a foreign national should be immediately removed if the visa that enabled his or her entry has been revoked. They have recommended that grounds for removal in INA §212(a) should be amended to expressly state visa revocation as a basis for deportation. Some further argue that aliens whose visas are revoked should not be entitled to a hearing before an immigration judge to determine if the alien should be deported. Others have asserted that current law balances the broader discretion given to the consular officers abroad with the explicit standards of the grounds for inadmissibility and the legal process for removing aliens from the United States. They further have maintained that consular officers often make "prudential revocations" of visas that they subsequently re-issue and that anecdotal cases of mistaken identities suggest that the alien screening databases are not sufficiently precise to be the basis for removal without a hearing. During the markup, the House Judiciary Committee rejected an amendment to H.R. 1471 that would have stricken the provisions in the bill prohibiting judicial review of the DHS Secretary's decision to refuse or revoke a visa. The defeated amendment also would have eliminated an exception in the INA that allows judicial review if a visa revocation provides the sole grounds for an individual's deportation. Acceptance of VSP in Consular Posts The statutory language of §428(d) of P.L. 107-296 makes clear that authority of the chief of mission remained intact despite the added authorities given to DHS. It states that nothing in that provision may be construed to alter or affect the authority of a chief of mission under §207 of the Foreign Service Act of 1980. Ultimately, it is the DOS chief of mission at a particular consular post who determines whether to accept a VSP unit. A 2008 report of the DHS Office of Inspector General discussed tensions between DOS and DHS in establishing VSP units abroad. Some DOS headquarters officials have said that ICE special agents do not need to be posted overseas to conduct their visa security activities. The DOS officials said ICE special agents are able to access the law enforcement databases and information systems used in the screening and vetting process remotely. VSP managers said that experienced law enforcement agents assigned overseas provide unique added value at overseas posts. ICE special agents assigned to VSUs [shorthand for VSP units] use their expertise in immigration and nationality law, investigations, document examination, intelligence research, and counterterrorism to complement the consular visa adjudication process with law enforcement vetting and investigation. In addition, ICE special agents assigned to VSUs at post focus on identifying "not yet known" terrorists and criminal suspects.... Top-level DOS leadership has stated they are fully supportive of the VSP and are coordinating with DHS to expand the units to additional consular posts. The 2011 GAO report continued to find difficulties in the working relationships between VSP agents and consular officials, but cited the January 2011 MOU as a corrective step. Effectiveness of the Visa Security Program The U.S. Government Accountability Office recently released an evaluation of the VSP that identified several shortcomings. In addition to noting the tensions between the consular officials and the VSP agents, GAO was especially concerned about the lack of standard operating procedures for VSP agents across the various posts. GAO also found that "VSP agents perform a variety of investigative and administrative functions beyond their visa security responsibilities that sometimes slow or limit visa security activities, and ICE does not track this information in the VSP tracking system, making it unable to identify the time spent on these activities." Staffing shortages and the use of temporary duty assignments, GAO further observed, created coverage problems and delays in some posts. Variability in the consistency and quality of training was cited as well. Perhaps most importantly, GAO stated that ICE has not expanded VSP to key high-risk posts despite well-publicized plans to do so. In 2007, ICE developed a 5-year expansion plan for the VSP, but ICE has not fully followed or updated the plan. For instance, ICE did not establish 9 posts identified for expansion in 2009 and 2010. Furthermore, the expansion plan states that risk analysis is the primary input to VSP site selection, and ICE, with input from State, ranked visa-issuing posts by visa risk, which includes factors such as the terrorist threat and vulnerabilities present at each post. However, 11 of the top 20 high-risk posts identified in the expansion plan are not covered by the VSP. Furthermore, ICE has not taken steps to address visa risk in high-risk posts that do not have a VSP presence. Although the expansion of the VSP is limited by a number of factors, such as budgetary limitations or limited embassy space, ICE has not identified possible alternatives that would provide the additional security of VSP review at those posts that do not have a VSP presence. The absence of VSP in these high-risk posts is a matter of particular congressional concern. This issue has arisen at congressional oversight and appropriations hearings in recent years.   H.R. 1741 would require DHS to conduct on-site review of visas issuances at all visa-issuing posts in Algeria; Canada; Colombia; Egypt; Germany; Hong Kong; India; Indonesia; Iraq; Jerusalem, Israel; Jordan; Kuala Lumpur, Malaysia; Kuwait; Lebanon; Mexico; Morocco; Nigeria; Pakistan; the Philippines; Saudi Arabia; South Africa; Syria; Tel Aviv, Israel; Turkey; United Arab Emirates; the United Kingdom; Venezuela; and Yemen. Resources for Visa Security DOS Visa Processing and Security Funding The adjudication and issuance of visas are largely fee-based, rather than a government service funded by direct appropriations. For the most part, prospective immigrants and nonimmigrants cover the costs of visa processing. The Consular Affairs immigrant visa application processing fee is $355, and the nonimmigrant processing fee is $131. Moreover, the 107 th Congress permanently authorized the collection of Machine-Readable Visa (MRV) fees at $65—or the cost of the machine-readable visa service if higher—and a $10 surcharge for machine-readable visas in nonmachine-readable passports. These MRV fees are credited as an offsetting collection used by DOS to recover costs of providing consular services. In the FY2012 Budget Request of the President, DOS presents the Consular Affairs visa operations as part of its Border Security Program. As Table 1 indicates, DOS requested an increase in its Border Security Program from $1.990 billion in FY2011 to $2.085 billion in FY2012, and would rely on the use of additional fee receipts to increase the overall funding. The question of whether DOS is adequately funded to process visas expeditiously while maintaining visa security procedures may arise as the budget is debated. DHS Visa Security Program Funding The VSP has been growing in terms of funding as well as units located abroad. The FY2009 budget request (the final year of President George W. Bush's Administration) was $11.8 million for the VSP, with $3.4 million to create two additional overseas VSP units in high-risk locations. Congress almost doubled President Bush request of $11.8 million to $22.4 million in FY2009. Funding in FY2010 fell short of President Barrack Obama's Administration request of $32.2 million, as Congress appropriated $30.7 million for the VSP. DHS has reported expanding the number of VSP units in high-risk consular posts by two each year in FY2009 and in FY2010, but acknowledges that Congress has required DHS to use the remaining two-year enhancement funds of $3.4 million it received for expansion by the close of FY2010 pursuant to its five-year expansion plan (discussed above) or the funds will be lost. DHS also stated that 63 ICE special agents were trained to become Visa Security Officers in FY2009. The Obama Administration requested that the VSP be funded at the same level in FY2012 as Congress funded it in FY2011—$29.5 million. The modest size of the VSP with 67 full-time equivalent staff (FTEs) has led some to question how many VSP units DHS will be able to realistically staff. Some Members of Congress are questioning how long it will take DHS to staff the 40 consular posts it deemed "high-risk" locations with the current level of funding. Congressman Gus Bilirakis, the Ranking Member of the House Homeland Security Subcommittee on Management, Investigations, and Oversight, has called for Congress to shift funding from DHS administrative functions to the VSP. As discussed above, however, others note that the expansion of the VSP has been stymied as much by questions of how much added-value it brings and the inter-department negotiations, as it has been by funding. For example, several Republican Senators reported that the application for Yemen has been pending since September 2008, and applications for Tel Aviv, Jerusalem, Frankfurt and Amman have been waiting for approval since September 2009. Appendix A. Legislative History of the Visa Functions in the Homeland Security Act of 2002 When the 107 th Congress weighed the creation of the Department of Homeland Security, considerable debate surfaced about whether or not any or all visa issuance functions should be located in the new department. Enactment of P.L. 107-296 addressed most of these issues, but a few concerns remained after the implementation of the act. Varied viewpoints are discussed below. As announced on June 6, 2002, the Administration's proposal for a homeland security department would have included Immigration and Naturalization Service (INS) among the agencies transferred to a new homeland security department. The stated goal of the Administration's proposal was to consolidate into a single federal department many of the homeland security functions performed by units within various federal agencies and departments. The Administration would have placed all functions of INS under the border and transportation security division of the proposed department. The narrative of the June 6, 2002, plan did not go into details, however, it appeared that under the plan Consular Affairs in the Department of State would have retained its visa issuance responsibilities. This proposal precipitated considerable discussion on where the visa issuance should be located. Option: Locating all Functions in DHS Voices in support of moving Consular Affairs's visa issuance responsibilities to the proposed DHS asserted that consular officers emphasize the promotion of tourism, commerce, and cultural exchange and are lax in screening foreign nationals who want to come the United States. Media reports of the "Visa Express" that DOS established in Saudi Arabia to allow travel agents to pre-screen nonimmigrants raised considerable concern, especially reports that several of the September 11 terrorists allegedly entered through "Visa Express." Critics argued that visa issuance was the real "front line" of homeland security against terrorists and that the responsibility for this function should be in a department that did not have competing priorities of diplomatic relations and reciprocity with foreign governments. Some argued that keeping the INS adjudications and Consular Affairs visa issuances in different departments would perpetuate the types of mistakes and oversights that stem from inadequate coordination and competing chains of command. Most importantly, they emphasized the need for immigration adjudications and visa issuances—as well as immigration law enforcement and inspections activities—to be under one central authority that has border security as its primary mission. Option: Locating Functions in Different Agencies Proponents of retaining visa issuances in Consular Affairs asserted that only consular officers in the field would have the country-specific knowledge to make decisions about whether an alien was admissible and that staffing 250 diplomatic and consular posts around the world would stretch the proposed homeland security department beyond its capacity. They also pointed out that under current law, consular decisions are not appealable and warned that transferring this adjudication to homeland security might make it subject to judicial appeals or other due process considerations. The MRV fees, as some point out, have become an important funding stream, contributing almost 10% of DOS total budget. They maintained that the problems Consular Affairs evidenced in visa issuances have already been addressed by strengthening provisions in the USA PATRIOT Act ( P.L. 107-56 ) and the Enhanced Border Security and Visa Reform Act ( P.L. 107-173 ). Those who supported retained immigrant adjudications and services in DOJ and visa issuances in DOS point to the specializations that each department brings to the functions. They asserted that the "dual check" system in which both INS and Consular Affairs make their own determinations on whether an alien ultimately enters the United States provides greater security. Proponents of the joint DOJ-DOS responsibilities argued that failures in intelligence gathering and analysis, not lax enforcement of immigration law, were the principal factors that enabled terrorists to obtain visas. Others opposing the transfer of INS adjudications and Consular Affairs visa issuances to DHS maintained that DHS would be less likely to balance the more generous elements of immigration law (e.g., the reunification of families, the admission of immigrants with needed skills, the protection of refugees, opportunities for cultural exchange, the facilitation of trade, commerce, and diplomacy) with the more restrictive elements of the law (e.g., protection of public health and welfare, national security, public safety, and labor markets). Homeland Security Act Representative Dick Armey, Majority Leader and Chair of the Select Committee on Homeland Security, introduced the President's proposal as H.R. 5005 , the Homeland Security Act of 2002. H.R. 5005 would have transferred all of the functions of INS to the newly created department under its Border Security and Transportation Division. As introduced, H.R. 5005 would have bifurcated visa issuances so that DHS would set the policies and DOS would retain responsibility for implementation. During the week of July 8, 2002, the House Committees on Judiciary, International Relations, and Government all approved language on visa issuances that retained DOS's administrative role in issuing visas, but added specific language to address many of the policy and national security concerns raised during their respective hearings. Breaking with the Administration, the House Judiciary Committee approved language that would have placed much of INS's adjudication and service responsibilities—including its role in approving immigrant petitions—with a new Bureau of Citizenship and Immigration Services headed by an Assistant Attorney General at DOJ. When the House Select Committee on Homeland Security marked up H.R. 5005 on July 19, 2002, it approved language on immigrant processing and visa issuances consistent with the House Judiciary Committee recommendations. As reported, H.R. 5005 clarified that the Secretary of DHS would have issued regulations regarding visa issuances and would have assigned staff to consular posts abroad to provide advice and review and to conduct investigations, and that Consular Affairs would have continued to issue visas. It would have further expanded the exclusion authority of the Secretary of State by permitting the Secretary to exclude an alien when necessary or advisable in the foreign policy or security interests of the U.S., giving the Secretary of State an authority even broader than that in law before the 1990 Immigration Amendments reformed the grounds for exclusion. It also would have clarified that decisions of the consular officers are not reviewable. During the floor debate on H.R. 5005 , only one immigration-related amendment was considered, and it would have moved the consular visa function to DHS. The amendment offered by Representative David Weldon failed, and the House went on to pass H.R. 5005 on July 26, 2002. Table A -1 summarizes what department would be responsible for visa issuance activities under the various bills. The National Homeland Security and Combating Terrorism Act of 2002 reported by the Senate Governmental Affairs Committee ( S. 2452 ) on June 24, 2002, included the immigration enforcement functions of INS and the Office of International Affairs but did not transfer any of the other immigration services and visa issuance functions. Representative Mac Thornberry sponsored H.R. 4660 , a bill similar to S. 2452 as introduced, that would have created a homeland security department but also did not transfer any of the immigration adjudications and visa issuances functions. The Senate Government Reform Committee acted on a substitute for S. 2452 on July 24, 2002, and that language became S.Amdt. 4471 . S.Amdt. 4471 differed somewhat on the issues of immigration adjudications and visa issuances from the Administration's proposal and H.R. 5005 as passed. The Senate amendment would have transferred all of INS to a newly created DHS under two new bureaus (the Bureau of Immigration Services and the Bureau of Enforcement and Border Affairs) in a Directorate of Immigration Affairs. Similarly to H.R. 5005 as passed, the Senate amendment would have given the Secretary of DHS authority to issue regulations on visa policy; however, it would have permitted the Secretary of the new department to delegate the authority to the Secretary of State. In contrast to the House-passed bill and S. 2452 as introduced, S.Amdt. 4471 would have established an Under Secretary for Immigration Affairs in DHS who would have handled immigration and naturalization functions as well as immigration enforcement and border functions. On November 13, 2002, Majority Leader Armey introduced and the House passed H.R. 5710 as a compromise bill to establish a Department of Homeland Security. Among its many provisions, H.R. 5710 retained the language clarifying that—although DOS's Consular Affairs would continue to issue visas—the Secretary of DHS would issue regulations regarding visa issuances and would assign staff to consular posts abroad to advise, review, and conduct investigations. It also would permit the Secretary of the new department to delegate the authority to the Secretary of State. H.R. 5710 would transfer all of INS to two new bureaus in DHS: the Bureau of Citizenship and Immigration Services and the Bureau of Border Security. The former would report directly to the Deputy Secretary for Homeland Security, while the latter would report to the Under Secretary for Border and Transportation Security. Language similar to H.R. 5710 passed the Senate on November 19, 2002, as S.Amdt. 4901 to H.R. 5005 . The House agreed to the Senate amendment on November 22, and the President signed it as P.L. 107-296 on November 25, 2002. Appendix B. Legislation on the 9/11 Commission Recommendations Pertaining to Visa Security The report of the National Commission on Terrorist Attacks Upon the United States (also known as the 9/11 Commission) offered its assessment of how visa and immigration inspection failures contributed to the terrorist attacks. The 9/11 Commission contended that "(t)here were opportunities for intelligence and law enforcement to exploit al Qaeda's travel vulnerabilities." The report went on to state: "Considered collectively, the 9/11 hijackers included known al Qaeda operatives who could have been watchlisted; presented fraudulent passports; presented passports with suspicious indicators of extremism; made detectable false statements on visa applications; made false statements to border officials to gain entry into the United States; and violated immigration laws while in the United States." The report maintained that border security was not considered to be a national security matter prior to 9/11, and as a result neither the State Department's consular officers nor the former Immigration and Naturalization Service's inspectors and officers were considered full partners in national counterterrorism efforts. The 9/11 Commission made several recommendations that underscore the urgency of implementing legislative provisions on visa policy and immigration control that Congress enacted several years ago. They also suggested areas in which Congress could take further action. The specific recommendations were as follows: Targeting travel is at least as powerful a weapon against terrorists as targeting their money. The United States should combine terrorist travel intelligence, operations, and law enforcement in a strategy to intercept terrorists, find terrorist travel facilitators, and constrain terrorist mobility. The U.S. border security system should be integrated into a larger network of screening points that includes our transportation system and access to vital facilities, such as nuclear reactors. The Department of Homeland Security, properly supported by the Congress, should complete, as quickly as possible, a biometric entry-exit screening system, including a single system for speeding qualified travelers. The U.S. government cannot meet its own obligations to the American people to prevent the entry of terrorists without a major effort to collaborate with other governments. Other 9/11 Commission recommendations, notably those related to intelligence policy and structures, have been the focus thus far of congressional consideration and media attention. The 9/11 Commission prepared a subsequent report that deals expressly with immigration issues. During the 108 th Congress, legislation implementing the 9/11 Commission recommendations ( S. 2845 , H.R. 10 , S. 2774 / H.R. 5040 and H.R. 5024 ) had various provisions that would affect visa issuances. The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ), a compromise version of these bills that included some—but not all—of the immigration provisions under consideration, was signed on December 17, 2004. Most notably, House-passed S. 2845 would have expanded the terror-related grounds for inadmissibility and deportability to include additional activities, such as receiving military-type training by or on behalf of a terrorist organization. P.L. 108-458 would make deportable any alien who has received military training from or on behalf of an organization that, at the time of training, was a designated terrorist organization. Among the other provisions in the 9/11 Commission implementation bills were: acquire and deploy technologies (e.g., biometrics) to detect potential terrorist indicators on travel documents; establish an Office of Visa and Passport Security; and train consular officers in the detection of terrorist travel patterns. H.R. 10 (as reported by the House Judiciary Committee on September 27 and passed by the House as S. 2845 on October 8, 2004) included provisions to establish an Office of Visa and Passport Security in the Bureau of Diplomatic Security of the Department of State to target and disrupt individuals and organizations at home and in foreign countries that are involved in the fraudulent production, distribution, or use of visas, passports and other documents used to gain entry to the United States. It also would have clarified that all nonimmigrant visa applications are reviewed and adjudicated by a consular officer, and would assign anti-fraud specialists to the top 100 posts that experience the greatest frequency of fraudulent documents. P.L. 108-458 establishes a Visa and Passport Security Program within the Bureau of Diplomatic Security at the Department of State. As passed by the Senate on October 8, 2004, S. 2845 —as well as House-passed H.R. 10 —would increase the number of consular officers by 150 over the preceding year, annually FY2006 through FY2009. Both bills also had provisions aimed at improving the security of the visa issuance process by providing consular officers and immigration inspectors greater training in detecting terrorist indicators, terrorist travel patterns and fraudulent documents. These provision were retained by the conferees in P.L. 108-458 .

Foreign nationals (i.e., aliens) not already legally residing in the United States who wish to come to the United States generally must obtain a visa to be admitted, with certain exceptions noted in law. The Departments of State (DOS) and Homeland Security (DHS) each play key roles in administering the law and policies on the admission of aliens. Although the DOS's Consular Affairs is responsible for issuing visas, the U.S. Citizenship and Immigrant Services (USCIS) in DHS approves immigrant petitions, the Immigration and Customs Enforcement (ICE) in DHS operates the Visa Security Program in selected embassies abroad, and the Customs and Border Protection (CBP) in DHS inspects all people who enter the United States. In addition, the Executive Office for Immigration Review (EOIR) in the U.S. Department of Justice (DOJ) has a significant policy role through its adjudicatory decisions on specific immigration cases. Although there was a discussion of assigning all visa issuance responsibilities to DHS when the department was being created, the Homeland Security Act of 2002 (P.L. 107-296) opted not to do so. Rather, P.L. 107-296 drew on compromise language stating that DHS issues regulations regarding visa issuances and assigns staff to consular posts abroad to advise, review, and conduct investigations, and that DOS's Consular Affairs continues to issue visas. The case of Umar Farouk Abdulmutallab, who allegedly attempted to ignite an explosive device on Northwest Airlines Flight 253 on December 25, 2009, refocused attention on the responsibilities of the Departments of State and Homeland Security for the visa process. He was traveling on a multi-year, multiple-entry tourist visa issued to him in June 2008. State Department officials have acknowledged that Abdulmutallab's father came into the Embassy in Abuja, Nigeria, on November 19, 2009, to express his concerns about his son, and that those officials at the Embassy in Abuja sent a cable to the National Counterterrorism Center. State Department officials maintain they had insufficient information to revoke his visa at that time. In the aftermath of the Abdulmutallab case, policymakers explored what went wrong and whether statutory and procedural revisions were needed. Some have expressed the view that DOS has too much control over visas, maintaining that the Homeland Security Act intended DHS to be the lead department and DOS to merely administer the visa process. Proponents of DOS playing the principal role in visa issuances assert that only consular officers in the field have the country-specific knowledge to make decisions about whether an alien is admissible and that staffing 250 diplomatic and consular posts around the world would stretch DHS beyond its capacity. Whether the visa security roles and procedures are adequately funded may arise as the budget issues are considered. The House Committee on the Judiciary has reported legislation (H.R. 1741) that would give the Secretary of Homeland Security "exclusive authority to issue regulations, establish policy, and administer and enforce the provisions of the Immigration and Nationality Act (8 U.S.C. 1101 et seq.) and all other immigration or nationality laws relating to the functions of consular officers of the United States in connection with the granting and refusal of a visa." This report will be updated as significant developments occur.

Background and Context Resale price maintenance has been called "vertical price fixing" because it involves entities at different levels of the supply/marketing chain. It generally entails an agreement (via formal contract or otherwise) between a manufacturer and a retailer that the dealer will charge some specific price for the manufacturer's products. As such, the agreement is considered a "conspiracy in restraint of trade" in violation of section 1 of the Sherman Act. The practice, particularly when a floor has been set under permissible resale prices ( minimum RPM), has been considered a per se violation of the antitrust laws since 1911, when the Court decided in Dr. Miles Medical Company v. John D. Park & Sons Company that such imposition and agreement was not analytically different from an agreement among the dealers themselves to fix their prices, thus depriving consumers of the advantages of competition. Imposition of maximum resale prices (a "ceiling" on permissible resale prices, as opposed to a "floor" below which a price is not permissible) or some other agreement which may affect price but does not require any specific level or term, on the other hand, has more recently been analyzed under the more lenient Rule of Reason standard. Significant inroads in the law of vertical restraints generally were made by three cases decided in the 1970s and 1980s. First, in Continental T.V., Inc. v. GTE Sylvania Inc. , the Court distinguished between vertically imposed price and non-price restraints, specifically overruling a barely 10-year-old, and very contentious case. The Sylvania Court concluded that it was "appropriate," given the "complex" market impact of non-price vertical restraints, to return to the Rule of Reason analysis for evaluating them (433 U.S. at 51, 52, 59). Then, in two dealer-termination cases, the Court further clarified its thinking on the "proper dividing line between" per se vertical price restraints and Rule of Reason non-price restraints. It required the plaintiff in Monsanto v. Spray-Rite Service Corp. to provide evidence of activity on the part of the manufacturer and the non-terminated dealer that "tends to exclude the possibility that [they] were acting independently" (465 U.S. 752, 764 (1984)). Finally, in Business Electronics Corp. v. Sharp Electronics Corp. the Court determined that neither (1) all of those agreements which affect price (because nearly all vertical agreements do), nor (2) all of those which contain the word "price" should be treated as per se violations. Per se illegality should be reserved for only those restraints that include "some [express or implied] agreement on price or price levels" (485 U.S. 717, 719, 728 (1988)). Having distinguished between the proper analysis of vertically imposed price and non-price restraints, the Court, in 1997, imposed further, and more direct, delineations in the law of vertical restraints; in State Oil Co. v. Khan , a unanimous Court acknowledged that although maximum RPM might be used "to disguise arrangements to fix minimum prices, ... we believe such conduct ... can be appropriately recognized and punished under the rule of reason." Notwithstanding that the per se treatment of maximum RPM had been in effect for approximately 30 years, Justice O'Connor noted, the Court had never been confronted with an "unadulterated" maximum RPM arrangement, and so found the "conceptual foundations [of that rule to be] gravely weakened." Leegin Creative Leather Products v. PSKS, Inc.7 Continuing the erosion of its precedents in the law of vertical restraints/RPM, a divided (5-4) Court overruled Dr. Miles , the final barrier to the Rule of Reason treatment of minimum RPM. Justice Kennedy, joined by Chief Justice Roberts and Justices Scalia (who had authored the Business Electronics opinion, supra , note 1), Thomas and Alito, stated that [v]ertical retail-price agreements have either procompetitive or anticompetitive effects, depending on the circumstances in which they were formed; and the limited empirical evidence available does not suggest [that] efficient uses of the agreements are infrequent or hypothetical. 127 S.Ct. at 2709. Therefore, the opinion continued, [a] per se rule should not be adopted for administrative convenience alone. Such rules can be counterproductive, increasing the antitrust system's total cost by prohibiting procompetitive conduct the antitrust laws should encourage. And a per se rule cannot be justified by the possibility of higher prices absent a further showing of anticompetitive conduct. The antitrust laws primarily are designed to protect interbrand competition from which lower prices can later result. Ibid . In apparent anticipation of its decision to overrule Dr. Miles (notwithstanding the doctrine of precedent known as stare decisis , which counsels that prior judicial precedents generally should not be upset), the opinion devoted a number of pages to presentation of its justifications. After acknowledging that "we do not write on a clean slate, for the decision in Dr. Miles is almost a century old," Justice Kennedy set out the reasons the majority felt it appropriate to abandon stare decisis in this case (127 S.Ct. at 2720). His justifications included first, the fact that even though "concerns about maintaining settled law are strong when the question is one of statutory interpretation," precedents involving the Sherman Act present a lesser compulsion: "The general presumption that legislative changes should be left to Congress has less force with respect to the Sherman Act." Second, the Sherman Act has been considered and approached as a common-law statute, and, Just as the common law adapts to modern understanding and greater experience, so too does the Sherman Act's prohibition on 'restraint(s) of trade' evolve to meet the dynamics of present economic conditions. 127 S.Ct. at 2720. Third, it would create a "chronically schizoid statute" to have an evolving rule of reason that takes into account "new circumstances and new wisdom," but leaves an "immovable" per se line that "remains forever fixed where it was." Fourth, there is ample evidence in economic literature that the per se rule is not appropriate for use in any RPM context. Fifth, both the Department of Justice and the Federal Trade Commission (FTC)—"the antitrust enforcement agencies with the ability to assess the long-term impacts of resale price maintenance"—have urged that the distinctions between classes of RPM be abandoned. Finally, prior to reviewing its decisions in the cases described in the "Background" portion of this report, as well as others it considered relevant, the Court quoted from a 2000 opinion to note that "we have overruled our precedents when subsequent cases have undermined their doctrinal underpinnings." Addressing PSKS's argument that when Congress repealed the authorization for state Fair Trade Laws it was, essentially, ratifying the per se rule, the Court replied, This is not so. The text of the Consumer Goods Pricing Act [ P.L. 94-145 ] did not codify the rule of per se illegality for vertical price restraints. It rescinded statutory provisions that made them per se legal. Congress once again placed these restraints within the ambit of § 1 of the Sherman Act.... Congress intended § 1 to give courts the ability 'to develop governing principles of law' in the common-law tradition. The Leegin case, therefore, was remanded to the 5 th Circuit, which. in turn, remanded to the district court "for proceedings consistent with the Supreme Court's opinion" (498 F.3d 486 (5 th Cir. 2007)). The dissent, written by Justice Breyer and joined by Justices Stevens, Souter and Ginsburg, took issue with the majority's justification for "its departure from ordinary considerations of stare decisis ...." (127 S.Ct. at 2725). Although the lawfulness of particular practices is often determined pursuant to the Rule of Reason, they acknowledged, there are some practices whose "likely anticompetitive consequences" are either so serious, with so few possible justifications, or whose justifications are "so difficult to prove [that] this Court has imposed a rule of per se unlawfulness—a rule that instructs courts to find the practice unlawful all (or nearly all) of the time" (127 S.Ct. at 2726). The "upshot" of ample economic evidence that RPM can result and has resulted in increased consumer prices, as well as the other side of the argument—that RPM can be beneficial to consumers —leads Justice Breyer to "ask such questions as, how often are harms or benefits likely to occur? How easy is it to separate the beneficial sheep from the antitrust goats?" (127 S.Ct. at 2729). Moreover, the dissent continued, while it is rational to allow economic discussions to inform antitrust analysis, there is a significant difference between recognizing that economics is a discipline which necessarily contains conflicting views and abandoning the necessity for antitrust law to be administered in such a way as to provide adequate certainty in the "content of rules and precedents" to be applied by the courts and used by "lawyers advising their clients" (127 S.Ct. at 2729). The "special advantages" of a "bright-line rule" they suggested, also might include the potential unfairness and impracticality of pursuing certain potentially criminal offenses (127 S.Ct. at 2731). In its reply to the majority's assertion that the Consumer Goods Pricing Act had not "codified" the per se rule of RPM, but rather, had merely "intended § 1 to give courts the ability 'to develop governing principles of law' in the common-law tradition," the dissent emphasized that Congress did not prohibit this Court from reconsidering the per se rule. But enacting major legislation premised upon the existence of that rule constitutes important public reliance upon that rule. And doing so aware of the relevant arguments constitutes even stronger reliance upon the Court's keeping the rule, at least in the absence of some significant change in respect to those arguments. Finally, the dissent argued, "every relevant factor ... mention[ed]" by Justice Scalia (a member of the Court's majority here), concurring in the judgment of an earlier case decided this Term, Federal Election Comm'n v. Wisconsin Right to Life, Inc. (127 S.Ct. 2652, 2007 WL 1804336), "argues [here] against overturning Dr. Miles " (127 S.Ct. at 2734). Those reasons are listed and discussed by Justice Breyer at 127 S.Ct. at 2734-2737: First, this case ( Leegin) is statutory, despite the Court's assertion that it is more properly to be considered in the realm of common-law adjudication; therefore, the Court should accord the deference due stare decisis concerning cases involving statutory interpretation. Second, although "the Court does sometimes overrule cases that it decided wrongly only a reasonably short time ago," Dr. Miles is nearly a century old (not to mention that in overruling Dr. Miles this decision also serves to overrule every case that has followed or applied it). Third, there is no credible argument that keeping the per se rule associated with Dr. Miles creates or maintains an "'unworkable' legal regime." Fourth, overruling Dr. Miles "unsettles" the law to a far greater degree than keeping it would. Fifth, the "considerable reliance upon the per se rule" of Dr. Miles that has led to the involvement of property or contract rights in RPM cases "argues against overruling [that case]." Sixth, overruling a "rule of law [that] has become 'embedded' in our 'national culture,'" as has the per se rule for RPM, is both improper and unwise. Accordingly, Justice Breyer concluded: The only safe predicitions to make about today's decision are that it will likely raise the prices of goods at retail and that it will create considerable legal turbulence as lower courts seek to develop workable principles. I do not believe that the majority has shown new or changed conditions sufficient to warrant overruling a decision of such long standing. All ordinary stare decisis considerations indicate the contrary. 127 S.Ct. at 2737.

The plaintiff in Leegin Creative Leather Products v. PSKS, Inc. successfully asked the Supreme Court to soften the longstanding treatment of resale price maintenance (RPM, vertical imposition of direct, minimum price restraints) as a per se (automatic, and not capable of being justified) antitrust offense. RPM had been so analyzed since the Court decided in 1911 that a manufacturer of patent medicines could not lawfully agree with retailers of its products on the prices at which those products would be sold (Dr. Miles Medical Company v. John D. Park & Sons Company, 220 U.S. 373). Such agreements, the Court had said in Dr. Miles, constituted both unlawful restraints of trade under the common law, and violations of the Sherman Act's prohibition against "contract[s] or combination[s] ... in restraint of trade" (15 U.S.C. § 1). Leegin's practice of entering into contracts with its retailers of the Brighton line of leather products to set the prices at which the dealers would resell those products was challenged by a discounting retailer whose replacement shipments were terminated; the trial court found a per se violation of section 1 (2004 WL 5254322), and the Court of Appeals for the Fifth Circuit affirmed that decision (171 Fed.Appx. 464 (2006)). Leegin argued in the Supreme Court that because RPM may sometimes be pro-consumer (might, for example, allow the retailers to profitably provide extra services desired by some consumers), the practice should not be conclusively presumed unreasonable "without elaborate inquiry as to 'its precise harm or business justification for its use.'" Agreeing with Leegin, the Court overruled Dr. Miles, stating that allowing RPM to be analyzed as a Rule of Reason violation (pursuant to which the procompetitive effects of a judicially determined antitrust violation are weighed against the anticompetitive results of the challenged activity) should be allowed: "Notwithstanding the risks of unlawful conduct, it cannot be stated with any degree of confidence that [RPM] always tend[s] to restrict competition ...." 551 U.S. ___, 127 S.Ct. 2705, 2709 (2007), quoting, Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 723 (1988). This report will not be updated.

Introduction Medicaid is a joint federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports (LTSS), to a diverse low-income population, including children, pregnant women, adults, individuals with disabilities, and people aged 65 and older. In FY2014, Medicaid is estimated to have provided health care services to 65 million individuals at a total cost of $498 billion, with the federal government paying $303 billion of that total. Medicaid is an important health care safety net for low-income populations, with approximately 18% of the U.S. population enrolled in Medicaid in calendar year (CY) 2013. For some types of services, Medicaid is a significant payer. For instance, in CY2013, Medicaid accounted for 43% of national spending on LTSS, and Medicaid pays for almost half of all births in the United States. Medicaid is one of the largest payers in the U.S. health care system, representing 15% of national health care spending in CY2013; in that year, private health insurance and Medicare accounted for 33% and 20%, respectively. Medicaid was enacted in 1965 as part of the same law that created the Medicare program (the Social Security Amendments of 1965; P.L. 89-97). State participation in Medicaid is voluntary, though all states, the District of Columbia, and the territories choose to participate. States are responsible for administering their Medicaid programs. Medicaid is financed jointly by the federal government and the states. Federal Medicaid spending is an entitlement, with total expenditures dependent on state policy decisions and use of services by enrollees. States must follow broad federal rules to receive federal matching funds, but they have flexibility to design their own versions of Medicaid within the federal statute's basic framework. This flexibility results in variability across state Medicaid programs. Each state has a Medicaid state plan that describes how the state will administer its Medicaid program. States submit these Medicaid state plans to the federal Centers for Medicare & Medicaid Services (CMS) for approval. Medicaid was designed to provide coverage to groups with a wide range of health care needs that historically were excluded from the private health insurance market (e.g., individuals with disabilities who require LTSS or indigent populations in geographic locations where access to providers is limited). Because of the diversity of the populations that Medicaid serves, Medicaid offers some benefits that typically are not covered by major insurance plans offered in the private market (e.g., nursing facility care or early and periodic screening, diagnosis, and treatment [EPSDT] services). Medicaid also pays for Medicare premiums and/or cost sharing for low-income seniors and individuals with disabilities, who are eligible for both programs and referred to as dual-eligible beneficiaries . For other Medicaid enrollees, out-of-pocket costs generally are nominal, which may not be the case with most employer-sponsored insurance or coverage through health insurance exchanges (also referred to as marketplaces ). The Medicaid program pays for special classes of providers, such as federally qualified health centers (FQHCs), rural health clinics (RHCs), and Indian Health Service (IHS) facilities that provide health care services to populations in areas where access to traditional physician care may be limited. Since its inception, the Medicaid program has expanded in a number of different directions. Federal laws have changed virtually every aspect of the program, affecting eligibility, benefits, beneficiary cost sharing, and fraud and abuse protections, among others. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 as amended) is the most recent federal law to make fundamental revisions to the Medicaid program, including a substantial expansion of Medicaid eligibility that began in 2014. The ACA likely will broaden Medicaid's role in providing health care coverage to the U.S. population and increase the likelihood that, going forward, Congress's attention to health policy issues will involve Medicaid. The ACA was designed to reduce the number of U.S. citizens without health insurance by preserving the existing system of employer-based health insurance, making changes to the individual insurance market, and expanding coverage to the uninsured through Medicaid and health insurance exchanges. Under the ACA, Medicaid and the health insurance exchanges are envisioned to work in tandem to provide a continuous source of subsidized coverage for lower-income individuals and families. Medicaid agencies are required to coordinate with the health insurance exchanges to educate people about new health insurance options and assist them in navigating the enrollment process. This report describes the basic elements of Medicaid, focusing on who is eligible, what services are covered, how enrollees share in the cost of care, how the program is financed, and how providers are paid. The report also explains waivers, program integrity activities, and the dual-eligible population. In addition, the report addresses the following selected issues: the ACA Medicaid expansion, the impact of the ACA health insurance annual fee on Medicaid, and the ACA maintenance of effort (MOE) requirement with respect to Medicaid eligibility. Eligibility Eligibility for Medicaid is determined by both federal and state law, whereby states set individual eligibility criteria within federal standards. Individuals must meet both categorical (e.g., elderly, individuals with disabilities, children, pregnant women, parents, certain non-elderly childless adults) and financial (i.e., income and sometimes assets limits) criteria. In addition, individuals need to meet federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship. Some eligibility groups are mandatory, meaning all states with a Medicaid program must cover them; others are optional. States are permitted to apply to CMS for a waiver of federal law to expand health coverage beyond the mandatory and optional groups listed in federal statute (see the " Medicaid Program Waivers " section for more information). If a state participates in Medicaid, the following are examples of groups that must be provided Medicaid coverage: low-income families that meet the financial requirements (based on family size) of the former Aid to Families with Dependent Children (AFDC) cash assistance program; pregnant women and children through the age of 18 with family income at or below 133% of the federal poverty level (FPL); low-income individuals who are aged 65 and older, or who are blind, or who are under the age of 65 and disabled who qualify for cash assistance under the Supplemental Security Income (SSI) program; recipients of adoption assistance and foster care (who are under the age of 18) under Title IV–E of the Social Security Act; certain individuals who age out of foster care, up to the age of 26, and do not qualify under other mandatory groups noted above; and certain groups of legal permanent resident immigrants (e.g., refugees for the first 7 years after entry into the United States; asylees for the first 7 years after asylum is granted; lawful permanent aliens with 40 quarters of creditable coverage under Social Security; immigrants who are honorably discharged U.S. military veterans) who meet all other financial and categorical Medicaid eligibility requirements. Examples of groups to which states may provide Medicaid include pregnant women and infants with family income between 133% and 185% of FPL; certain individuals who qualify for nursing facility or other institutional care and have incomes up to 300% of SSI benefit level, referred to as the 300 percent rule ; medically needy individuals who are members of one of the broad categories of Medicaid covered groups (i.e., are aged, have a disability, or are in families with children) and have high medical expense, but have income that exceed the applicable income requirements; working people with disabilities; and non-elderly adults who otherwise are not eligible for Medicaid with income at or below 133% of FPL (i.e., the ACA Medicaid expansion). (For more information about the ACA Medicaid expansion, see " ACA Medicaid Expansion .") Modified Adjusted Gross Income As of January 1, 2014, MAGI rules are used in determining eligibility for most of Medicaid's non-elderly populations, including the ACA Medicaid expansion. This change could mean some individuals who previously were eligible for Medicaid no longer would be found eligible (and vice versa) due to the change in the way income is counted for Medicaid eligibility. For example, the conversion to MAGI might make some children who previously were eligible for Medicaid ineligible because stepparent income often is excluded from the pre-ACA income counting rules but included for MAGI. By contrast, children previously not eligible might become eligible because MAGI excludes child support income, which generally was included under the pre-ACA income counting rules. Medicaid's MAGI income-counting rule is set forth in law and regulation. For Medicaid, MAGI is defined as the Internal Revenue Code's adjusted gross income (AGI, which reflects a number of deductions, including trade and business deductions, losses from sale of property, and alimony payments) increased by certain types of income (e.g., tax-exempt interest income received or accrued during the taxable year and the nontaxable portion of Social Security benefits) . In addition, under Medicaid regulations certain types of income are subtracted (e.g., certain scholarships and fellowships) to arrive at MAGI. Under the MAGI counting rules, the 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 the state in coordination with CMS. See Table A-1 for the state-by-state MAGI-based eligibility levels adjusted for the 5% disregard effective January 1, 2015. The transition to the MAGI income rules had significant implications for the Medicaid eligibility determination process. It represented a major change in terms of the types of information collected (such as what counts as income) and the definition of household (such as the inclusion of the income of a stepparent) compared with former Medicaid eligibility rules. These changes necessitated a redesign of the existing Medicaid eligibility and enrollment systems for each state. These systems were integrated with the health insurance exchanges as well as with other social programs that serve low-income populations (e.g., the Temporary Assistance for Needy Families [TANF] and the Supplemental Nutrition Assistance Program [SNAP]). Medicaid Enrollment Trends Figure 1 shows historical and projected Medicaid enrollment for FY2000 through FY2023 (see Table B-1 for state-by-state Medicaid enrollment for FY2012). The figure shows steady enrollment growth, especially among nondisabled children and adults as a result of the recessions. During periods of economic downturns, Medicaid programs face enrollment increases at a faster rate because job and income losses make more people eligible. One study estimated that for every 1% increase in the national unemployment rate, Medicaid enrollment increases by 1 million individuals. The ACA Medicaid expansion is projected to add 4.3 million newly eligible adults to Medicaid in FY2014 and 12.0 million newly eligible adults by FY2023. Regardless of whether a state decides to implement the ACA Medicaid expansion, all states are expected to experience an increase in Medicaid enrollment due to the woodwork effect. The woodwork effect is the term for uninsured individuals who are eligible for Medicaid without the expansion but decide to enroll in Medicaid due to increased media attention and outreach efforts associated with the ACA. Share of Enrollment Versus Expenditures, by Population Different Medicaid enrollment groups have very different service utilization patterns. Larger enrollment groups account for a smaller proportion of Medicaid expenditures, while some smaller enrollment groups are responsible for a larger proportion of Medicaid expenditures. As shown in Figure 2 , for FY2012, roughly half of Medicaid enrollees were children without disabilities, who accounted for only about 20% of Medicaid's total benefit spending. The next-largest enrollee group—adults—accounted for about 25% of all enrollees but only about 16% of benefit expenditures. In contrast, individuals with disabilities represented about 17% of Medicaid enrollees but accounted for the largest share of Medicaid benefit spending (about 44%). Finally, the elderly represented about 9% of Medicaid enrollees but about 21% of all benefit spending. While these statistics vary somewhat from year to year and state to state, the patterns described above generally hold true across years. Benefits Medicaid coverage includes a wide variety of preventive, primary, and acute care services as well as LTSS (see " Long-Term Services and Supports " for more information about LTSS). Not everyone enrolled in Medicaid has access to the same set of services. Different eligibility classifications determine available benefits. Federal law provides two primary benefit packages for state Medicaid programs: (1) traditional benefits and (2) alternative benefit plans (ABPs). Each of these packages is summarized in Table 1 . For the medically needy subgroup, states may offer a more restrictive benefit package than is available to other enrollees. In addition, states can use waiver authority (e.g., Section 1115 of the Social Security Act) to tailor benefit packages to specified Medicaid subgroups (see " Medicaid Program Waivers " for more information about Section 1115 waivers). Traditional Medicaid Benefits The traditional Medicaid program requires states to cover a wide array of mandatory services (e.g., inpatient hospital care, lab and x-ray services, physician care, nursing facility services for individuals aged 21 and older). In addition, states may provide optional services, some of which commonly are covered (e.g., personal care services, prescription drugs, clinic services, physical therapy, and prosthetic devices). States define the specific features of each covered benefit within four broad federal guidelines: Each service must be sufficient in amount , duration , and scope to reasonably achieve its purpose. States may place appropriate limits on a service based on such criteria as medical necessity. Within a state, services available to the various population groups must be equal in amount, duration, and scope. This requirement is the comparability rule . With certain exceptions, the amount, duration, and scope of benefits must be the same statewide, referred to as the statewideness rule . With certain exceptions, enrollees must have freedom of choice among health care providers or managed care entities participating in Medicaid. (See " Service Delivery Models " for information about managed care.) The breadth of coverage for a given benefit can, and does, vary from state to state, even for mandatory services. For example, states may place different limits on the amount of inpatient hospital services a beneficiary can receive in a year (e.g., up to 15 inpatient days per year in one state versus unlimited inpatient days in another state)—as long as applicable requirements are met regarding comparability; statewideness; sufficiency of amount, duration, and scope; and freedom of choice. Exceptions to state limits may be permitted under circumstances defined by the state. Alternative Benefit Plans As an alternative to providing all the mandatory and selected optional benefits under traditional Medicaid, the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) gave states the option to enroll state-specified groups in what was referred to as benchmark or benchmark-equivalent coverage but currently are called ABPs. The ACA made significant changes to both ABP design and requirements. Under ABPs, states may waive the statewideness and comparability requirements that apply to traditional Medicaid benefits. This flexibility permits the state to define populations that are served and the specific benefit packages that apply. In general, ABPs may cover fewer benefits than traditional Medicaid, but there are some requirements, such as coverage of EPSDT services (for children under the age of 21), family planning services and supplies, and both emergency and nonemergency transportation to and from providers that might make them more generous than private insurance. States that choose to implement the ACA Medicaid expansion are required to provide ABP coverage to the individuals eligible for Medicaid through the expansion (with exceptions for selected special-needs subgroups). In addition, states have the option to provide ABP coverage to other subgroups. ABPs must cover at least the 10 essential health benefits (EHBs) that also apply to the qualified health plans offered in the health insurance exchanges. In addition, ABP coverage must comply with the federal requirements for mental health parity, and special rules also apply with regard to prescription drugs, rehabilitative and habilitative services and devices, and preventive care. Medicaid beneficiaries enrolled in such coverage must have access to services provided by rural health clinics and federally qualified health centers. Long-Term Services and Supports LTSS refers to a broad range of health and health-related services and supports needed by individuals who lack the capacity for self-care due to a physical, cognitive, or mental disability or condition. Among the Medicaid LTSS benefits, the only state plan benefits that participating states are required by federal law to cover are nursing facility services and home health. States may cover other types of LTSS, including case management services, personal care services, and private duty nursing. As the largest single payer of LTSS in the United States, Medicaid plays a key role in providing these services. In FY2014, Medicaid LTSS accounted for 26% of all Medicaid spending despite the fact that LTSS recipients represent a relatively small share of the total Medicaid population (See Figure 3 ). An estimated 4.2 million Medicaid beneficiaries (or 6.4%) of the 66 million total enrolled Medicaid population received LTSS in FY2010. Medicaid funds LTSS for eligible beneficiaries in both institutional and home - and community-based settings, though the services offered di ffer substantially by state. Moreover, states are required to offer certain Medicaid institutional services to eligible beneficiaries, while the majority of Medicaid home - and community-based services (HCBS) are optional for states. In recent decades, federal authority has expanded to assist states in increasing and diversifying their Medicaid LTSS coverage to include HCBS. As a result, the share of Medicaid LTSS spending for HCBS has increased considerably, from 3 3 % o f Medicaid LTSS spending in 2003 to 51 % of Medicaid LTSS spending in 2013. Medicaid Service Spending Figure 3 below shows the nationwide distribution of Medicaid expenditures across broad categories of service for FY2014. These data illustrate that 37% of benefit spending is for capitated payments under managed care arrangements (see " Service Delivery Models " for information about managed care), while LTSS account for a little more than a quarter and acute care services represent another quarter of Medicaid benefit payments. In general, when other sources of insurance/payment are available (including Medicare), Medicaid wraps around that coverage (i.e., additional coverage for services covered under Medicaid but not under the other source of coverage). Beneficiary Cost Sharing Federal statutes and regulations address the circumstances under which enrollees may share in the costs of Medicaid, both in terms of participation-related cost sharing (e.g., monthly premiums) and point-of-service cost sharing (e.g., co-payments [i.e., flat dollar amounts paid directly to providers for services rendered]). States can require certain beneficiaries to share in the cost of Medicaid services, but there are limits on (1) the amounts that states can impose, (2) the beneficiary groups that can be required to pay, and (3) the services for which cost sharing can be charged. In general, premiums and enrollment fees often are prohibited. However, premiums may be imposed on certain enrollees, such as individuals with incomes above 150% of FPL, certain working individuals with disabilities, and certain children with disabilities. States can impose cost sharing, such as co-payments, coinsurance, deductibles, and other similar charges, on most Medicaid-covered benefits up to federal limits that vary by income. Some subgroups of beneficiaries are exempt from cost sharing (e.g., children under 18 years of age and pregnant women). The aggregate cap on all out-of-pocket cost sharing is generally up to 5% of monthly or quarterly household income. Service Delivery Models In general, benefits are made available to Medicaid enrollees via two service delivery systems: fee-for-service or managed care . Under the fee-for-service delivery system, health care providers are paid by the state Medicaid program for each service provided to a Medicaid enrollee. Under the managed care delivery system, Medicaid enrollees get most or all of their services through an organization under contract with the state. States traditionally have used the fee-for-service service delivery model for Medicaid, but since the 1990s, the share of Medicaid enrollees covered by the managed care model has increased dramatically. In FY2011, about 72% of Medicaid enrollees were covered by some form of managed care and all but four states (Alaska, Idaho, New Hampshire, and Wyoming) used managed care coverage to some extent. There are three types of Medicaid managed care: Managed care organizations (MCOs) —states contract with MCOs to provide a comprehensive package of benefits to certain Medicaid enrollees. States usually pay the MCOs on a capitated basis, which means the states prospectively pay the MCOs a fixed monthly rate per enrollee to provide or arrange for most health care services. MCOs then pay providers for services to enrollees. Primary care case management (PCCM)— states contract with primary care providers to provide case management services to Medicaid enrollees. Typically, under PCCM, the primary care provider receives a monthly case management fee per enrollee for coordination of care, but the provider continues to receive fee-for-service payments for the medical care services utilized by Medicaid enrollees. Limited benefit plans —these plans look like MCOs in that states usually contract with a plan and pay it on a capitated basis. The difference is that limited benefit plans provide only one or two Medicaid services (e.g., behavioral health or dental services). While managed care has been used largely for healthier Medicaid subgroups (i.e., children and parents), some states are turning to this type of service delivery model for the elderly and individuals with disabilities. In addition to these two main types of service delivery models, some states use alternative models, such as premium assistance and health savings accounts. Some states are using these alternative models for their ACA Medicaid expansion. For example, Arkansas uses premium assistance through the private option for the ACA Medicaid expansion and Michigan uses health savings accounts. Financing The federal government and the states jointly finance Medicaid. The federal government reimburses states for a portion (i.e., the federal share) of each state's Medicaid program costs. Because federal Medicaid funding is an open-ended entitlement to states, there is no upper limit or cap on the amount of federal Medicaid funds a state may receive. In FY2014, Medicaid expenditures totaled $498 billion. The federal share totaled $303 billion and the state share was $195 billion. Federal Share The federal government's share of most Medicaid expenditures is established by the federal medical assistance percentage (FMAP) rate, which generally is determined annually and varies by state according to each state's per capita income relative to the U.S. per capita income. The formula provides higher FMAP rates, or federal reimbursement rates, to states with lower per capita incomes, and it provides lower FMAP rates to states with higher per capita incomes. FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%. In FY2015, 13 states have the statutory minimum FMAP rate of 50%, and Mississippi has the highest FMAP rate of 74% (see Table B-1 for each state's FY2015 FMAP rate). The FMAP rate is used to reimburse states for the federal share of most Medicaid expenditures, but exceptions to the regular FMAP rate have been made for certain states (e.g., the District of Columbia and the territories), situations (e.g., during economic downturns), populations (e.g., certain women with breast or cervical cancer and individuals in the Qualifying Individual program), providers (e.g., Indian Health Service facilities), and services (e.g., family planning and home health services). In addition, the federal share for most Medicaid administrative costs does not vary by state and is generally 50%. The ACA included FMAP exceptions, including the newly eligible federal matching rates and the expansion state federal matching rates. Under the newly eligible federal matching rate, from 2014 through 2016, states receive a 100% federal matching rate for the cost of individuals who are newly eligible for Medicaid due to the ACA expansion. As shown in Table 2 , this newly eligible federal matching rate phases down to 95% in 2017, 94% in 2018, 93% in 2019, and 90% thereafter. The expansion state federal matching rate is available for individuals in expansion states who were eligible for Medicaid on March 23, 2010, and are in the new eligibility group for non-elderly, nonpregnant adults at or below 133% of FPL. The formula used to calculate the expansion state federal matching rates is based on a state's regular federal matching rate, so the expansion state federal matching rates will vary from state to state until 2019, at which point the newly eligible and the expansion state federal matching rates will converge at 93% and phase down to 90% for 2020 and subsequent years. While most federal Medicaid funding is provided on an open-ended basis, certain types of federal Medicaid funding are capped. For instance, federal disproportionate share hospital (DSH) funding to states cannot exceed a state-specific annual allotment. Also, Medicaid programs in the territories (i.e., American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the Virgin Islands) are subject to annual spending caps. State Share The federal government provides broad guidelines to states regarding allowable funding sources for the state share (also referred to as the nonfederal share ) of Medicaid expenditures. However, to a large extent, states are free to determine how to fund their share of Medicaid expenditures. As a result, there is significant variation from state to state in funding sources. States can use state general funds (i.e., personal income, sales, and corporate income taxes) and other state funds (e.g., provider taxes, local government funds, tobacco settlement funds, etc.) to finance the state share of Medicaid. Federal statute allows as much as 60% of the state share to come from local government funding. Federal regulations also stipulate that the state share not be funded with federal funds (Medicaid or otherwise). In state fiscal year 2013, on average, 73% of the state share of Medicaid expenditures was financed by state general funds, and the remaining 27% was financed by other state funds. A few funding sources have received a great deal of attention over the past couple of decades because states have used these funds in some financing mechanisms designed to maximize the amount of federal Medicaid funds coming to the state. This process is referred to as Medicaid maximization . In general, some states have used Medicaid maximization strategies that involve the coordination of fund sources, such as provider taxes and intergovernmental transfers, and payment policies, such as DSH and other supplemental payments to draw down federal Medicaid funds without expending many, if any, state general funds. Expenditures The cost of Medicaid, like most health expenditures, generally has increased at a rate significantly faster than the overall rate of U.S. economic growth, as measured by gross domestic product. In the past, much of Medicaid's expenditure growth has been due to federal or state expansions of Medicaid eligibility criteria, but per enrollee costs for Medicaid also have increased faster than the economy. However, when compared to other forms of health insurance, Medicaid per enrollee expenditures are relatively low. Medicaid expenditures are influenced by economic, demographic, and programmatic factors. Economic factors include health care prices, unemployment rates (see the " Medicaid Enrollment Trends " section for a discussion of the impact of the unemployment rate on Medicaid enrollment, which also impacts expenditures), and individuals' wages. Demographic factors include population growth and the age distribution of the population. Programmatic factors include state decisions regarding optional eligibility groups, optional services, and provider payment rates. Other factors include the number of eligible individuals who enroll, utilization of covered services, and enrollment in other health insurance programs (including Medicare and private health insurance). Figure 4 shows actual Medicaid expenditures from FY1997 to FY2014 and projected Medicaid expenditures from FY2015 through FY2023 (see Table B-1 for state-by-state expenditures for FY2014). These figures are broken down by state and federal expenditures. In FY2014, Medicaid spending on services and administrative activities in the 50 states, the District of Columbia, and the territories totaled $494 billion. Medicaid expenditures are estimated to grow to $835 billion in FY2023. Historically, in a typical year, the average federal share of Medicaid expenditures was about 57%, which means the average state share is about 43%. However, the federal government's share of Medicaid expenditures increased with the implementation of the ACA Medicaid expansion because the federal government is funding a vast majority of the cost of the expansion through the newly eligible and expansion state federal matching rates. In FY2014, the average federal share of Medicaid increased to 60%, and the federal share of Medicaid is expected to remain at that level through FY2023. Provider Payments For the most part, states establish their own payment rates for Medicaid providers. Federal statute requires that these rates be sufficient to enlist enough providers so that covered benefits will be available to Medicaid enrollees at least to the same extent they are available to the general population in the same geographic area. Low Medicaid physician payment rates in many states and their impact on provider participation have been perennial concerns for policymakers. Still, during the most recent recession, which ended in 2009, many states reduced Medicaid provider payment rates due to budget pressures. However, over the past couple years, more states have been enhancing rather than reducing provider rates overall due to improvements in state finances. The ACA required that Medicaid payment rates for certain primary care services be raised to what Medicare pays for these services for CY2013 and CY2014. The federal government picked up the entire cost of that increase in primary care rates (i.e., the difference between Medicare payment rates and the existing Medicaid payment rates as of July 1, 2009) for those two years. While the ACA requirement and the enhanced federal funding have expired, one survey found that 15 states planned to continue the higher payment rates at least partially, 24 states did not plan to continue the higher rates, and the remaining states had not made a decision at the time the survey was conducted. In some cases, states make supplemental payments to Medicaid providers that are separate from, and in addition to, the standard payment rates for services rendered to Medicaid enrollees. Often, providers receive supplemental payments in a lump sum. States are permitted to make supplemental payments to providers, but federal regulations specify upper payment limit (UPLs), which prohibit using federal matching funds for Medicaid fee-for-service payments in excess of what would have been paid under Medicare payment principles. The institutions subject to the UPL requirement are hospitals (separated into inpatient services and outpatient services), nursing facilities, intermediate care facilities for the intellectually disabled, and freestanding nonhospital clinics. Medicaid DSH payments are one type of supplemental payment, and federal statute requires that states make Medicaid DSH payments to hospitals treating large numbers of low-income patients. In FY2014, federal DSH allotments totaled $11.7 billion. The ACA made aggregate reductions in Medicaid DSH allotments for FY2014 through FY2020, but multiple subsequent laws have amended these reductions. Under current law, the aggregate reductions to the Medicaid DSH allotments are to impact FY2018 through FY2025 and in FY2026 states' DSH allotments are to rebound to their pre-reduced levels with the annual inflation adjustments for FY2018 to FY2025. Medicaid Program Waivers The Social Security Act authorizes several waiver and demonstration authorities to provide states with the flexibility to operate their Medicaid programs. Each waiver authority has a distinct purpose and specific requirements. Under the various waiver authorities, states may try new or different approaches to the delivery of health care services or adapt their programs to the special needs of particular geographic areas or groups of Medicaid enrollees. The primary Medicaid waiver authorities include the following: Section 1115 Research and Demonstration Projects —Under Section 1115 of the Social Security Act, the Secretary of HHS may waive Medicaid requirements contained in Section 1902 (including but not limited to what is known as freedom of choice of provider, comparability of services, and statewideness ). States use this waiver authority to change eligibility criteria to offer coverage to new groups of people, to provide services that are not otherwise covered, to offer different service packages or a combination of services in different parts of the state, to cap program enrollment, and to implement innovative service delivery systems, among other purposes. Section 1915(b) Managed Care/Freedom of Choice Waivers —Section 1915(b) of the Social Security Act permits states to establish mandatory managed care programs or otherwise limit enrollees' choice of providers. Section 1915(c) Home- and Community-Based Services (HCBS) Waivers— Section 1915(c) authorizes the Secretary of HHS to waive certain requirements of Medicaid law, allowing states to cover a broad range of HCBS (including services not available under the Medicaid state plan) for certain persons with LTSS needs. Specifically, under Section 1915(c) states can waive rules regarding statewideness and comparability of services. States also may apply certain income counting rules to persons in HCBS waivers that allow an individual who otherwise might not qualify to be eligible for Medicaid. Section 1915(b)/(c) Waivers —Section 1915(b) and (c) waivers allow states to provide HCBS to disabled and elderly populations in a managed care setting or within a limited pool of providers. States must apply for each waiver authority concurrently and comply with the individual requirements of each waiver. States often operate multiple waiver programs with their state plans. Key characteristics of these primary Medicaid waiver authorities compared with state plan requirements are summarized in Table 3 . The statutory requirements that may be waived under each type of waiver are different, but all types of waivers are time limited and approvals are subject to reporting and evaluation requirements. In addition, all types of waivers must comply with various financing requirements (e.g., budget neutrality, cost-effectiveness, or cost-neutrality). Program Integrity Program integrity initiatives are designed to combat fraud, waste, and abuse in the Medicaid program. Some oversight efforts focus on preventing fraud and abuse through effective program management, while others focus on addressing problems after they occur through investigations, recoveries, and enforcement activities. Areas such as eligibility determination have multiple program integrity initiatives, whereas other areas, such as managed care, have received comparatively little attention in the past. Multiple agencies at the federal and state levels are involved in program integrity. The federal agencies are CMS, the Office of the Inspector General for the Department of HHS, the Department of Justice, and the Government Accountability Office. The state agencies involved with program integrity activities include the state Medicaid agencies and the federally required Medicaid Fraud Control Units (MFCUs). Coordination of Medicaid program integrity activities can be a problem because there are so many agencies working on such initiatives and each state develops its own approach to program integrity. The federal government and states contribute equally to fund most Medicaid activities to combat waste, fraud, and abuse, although for some activities the federal government provides additional funds through enhanced FMAP rates. As mentioned earlier, all states receive the same FMAP rate for administrative expenditures, including most program integrity activities, which generally is 50%. States receive higher FMAP rates for selected administrative activities, such as 90% for the startup of MFCUs and 75% for ongoing MFCU operation. The ACA included some provisions to increase uniformity among Medicare, Medicaid, and CHIP program integrity activities. For instance, the ACA introduced additional provider screening requirements that are applicable to Medicare, Medicaid, and CHIP. The ACA also created an integrated Medicare and Medicaid data repository to enhance program integrity data sharing among federal and state agencies and law-enforcement officials. Moreover, the ACA established a recovery audit contractor (RAC) requirement for Medicaid, under which state Medicaid agencies contract with an RAC to identify and recover overpayments and identify underpayments. Selected Issues Currently, the Medicaid program is dealing with several major issues, which mostly stem from the implementation of the ACA. First, the ACA Medicaid expansion began on January 1, 2014. Since the expansion is optional for states, some states are implementing the expansion, some are still deciding, and others have chosen not to implement the expansion. Second, the coordination of care for dual-eligible beneficiaries is a focus of federal and state policymakers. Third, a new ACA health insurance annual fee may increase Medicaid expenditures through higher Medicaid MCO rates. Finally, the ACA included a Medicaid maintenance of effort (MOE) provision, which expired on January 1, 2014, for adults but continues until September 30, 2019 for children. ACA Medicaid Expansion The primary goal of the ACA is to increase access to affordable health insurance for the uninsured and to make health insurance more affordable for individuals who already have such coverage. The ACA Medicaid expansion is one of the major insurance coverage provisions included in the law. As enacted, beginning in 2014, the ACA Medicaid expansion created a new mandatory Medicaid eligibility group: all adults under the age of 65 with income up to 133% of FPL (effectively 138% of FPL; see " Eligibility " for more information). The ACA requires most of the individuals covered under the ACA Medicaid expansion to receive ABP coverage (see " Benefits " for more information), and the law provides enhanced federal matching rates for coverage of this new eligibility group (see " Federal Share " for more information). Originally, it was assumed that all states would implement the ACA Medicaid expansion in 2014 as required by statute because implementation was required for states to receive any federal Medicaid funding. However, on June 28, 2012, the U.S. Supreme Court issued its decision in National Federation of Independent Business (NFIB) v. Sebelius finding that the federal government cannot terminate the federal Medicaid funding a state receives for its current Medicaid program if a state does not implement the ACA Medicaid expansion. State Decisions Since the federal government cannot terminate current Medicaid federal matching funds if a state does not implement the Medicaid expansion required by the ACA, the Supreme Court's ruling in NFIB effectively made state participation in the ACA Medicaid expansion voluntary. However, if a state accepts the ACA Medicaid expansion funds, it must abide by the new expansion coverage rules. CMS informed states that they face no deadline for deciding whether to implement the ACA Medicaid expansion and, according to CMS, states also can discontinue the expansion at any time. If states want to take full advantage of the 100% federal financing for the newly eligible enrollees, however, they must have implemented the expansion on January 1, 2014. The statute explicitly provides the 100% federal funding for the newly eligible enrollees for 2014, 2015, and 2016 rather than for the first three years a state implements the expansion. On January 1, 2014, when the ACA Medicaid expansion went into effect, 24 states and the District of Columbia included the ACA Medicaid expansion as part of their Medicaid programs. The following states implemented the expansion on later dates: Michigan (April 1, 2014), New Hampshire (August 15, 2014), Pennsylvania (January 1, 2015), and Indiana (February 1, 2015). In addition, Montana Governor Bullock signed the bill adopting the ACA Medicaid expansion on April 29, 2015, but the law directs the state to apply for a Section 1115 waiver to implement the expansion that requires federal government approval. In July 2015, the governor of Alaska informed the legislature of his intent to accept federal Medicaid funding for the ACA Medicaid expansion. In addition, Utah currently is debating the ACA Medicaid expansion. Figure 5 shows state decisions about implementing the ACA Medicaid expansion as of July 2015. Dual-Eligible Beneficiaries In FY2011, there were 10.2 million dual-eligible beneficiaries, who are individuals enrolled in both Medicare and Medicaid, which is almost 15% of Medicaid enrollment. Individuals qualify for Medicare either because they are aged 65 or older or because they are under the age of 65, have a disability, and have been receiving Social Security Disability Insurance for two years. As mentioned previously, individuals qualify for Medicaid because they meet both the categorical requirement (i.e., are a member of a covered group, such as children, pregnant women, families with dependent children, the elderly, or the disabled) and financial eligibility requirements, which vary by state. Although commonly addressed as a single population, dual-eligible individuals are diverse. While dual-eligible beneficiaries tend to be sicker and poorer than the Medicaid population as a whole, not all dual-eligible beneficiaries are in poor health. Individuals receive different types of Medicaid coverage (i.e., full benefits or financial assistance with Medicare premiums and/or cost sharing). There are numerous Medicaid eligibility pathways for dual-eligible beneficiaries, but the two main categories of dual-eligible individuals are full dual-eligible beneficiaries and partial dual-eligible beneficiaries. Full dual-eligible beneficiaries receive full benefits from Medicare, and Medicaid provides them with full benefits in addition to financial assistance with their Medicare premiums and cost sharing. Partial dual-eligible beneficiaries receive full benefits from Medicare and financial assistance from Medicaid for Medicare premiums and cost sharing. In FY2011, there were 7.5 million full duals, with Medicaid spending totaling $134.3 billion, and 2.6 million partial duals with $6.0 billion in Medicaid spending. Because Medicare and Medicaid are different programs, coordinating care and services for dual-eligible beneficiaries presents challenges. Medicare is a national program administered by CMS, while Medicaid is a federal-state partnership under which each state designs and administers its own version of Medicaid under broad federal rules. Coordination of benefits between these distinct programs is administratively complex. Dual-eligible beneficiaries and their service providers must comply with Medicare and Medicaid program rules and processes, which are not always aligned. In addition, delivery of uncoordinated or poorly coordinated health care and related services can be costly and inefficient, affecting dual-eligible beneficiaries' quality of care and increasing Medicare and Medicaid spending. To reduce spending on dual-eligible beneficiaries and improve the quality of their care, federal and state policymakers are focusing on coordinating care for dual-eligible beneficiaries. The ACA established the Medicare-Medicaid Coordination Office within CMS to improve care coordination for dual-eligible beneficiaries. In addition, the ACA provided CMS with the ability to test innovative payment and service delivery models to improve coordination of care and reduce the cost of dual-eligible beneficiaries. With this new authority, CMS is funding demonstration projects to develop approaches to coordinate care for full duals and also to integrate Medicare and Medicaid financing for these individuals. Impact of ACA Health Insurance Annual Fee on Medicaid The ACA imposes an annual fee on certain for-profit health insurers, starting in 2014. The ACA health insurance annual fee applies to Medicaid MCOs with the exception of nonprofit insurers incorporated under state law that receive more than 80% of their gross revenues from government programs that target low-income, elderly, or disabled populations (such as CHIP, Medicare, and Medicaid). According to one estimate, approximately 80% of Medicaid enrollees covered by managed care receive coverage from a plan impacted by the ACA fee. Some insurance plans have informed shareholders and state insurance regulators that they intend to pass on the cost of the fee to businesses and enrollees in the form of higher premiums. Medicaid MCOs do not have the ability to pass on the cost of the fee to enrollees through higher premiums because few Medicaid enrollees pay premiums and when premiums are charged the federal government requires the premiums to be nominal. A number of state governors caution that the ACA health insurance annual fee will result in higher costs to Medicaid. Federal regulations require that the capitated amounts paid to Medicaid MCOs be actuarially sound , which means the state must consider MCOs' costs, including health benefits, marketing and administrative expenses, and taxes. For this reason, some states have indicated they are willing to include the cost of the ACA fee in the capitation rates, which likely will increase Medicaid expenditures. Maintenance of Effort In response to the economic recession (December 2007 through June 2009), Congress enacted the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 , extended in P.L. 111-226 ). ARRA included a temporary increase in FMAP rates. To receive federal Medicaid matching funds under ARRA states were required to maintain the same Medicaid eligibility standards, methodologies, and procedures in effect on July 1, 2008, through June 30, 2011. This provision is referred to as the ARRA MOE requirement. The ARRA MOE provisions were extended and expanded under the ACA. The ACA MOE provisions were designed to ensure that individuals eligible for Medicaid or CHIP did not lose coverage between the date of enactment of the ACA (March 23, 2010) and the implementation of the health insurance exchanges. Under the ACA MOE provisions, states were required to maintain their Medicaid programs with the same eligibility standards, methodologies, and procedures in place on the date of enactment until the health insurance exchanges were operational. Additionally, the ACA MOE continues for Medicaid-eligible children up to the age of 19 until September 30, 2019. Failure to comply with the ACA MOE requirements means a state loses all its federal Medicaid matching funds. The MOE provisions did not prohibit states from cutting Medicaid in other ways, such as by reducing provider rates or eliminating optional benefits. In addition, it did not prohibit states from expanding Medicaid coverage during the MOE period. Under both the ARRA and ACA MOEs, states were not able to restrict income eligibility for their Medicaid programs, generally speaking, from July 1, 2008, through January 1, 2014 (i.e., when health insurance exchanges were operational). States now have the ability to reduce the cost of Medicaid through reductions to Medicaid eligibility standards for adult populations. However, under current law, the ACA MOE for children is to remain in place until September 30, 2019. Medicaid Resources For more information on Medicaid, the following CRS reports may be of interest. CRS Report R42640, Medicaid Financing and Expenditures CRS Report R43656, Traditional Benefits and Alternative Benefit Plans Under Medicaid CRS Report R43328, Medicaid Coverage of Long-Term Services and Supports CRS Report R43778, Medicaid Prescription Drug Pricing and Policy CRS Report R43564, The ACA Medicaid Expansion CRS Report R43850, Out-of-Pocket Costs for Medicaid Beneficiaries: In Brief CRS Report R41210, Medicaid and the State Children's Health Insurance Program (CHIP) Provisions in ACA: Summary and Timeline CRS Report R42865, Medicaid Disproportionate Share Hospital Payments CRS Report R43847, Medicaid's Federal Medical Assistance Percentage (FMAP), FY2016 Appendix A. State Medicaid and CHIP Income Eligibility Standards Table A-1 depicts the modified adjusted gross income (MAGI)-based eligibility levels for Medicaid as of January 1, 2015, based on findings from a 50-state survey. The table expresses these standards as a percentage of the federal poverty level (FPL). Appendix B. State-by-State Medicaid Data Table B-1 provides the most recent available data for state-by-state Medicaid enrollment, expenditures (including both the federal and state shares), and federal medical assistance percentage (FMAP) rates.

Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term services and supports (LTSS) to an estimated 65 million people at a cost to states and the federal government of $498 billion in FY2014. In comparison, the Medicare program provided health care benefits to nearly 54 million seniors and certain individuals with disabilities in that same year at a cost of roughly $606 billion to the federal government. Because Medicaid represents a large component of federal mandatory spending, Congress is likely to continue its oversight of Medicaid's eligibility, benefits, and costs. Participation in Medicaid is voluntary for states, though all states, the District of Columbia, and the territories choose to participate. The federal government requires states to cover certain mandatory populations and benefits, but the federal government also allows states to cover other optional populations and services. Due to this flexibility, there is substantial variation among the states in terms of factors such as Medicaid eligibility, covered benefits, and provider payment rates. In addition, there are several waiver and demonstration authorities that allow states to operate their Medicaid programs outside of federal rules. Historically, Medicaid eligibility generally has been limited to low-income children, pregnant women, parents of dependent children, the elderly, and individuals with disabilities; however, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) included the ACA Medicaid expansion, which expands Medicaid eligibility to individuals under the age of 65 with income up to 133% of the federal poverty level (FPL) (effectively 138% of FPL) at state option. The ACA makes a number of other changes, which together represent the most significant reform to the Medicaid program since its establishment in 1965. In addition to the ACA Medicaid expansion, the ACA expands Medicaid eligibility for children aged 6 to 18 and former foster care children; transitions to the modified adjusted gross income (MAGI) counting methodology to determine eligibility for most non-elderly Medicaid enrollees; requires alternative benefit plan (ABP) coverage for certain Medicaid enrollees; provides enhanced federal matching funds for the ACA Medicaid expansion; increases uniformity among Medicare, Medicaid, and the State Children's Health Insurance Program (CHIP) program integrity activities; and provides the Centers for Medicare & Medicaid Services (CMS) with the ability to test methods to improve coordination of care for dual-eligible beneficiaries, among other changes. This report describes the basic elements of Medicaid, focusing on who is eligible, what services are covered, how enrollees share in the cost of care, how the program is financed, and how providers are paid. The report also explains waivers, program integrity activities, and the dual-eligible population. In addition, it describes the following selected issues: the ACA Medicaid expansion, the impact of the ACA health insurance annual fee on Medicaid, and the ACA maintenance of effort (MOE) requirement with respect to Medicaid eligibility.

Introduction In recent weeks, several media accounts have reported that U.S. intelligence agencies are actively gathering data from a wide range of sources. The records resulting from the alleged surveillance activity reportedly include vast sums of metadata on phone usage, emails, file transfers, and live chats. In response to the media accounts, lawmakers and Administration officials have acknowledged that the government, relying on authority in Section 215 of the USA Patriot Act, has obtained a court order allowing for the acquisition of metadata from service providers, such as the Verizon Business Network Services, Inc. (Verizon). In addition, the Director of National Intelligence has acknowledged the existence of PRISM, "an internal government computer system used to facilitate the government's ... collection of foreign intelligence information from electronic communication service providers." The acknowledgment by the Director of National Intelligence indicated that Section 702 of the Foreign Intelligence Surveillance Act of 1970 (FISA) was the legal basis relied on by the government to gather the data associated with the PRISM system. In describing the government surveillance efforts, the Director of National Intelligence notes that while targeting may "incidentally intercept[]" U.S. persons, targeting procedures "ensure that an acquisition targets non-U.S. persons reasonably believed to be outside the United States for specific purposes" and minimization procedures prohibit the dissemination of information about a U.S. person unless it is "necessary to understand foreign intelligence or assess its importance, is evidence of a crime, or indicates a threat of death or serious bodily harm." The attention surrounding the allegedly massive government data gathering program has sparked outrage in some quarters, with some entities contemplating filing lawsuits to challenge the government practices on constitutional grounds and others going so far as to actually file suit. The new filings only add to the litigation challenging the government's surveillance practices, as lawsuits that pre-date the recent media reports are pending in federal courts, awaiting disposition. The renewed interest in litigation regarding the government surveillance programs comes on the heels of a recent Supreme Court ruling in Clapper v. Amnesty International . In Clapper, the Court held that a group of attorneys and human rights organizations did not have standing to challenge a provision of the 2008 amendments to the FISA, which established new statutory authority for U.S. government surveillance directed at the communications of non-U.S. citizens abroad. The Court reasoned that the Clapper plaintiffs did not have standing because the attorneys and interest groups bringing the lawsuit had not sufficiently shown that they would be injured by the 2008 law because their fears of being subject to government surveillance were dependent on a chain of speculative contingences. This report discusses the doctrine of standing and explores how that doctrine formed the basis of the Clapper decision. After discussing the Clapper decision, the report will conclude with a discussion about how the Supreme Court's most recent discussion of standing may affect litigation over recently revealed government surveillance efforts. Background on the Doctrines of Constitutional and Prudential Standing In every case that is filed in federal court, the party bringing suit must establish standing to prosecute the action. The essential question of standing is whether a litigant is "entitled to have the court decide the merits of the dispute or of particular issues." The doctrine of standing primarily derives from the text of Article III, Section 2 of the Constitution, which extends federal judicial power to certain "cases" and "controversies." In limiting the judicial powers to "cases" and "controversies," the Supreme Court has held that Article III restricts the federal courts to exercising the "traditional role of Anglo-American courts, which is to redress or prevent actual or imminently threatened injury to persons caused by private or official violations of law." In other words, the "cases" or "controversies" language of Article III has been interpreted to be a "fundamental limit[]" on the jurisdiction of federal courts such that a federal court cannot exercise its power unless it is founded upon the facts of a controversy between truly adverse parties. The Supreme Court has called the "Article III doctrine that requires a litigant to have 'standing' to invoke the powers of a federal court to be perhaps the most important of [the case-or-controversy] doctrines." The "irreducible constitutional minimum" of standing contains three elements. First, the plaintiff must have suffered an "injury in fact," which is an "invasion of a legally protected interest" that is both "concrete and particularized" and "actual or imminent, not conjectural or hypothetical." Second, there must be a "causal connection" between the injury and the conduct that is complained of, such that the injury is "fairly traceable" to the challenged action. Finally, it must be likely that the injury will be redressed by a favorable decision. Moreover, if the plaintiff is seeking prospective equitable relief, such as a declaration from the court that certain conduct is illegal (a declaratory judgment) or an order preventing certain conduct from taking place (an injunction), a mere allegation of past harm is insufficient to establish standing. Instead, when declaratory or injunctive relief is sought, a plaintiff "must show that he ... 'is immediately in danger of sustaining some direct injury' as a result of the challenged ... action." Beyond the three requirements of Article III standing, the Court has also endorsed the so-called prudential standing doctrine, which embodies "judicially self-imposed limits on the exercise of federal jurisdiction." Among the principles that encompass the prudential standing doctrine are the prohibition on one litigant raising another person's legal rights, the rule barring adjudication of generalized grievances, and the requirement that a plaintiff's complaint fall within the zone of interests protected by the law invoked. While the doctrine of prudential standing does not derive from the text of Article III—the Court has described the prudential dimensions of standing as non-jurisdictional and a matter of "judicial self-governance" —the two doctrines are "closely related" and overlap. Collectively, by insisting on these requirements for standing, Article III and prudential standing doctrines ensure that legal injuries that are shared in equal measure by all or a large class of citizens are properly a subject for the elected branches and not the judiciary. As a consequence, the standing doctrine is part and parcel of the doctrine of separation of powers, as requiring a litigant to have standing to pursue a federal lawsuit allows the judiciary to avoid unnecessarily intruding on the powers vested in the executive and legislative branch. Moreover, the doctrine of standing, by requiring litigants to have suffered an injury, is intended to allow legal questions to be presented to a federal court only in a concrete factual context by individuals who have a serious stake in the litigation. Clapper v. Amnesty International The Clapper case was a constitutional challenge to Section 702 of the FISA, a 2008 amendment that generally provides the federal government with the authority to engage in eavesdropping to gather foreign intelligence information from foreign nations and non-state actors while they are abroad, so long as there is no intentional targeting of U.S. persons. Specifically, Section 702 provides that the Attorney General and the Director of National Intelligence may authorize jointly, for a period of up to one year, the "targeting of persons reasonably believed to be located outside of the United States to acquire foreign intelligence information." The statute provides, however, that in acquiring such foreign intelligence the government may not intentionally (1) target any person known to be or reasonably believed to be in the United States; (2) target a U.S. person; or (3) acquire any communication where the sender and all recipients are known to be located in the United States. Moreover, the statute requires that the Attorney General and the Director of National Intelligence conduct such acquisitions pursuant to targeting and minimization procedures that have been approved by the Foreign Intelligence Surveillance Court (FISC), a non-adversarial court authorized under FISA. After the 2008 law went into effect, a wide range of litigants challenged Section 702 of FISA on First and Fourth Amendment grounds in federal court, seeking an order enjoining enforcement of the law. The litigants included a group of attorneys with clients with connections to terrorist-related cases, several journalists who have overseas sources in countries where terrorism may be ongoing, and human rights researchers who claimed to be seeking to talk to people subjected to torture in secret prisons overseas. The litigants had two theories for why they had suffered a sufficient injury such that they had standing to raise their claims in federal court. First, the plaintiffs argued that they would be injured in the future because the extensive monitoring authorized by Section 702 would allow interceptions of their conversations and would chill their speech and invade their privacy interests. Second, the plaintiffs also argued that because of their belief that they were being monitored, they had already been injured because they were required to take steps to protect their confidential contacts at allegedly considerable expense. For example, one plaintiff averred in a sworn statement that they had to travel to their contacts in person to avoid having their electronic or wired communications monitored. However, the litigants could not offer any sort of proof that their conversations were actually being targeted through the Section 702 surveillance. In August 2009, a federal judge in New York City ruled that the litigants had not sufficiently alleged that they would be targeted by government surveillance and dismissed the case on standing grounds. Specifically, the court held that the plaintiffs had failed to establish standing because an injury for Article III purposes requires something more than an "abstract fear that [one's] communications will be monitored." On appeal to the Second Circuit Court of Appeals, the circuit court disagreed. The Second Circuit stated that to determine whether a plaintiff who has not yet been injured has standing to challenge a federal law or policy, a court needs to find that the law or policy creates an "objectively reasonable likelihood" of injury. With respect to the plaintiffs challenging Section 702 of FISA, the Second Circuit ruled that the plaintiffs had shown an "objectively reasonable likelihood" of being overheard because, "unlike most Americans," the plaintiffs engage in professional activities that make it reasonably likely that their privacy will be invaded and their conversations overheard. The Supreme Court granted certiorari to hear the case in May of last year and heard argument last October. The Majority Opinion On February 26, 2013, Justice Alito, writing for a five-member majority of the Court, reversed the Second Circuit and rejected the two theories of standing proposed by the plaintiffs. Before discussing the merits of each of the litigants' standing theories, the Court reasoned that, because of the separation of powers concerns that underlie the doctrine of Article III standing, an inquiry into standing must be "especially rigorous" when reaching the merits of a dispute that would require a court to opine on whether an action taken by another branch of the federal government would be unconstitutional. Relatedly, the Court also emphasized that standing will often be lacking in cases in which the judiciary reviews "actions of the political branches in the fields of intelligence gathering and foreign affairs." With those broad principles in mind, the Court turned to the plaintiffs' specific arguments as to why they had standing. With respect to the plaintiff's "future injury" argument, the Court held that a future injury, for constitutional standing purposes, must be "certainly impending" or "imminent," and allegations that an injury is "possible" in the future are insufficient. Applying that test to the Clapper plaintiffs, the Court found that the litigants' claims that they would be targeted by surveillance authorized under Section 702 were too speculative to bestow Article III standing based on a future injury. The Court noted that the litigants' theory for how they would be injured in the future by Section 702 was based on a series of assumptions that all had to occur in order for them to have an injury that could be traced to the federal law and redressed by a favorable court ruling. Amongst the plaintiffs' assumptions, the Court noted that the Clapper litigants were assuming that (1) the government is thinking of imminently targeting the communication of the plaintiffs' foreign contacts; (2) the government would use Section 702, as opposed to other sources of authority, to engage in the surveillance; (3) the FISC would authorize such surveillance; (4) the government would actually succeed in eavesdropping on one of their contacts; and (5) the eavesdropping would actually capture the contents of the conversations of one of the litigants, injuring them. In other words, for the Court, the Clapper litigants' standing theory was based too much on a speculative chain of events that might never occur, and, because an injury for standing purposes must be "certainly impending," the plaintiffs could not satisfy the constitutional requirement for being allowed to sue. In a footnote, the Court opined on the argument that, given that a lack of proof was fatal to the plaintiffs' standing, the government could help "resolve the standing inquiry by disclosing to a court" in private whether it was intercepting particular communications and what minimization procedures it was using. The Court rejected this suggestion because it was not the government's burden to prove standing and such proceedings would provide a means by which a terrorist could determine whether the government was conducting surveillance against a specific target. The Court also rejected the argument that the plaintiffs had already been injured because they had incurred expenses in taking measures to avoid being monitored while talking with their foreign contacts. Specifically, Justice Alito stated that a plaintiff cannot "manufacture standing" by choosing to make expenditures on a hypothetical future harm or else an "enterprising plaintiff would be able to secure ... standing simply by making an expenditure based on a nonparanoid fear." The Court also noted that any expenses that the plaintiffs incurred to avoid government monitoring were not the product of Section 702, but of their own subjective fear of surveillance, and, as a result, failed to meet the second requirement of Article III standing that injury be caused by the challenged conduct. The Dissenting Opinion Justice Breyer filed a dissenting opinion for four members of the Court. The dissenting opinion's central disagreement with the majority opinion was with respect to the "certainly impending" standard for evaluating whether a plaintiff had standing to complain of a future injury. Specifically, the dissenters found that while the Court had used the language of "certainly impending" in the past, it was never meant to be a necessary standard by which to adjudge an injury-in-fact. Instead, akin to the Second Circuit's "objectively reasonable likelihood" of injury test, the dissenters argued that the Court should have used a standard of "reasonable probability" or "high probability" to determine "standing" instead of a standard that the injury must be "certainly impending." If the probabilistic standard were used in this case, the dissenters said, the challengers would have met it because the government had a strong motive and the capacity to engage in the interception of communications of the litigants. Future of Litigation Challenging the Foreign Surveillance Practices Four months after the Supreme Court's ruling in Clapper came the avalanche of news stories alleging that the U.S. intelligence community was engaged in broad intelligence gathering measures, including the capturing of a broad universe of records from particular companies. The question, raised by some, is whether recent media accounts, coupled with the government's acknowledgement of a vast surveillance program, breathe new life into the Clapper -like challenges to government surveillance. On one hand, the ability of a plaintiff to muster enough evidence to establish standing has been arguably boosted by recent revelations about government surveillance efforts. For example, the ACLU's recent lawsuit against the government challenging the use of section 215 of the Patriot Act to cull telephone metadata alleges that the plaintiffs are either former recent or "current customers of Verizon ..." The ACLU Complaint, noting media reports that have published an order from the FISC directing Verizon to produce "all call detail records or 'telephony metadata'" of its customers, including those "wholly within the United States," alleges that as a customer of Verizon, the ACLU and other plaintiffs' records are covered by the court order and given to the government. Likewise, in its petition to the Supreme Court challenging the FISC order requiring Verizon to produce certain metadata, EPIC, a privacy advocacy group, also contends that it is a Verizon customer and subject to the FISC order. A lawsuit brought by former federal prosecutor Larry Klayman, which challenges both the telephony metadata gathering program and the PRISM program, makes a similar allegation. The newly filed legal challenges also note that the surveillance threatens confidential work that the litigants respectively undertake, such as communicating with potential "witnesses, informants, or sources." As such, the arguments of the new litigants on how they have been injured are more specific and theoretically less speculative than the arguments made by the plaintiffs in Clapper . For example, unlike the plaintiffs in Clapper , the ACLU plaintiffs and EPIC can prove that the government has obtained court approval and is using specific authority to acquire data that necessarily includes the data pertaining to the litigants' communications. Moreover, the ACLU's and EPIC's respective lawsuits are arguably distinguishable from the Clapper suit. The new lawsuits challenge a concrete application of a statute premised on past and future injuries. In Clapper , by contrast, the Supreme Court was only addressing litigation where the plaintiffs did not allege any past or ongoing interception of their communications, but only the possibility of future interception, which appears to strengthen the standing arguments for the newly filed lawsuits. Moreover, while the fact is that plaintiffs like the ACLU and EPIC are complaining of an injury that is arguably shared by the millions of other Verizon customers, that fact in and of itself does not make the claim a generalized grievance. Nonetheless, while recent revelations in the press may have helped boost an argument for establishing standing, demonstrating Article III standing remains a difficult task, especially in light of Clapper . While the plaintiffs, such as those in the ACLU, Klayman, and EPIC cases, may be able to demonstrate that they use Verizon in their communications and that Verizon's data is the subject of a FISC order, the litigants are still arguably making a series of the same assumptions that troubled the Clapper court. For example, the plaintiffs in these newly filed cases still have "no actual knowledge of the Government's ... targeting practices," and are assuming not only that the government has been successful in acquiring the data in question but also that the government is actually using or it is "certainly impending" that the government will use targeting techniques that cause the specific injury alleged, an erosion of the confidentiality of certain communications. For example, the ACLU's complaint merely speculates that the information provided to the government " could readily be used to identify those who contact Plaintiffs for legal assistance ..." Similar statements were viewed as insufficient to establish standing in Clapper, as having the capability to injure cannot be equated with the concept that an injury is "certainly impending." An "individual's ... fear that, armed with the fruits of" the surveillance, the government "might in the future take some other and additional action detrimental to that individual" is not a "specific present objective" injury sufficient to demonstrate Article III standing. While the plaintiffs and the petitioner in the newly filed litigation will likely argue that the general existence of a known surveillance program causes a chilling effect, resulting in an injury, it is questionable whether that injury in and of itself is sufficient to establish Article III standing. The Supreme Court in 1972 rejected the argument that standing can be crafted from the "very existence of ... [a] data-gathering system produc[ing] a constitutionally impermissible chilling effect." An "abstract injury" is not enough for standing, but instead a plaintiff must show that the injury is both "real and immediate." It is unclear whether claims that surveillance that is alleged to have the potential to erode the confidentiality of certain conversations is a sufficiently concrete and particularized injury necessary to demonstrate constitutional standing. Relatedly, where the injury alleged is of an "abstract and indefinite nature" and shared by "large numbers of Americans," the Court has found that the "political process, rather than the judicial process, may provide the more appropriate remedy for" such a "widely shared grievance." Finally, as Clapper makes clear, any attempt by a plaintiff to try to obtain evidence to substantiate claims regarding the sufficiency of a particular injury will likely not go very far. The Clapper Court reiterated that it was the plaintiffs' burden to "prove their standing by pointing to specific facts." Attempts to obtain discovery of specific evidence to prove standing may face other obstacles, such as the state secrets doctrine. In addition, the Clapper court called requests for in camera review by a district court of evidence to determine if the state secrets doctrine is even applicable "puzzling" because of its potential to disclose to terrorists details about the actual targets of government surveillance. As a consequence, an affidavit from the government that the state secrets doctrine is applicable to any discoverable material may be sufficient to squash any efforts at jurisdictional discovery aimed at establishing standing. Given this and given the Clapper court's statement that the standing inquiry must be "especially rigorous" in cases seeking a court to "review actions of the political branches in the fields of intelligence gathering and foreign affairs," it appears that standing will remain an obstacle for litigants challenging government surveillance programs. As a consequence, the recent news accounts and disclosures by the government may not be enough to allow a federal court to reach the merits of the legality of certain government surveillance efforts.

Recent news accounts (and government responses to those news accounts) have indicated that the government is reportedly engaged in a surveillance program that gathers vast amounts of data, including records regarding the phone calls, emails, and Internet usage of millions of individuals. The disclosures to the media reportedly suggest that specific telecommunication companies have been required to disclose certain data to the government as part of the intelligence community's surveillance efforts. The recent controversy over the reports of government targeting efforts comes months after the Supreme Court ruled in a case called Clapper v. Amnesty International. In Clapper, the Court dismissed a facial constitutional challenge to Section 702 of the Foreign Intelligence Surveillance Act on constitutional standing grounds. Specifically, the Clapper court found that the litigants, a group of attorneys and human rights activists who argued that their communications with clients could be the target of foreign intelligence surveillance, could not demonstrate they would suffer a future injury that was "certainly impending," the requirement the majority of the Court found to be necessary to establish constitutional standing when asking a court to prevent a future injury. Notwithstanding the Clapper decision, in light of the recent revelations about the government's intelligence gathering methods, several lawsuits have been filed by individuals who are customers of the companies allegedly subject to court orders requiring the disclosure of data to the government. The litigants in these newly filed lawsuits would appear to have a stronger argument for how they have been injured than the plaintiffs in Clapper did. Notably, unlike the Clapper plaintiffs, the litigants in these new lawsuits have evidence that the government is actually using its authority to gather data that is pertinent to the plaintiffs. However, the plaintiffs in these lawsuits may still have significant difficulties in establishing standing, as they have arguably not alleged that they have been specifically targeted by the government or injured in any concrete and particularized way by the government's conduct. Moreover, gathering evidence to prove an injury will be difficult because of evidentiary privileges protecting the government information. As a consequence, litigation challenging the government surveillance programs that are the topic of recent media accounts may have the same difficulties found in the Clapper litigation.

Introduction Energy tax policy involves the use of one of the government's main fiscal instruments, taxes (both as an incentive and as a disincentive) to alter the allocation or configuration of energy resources and their use. In theory, energy taxes and subsidies, like tax policy instruments in general, are intended either to correct a problem or distortion in the energy markets or to achieve some economic (efficiency, equity, or macroeconomic) objective. In practice, however, energy tax policy in the United States is made in a political setting, determined by fiscal dictates and the views and interests of the key players in this setting, including policymakers, special interest groups, and academic scholars. As a result, enacted tax policy embodies compromises between economic and political goals, which could either mitigate or compound existing distortions. U.S energy tax policy as it presently stands aims to address concerns regarding the environment as well as those surrounding energy security. Incentives promoting renewable energy production, energy efficiency and conservation, and alternative technology vehicles address both environmental and energy security concerns. Tax incentives for the domestic production of fossil fuels also promote energy security by attempting to reduce the nation's reliance on imported energy sources. The idea of applying tax policy instruments to energy markets is not new. Until the 1970s, however, energy tax policy had been little used, except to promote domestic fossil fuel production. Recurrent energy-related problems since the 1970s—oil embargoes, oil price and supply shocks, wide petroleum price variations and price spikes, large geographical price disparities, tight energy supplies, and rising oil import dependence, as well as increased concern for the environment—have caused policymakers to look toward energy taxes and subsidies with greater frequency. The direction of U.S. energy tax policy has changed several times since the 1970s. During the 114 th Congress, energy tax policy appears to be designed to encourage energy efficiency and renewable energy production while continuing to promote U.S. energy security. Several expired energy tax incentives were extended through 2016 as part of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). Tax incentives for wind and solar were given longer-term extensions coupled with phaseouts. Absent further legislative action in the 114 th Congress, several energy-related tax provisions will expire at the end of 2016. The President's FY2017 budget proposed a number of changes to energy tax policy. Specifically, the Obama Administration has proposed repealing a number of existing tax incentives for fossil fuels, while providing new or expanded incentives for carbon sequestration, alternative and advanced technology vehicles, renewable electricity, energy efficiency, and advanced energy manufacturing. Similar proposals appeared in past Obama Administration budgets. The FY2017 budget also proposes imposing a per-barrel fee on oil. The economic rationale for interventions in energy markets helps inform the debate surrounding energy tax policy. This report begins by providing background on the economic rationale for energy market interventions, highlighting various market failures. After identifying possible market failures in the production and consumption of energy, possible interventions are discussed. The report concludes with an analysis of the current status of energy tax policy. The Appendix of this report provides a brief summary of energy tax legislation from the 108 th through 113 th Congresses that has shaped current energy tax policy. Policy Intervention in Energy Markets The primary goal of taxes in the U.S. economy is to raise revenues. There are times, however, when tax policy can be used to achieve other goals. These include the use of tax policy as an economic stimulus or to achieve social objectives. Tax policy can also be used to correct for market failures (for example, the under- or over-supply of a good), which without intervention result in market inefficiencies. There are a number of market failures surrounding the production and consumption of energy. Tax policy, as it relates to energy, can be used to address these market failures. Rationale for Intervention in Energy Markets3 There are a variety of circumstances in which government intervention in energy markets may improve market outcomes. Generally, government intervention has the potential to improve market outcomes when there are likely to be market failures. Externalities represent one of the most important market failures in energy's production and consumption. Market failures in energy markets also arise from principal-agent problems and information failures. Concerns regarding national security are used as a rationale for intervention in energy markets as well. Externalities An externality is a spillover from an economic transaction to a third party, one not directly involved in the transaction itself. Externalities are often present in energy markets as both the production and consumption of energy often involve external costs (or benefits) not taken into account by those involved in the energy-related transaction. Instead, these externalities are imposed on an unaffiliated third party. The market mechanism will likely lead to an economically inefficient level of production or consumption when externalities are present. When externalities are present, markets fail to establish energy prices equal to the full cost to society of supplying the good. The result is a system where price signals are inaccurate, such that the socially optimal level of output, or allocative efficiency, is not achieved. Economic theory suggests that a tax be imposed on activities associated with external costs, while activities associated with external benefits be subsidized—in order to equate the social and private marginal costs. These taxes or subsidies are intended to provide a more efficient allocation of resources. Many energy production and consumption activities result in negative externalities, perhaps the most recognized being environmental damage. Air pollution results from mining activities as well as from the transportation, refining, and industrial and consumer use of oil, gas, and coal. Industrial activity can also produce effluents that contaminate water supplies and lead to other damages to the land. These environmental damages can lead to lung damage and a variety of other health problems. The use of fossil fuels, both in the production of energy (e.g., coal-fired power plants) and at the consumer level (e.g., using gasoline to power automobiles), and the associated greenhouse gas emissions are widely claimed to have contributed to global climate change. There may also be market failures associated with external benefits stemming from the process of learning-by-doing. Learning-by-doing refers to the tendency for production costs to decline with experience. As firms become more experienced in the manufacturing and use of energy-efficient technologies their knowledge may spill over to other firms without compensation. In energy markets, early adopters of energy-efficient technologies and practices may not be fully compensated for the value of the knowledge they generate. Principal-Agent and Informational Inefficiencies Market failures in energy use may also arise due to the principal-agent problem. Generally, the principal-agent problem exists when one party, the agent, undertakes activities on the behalf of another party, the principal. When the incentives of the agent differ from those of the principal, the agent's activities are not undertaken in a way that is consistent with the principal's best interest. The result is an inefficient outcome. In energy markets, the principal-agent problem commonly arises when one party is responsible for making equipment purchasing choices while another party is responsible for paying the energy costs, which are related to the efficiency level of the purchased equipment. For residential rental properties, the incentives for the landlords and tenants surrounding the adoption of energy-savings practices are often not aligned, demonstrating the principal-agent problem. Landlords will tend to under-invest in energy-saving technologies for rental housing when the benefits from such investments accrue to tenants (i.e., tenants are responsible for paying their own utilities) and the landlord does not believe the costs of installing energy-saving devices can be recouped via higher rents. Tenants do not have an incentive to invest in energy-savings technologies in rental units when their expected tenure in a specific property is relatively short, and they will not have enough time to reap the full benefits of the energy-conserving investments. There is also evidence that when utilities are included in the rent, tenants do not engage in energy-conserving behaviors. On the other hand, when tenants pay utilities on their own, energy-saving practices are more frequently adopted. The implication is that inefficient energy use by tenants in apartments where utilities are included as part of the rent would offset energy-saving investments made by landlords; consequently, landlords under-invest in energy efficiency. In general, the under-investment in energy conservation measures in rental housing provides economic rationale for intervention. In another example, the incentives of homebuilders and homebuyers may not be aligned. Consequently, the principal-agent problem may result in an inefficient utilization of energy-efficient products in newly constructed homes. Homebuilders may have an incentive to install relatively low-efficiency products to keep the cost of construction down, if they do not believe that the cost of installing energy-efficient products will be recovered upon sale of the property. The value of installing energy-efficient devices may not be recoverable, if builders are not able to effectively communicate the value of energy-efficient devices once installed. Further, since homebuilders are not able to observe the energy use level of prospective buyers they may not be able to choose the products that best match the use patterns of the ultimate energy consumer. The result may be less energy efficiency in new homes. There are also informational problems that may lead to underinvestment in energy-efficient technologies. For example, homeowners may not know the precise payback or rate of return of a specific energy-efficient device. This may explain the so-called "energy paradox"—the empirical observation that consumers require an abnormally high rate of return to undertake energy-efficiency investments. National Security Preserving national security is another often-cited rationale for intervention in energy markets. However, in recent years, the proportion of petroleum consumed in the United States imported from foreign countries has declined. In 2015, about 24% of petroleum consumed in the United States was imported, the lowest level since 1970. There are potentially a number of external costs associated with petroleum importation, especially when imported from unstable countries and regions. First, a high level of reliance on imported oil may contribute to a weakened system of national defense or contribute to military vulnerability in the event of an oil embargo or other supply disruption. Second, there are costs to allocating more resources to national defense than necessary when relying on high levels of imported oil. Specifically, there is an opportunity cost associated with resources allocated to national defense, as such resources are not available for other domestic policy initiatives and programs. To the extent that petroleum importers fail to take these external costs into account, there is market failure. In addition, the economic well-being and economic security of the nation depends on having stable energy sources. There are economic costs associated with unstable energy supplies. Specifically, increasing unemployment and inflation may follow oil price spikes. Potential Interventions in Energy Markets When there are negative externalities associated with an activity, correcting the economic distortion with a tax, if done correctly, can improve economic efficiency. While such taxes are theoretically desirable, historically, such taxes have been politically unpopular. Conversely, when there are positive externalities associated with an activity, a subsidy can improve economic efficiency. The tax (subsidy) should be set equal to the monetary value of the damages (benefits) to third parties imposed by the activity. The tax serves to increase the price of the activity, and reduce the equilibrium quantity of the activity, while a subsidy reduces the price, increasing the equilibrium quantity of the activity. The production and consumption of fossil fuel energy can have negative externalities via detrimental environmental impacts. While multiple policy options to address this externality exist, economists tend to favor an emissions tax to address this externality because of such a tax's efficiency advantage. In the late 2000s, proponents of greenhouse gas controls favored a cap and trade policy, as proposed in House-passed American Clean Energy and Security Act of 2009 ( H.R. 2454 ). The policy discussion, however, has shifted to focus on a carbon tax or emissions fee approach. An alternative approach to reducing the use of fossil fuels has been to subsidize energy production from alternative energy sources. There are concerns, however, that using subsidies to stimulate demand for alternative fuels, as an alternative to fossil fuels, may not be economically efficient. First, subsidies reduce the average cost of energy, and as the average cost of energy falls, the quantity of energy demanded increases, countering energy conservation initiatives. Second, while the subsidy is intended to enhance economic efficiency, subsidies may be inefficient to the extent they are funded with distortionary taxes. Hence, the more economically efficient alternative may be to place a tax on the undesirable activity. Other energy-related activities may have positive externalities. There is the potential for learning-by-doing from early adopters of energy-efficient technologies, indicating that there may be positive external effects associated with these activities. For this reason, subsidies given to early adopters may enhance economic efficiency. Further, positive externalities are associated with R&D activities that lead directly to technological innovations. In addition to budgeted spending on R&D, the tax code provides incentives for firms to engage in energy R&D (for example, the energy research credit [Internal Revenue Code (IRC) §41]). When principal-agent problems lead to a market failure, economically efficient corrective measures would be those that increase the equilibrium quantity of the underprovided good. The market for energy efficient technologies is one example of this type of market failure. Currently, a taxpayer's gross income excludes any subsidy provided by a public utility to a consumer for the purchase or installation of energy-saving devices (see IRC §136). This exclusion subsidizes energy-efficient devices. This exclusion does not specifically target the inefficiency in rental housing created by the principal-agent problem, since the exclusion applies to both owner- and non-owner-occupied property. Nonetheless, the exclusion may serve to ameliorate some of the market failure in the provision of energy-efficiency for rental property. There are also various options for market intervention to address the informational problem associated with energy consumption and energy-efficient technologies. One option would be an information-based solution, such as energy-efficiency labeling and education and awareness campaigns. Alternatively, a tax-incentive-based approach—such as a credit or deduction for the purchase of energy-efficient devices—could be used to address the market inefficiency. Given that this market failure is an informational problem, it might be more efficient to pursue information-based solutions (such as energy-efficiency labeling like the U.S. Environmental Protection Agency and Department of Energy's Energy Star program). Finally, there are questions regarding the most efficient and effective mode of intervention to address the negative external costs, specifically national and economic security concerns, associated with the consumption of imported oil. One option would be to impose a tax to correct the distortion. There are two problems with imposing such a tax. First, a tax on imported oil is likely to violate trade agreements. This has led policymakers to pursue policies that subsidize domestic petroleum production. The second problem is that oil is a commodity priced on world markets. The United States producing oil for its own use does not necessarily insulate consumers from global fluctuations in oil prices. Additionally, to the extent that oil price fluctuations impact export prices in other parts of the world, such as Europe and China, the United States is still likely to experience economic impacts from oil price fluctuations. Taxes as a User Charge Energy taxes may be employed as user charges for a public good or a quasi-public good. In the United States, non-toll highways and highway infrastructure have the public good property of non-excludability. Highways are not likely to be provided by the market because public goods and quasi-public goods are susceptible to the free-rider problem. If the private market fails to provide a public good, like highways, then government intervention via provision of highways can enhance economic efficiency. The federal excise tax on gasoline is often viewed as a user fee for the federal highway system. For the tax to be efficient and equitable, it would charge individuals in proportion to their benefit from the public good (the highway system). In practice, gas taxes do not reflect the cost to the user but instead depend on the fuel efficiency of a specific vehicle. Furthermore, some of the revenues collected from the federal gas tax serve to subsidize public transportation, undermining the view of the federal gas tax as a highway user fee. Current Status of U.S. Energy Tax Policy26 Current U.S. energy tax policy is a combination of long-standing provisions and relatively new incentives. Energy-related tax incentives also support both energy production and consumption. Provisions supporting the oil and gas sector reflect desires for domestic energy production and energy security, long-standing cornerstones of U.S. energy policy. Incentives for renewable energy reflect the desire to have a diverse energy supply, also consistent with a desire for domestic energy security. Incentives for energy efficiency are designed to reduce consumption of energy from all energy sources. Incentives for renewable energy, energy efficiency, and alternative technology vehicles reflect environmental concerns related to the production and consumption of energy using fossil-based resources. Table 1 contains a current list of energy-related tax expenditures and other energy tax provisions. Fossil Fuels There are a number of tax incentives currently available for energy production using fossil fuels. They can be broadly categorized as (1) enhancing capital cost recovery; (2) subsidizing extraction of high-cost fossil fuels; or (3) encouraging investment in non-petroleum or cleaner fossil fuel energy options. Certain incentives are designed to support coal, while others tend to support the oil and gas sector. The fossil fuels related incentives listed in Table 1 are estimated to reduce federal tax revenues by $21.5 billion between 2015 and 2019. Among the capital cost subsidies, the allowance of the percentage depletion method is estimated to cost $8.8 billion between 2015 and 2019. Under percentage depletion, a deduction equal to a fixed percentage of the revenue from the sale of a mineral is allowed. Total lifetime deductions, using this method, typically exceed the capital invested in the project. To the extent that percentage depletion deductions exceed project investment, percentage depletion becomes a production subsidy, instead of an investment subsidy. In other words, taxpayers may be able to claim allowances that reduce tax liability even after the cost of investment is fully recovered. Other capital cost recovery provisions include expensing of intangible drilling costs related to exploration and development and a decrease in the amortization period for certain geological and geophysical (G&G) expenditures. The expensing of exploration and development costs is estimated to cost the federal government $7.5 billion in revenue losses over the 2015 through 2019 budget window, while the reduced amortization period for G&G expenditures is estimated to cost $0.7 billion over the same time period. Compared to capital cost recovery provisions, tax expenditures intended to offset high extraction costs are small. These provisions do not appear in Table 1 as they fall below the de minimis threshold. In recent years, credits for enhanced oil recovery and oil and gas production from marginal wells were phased out due to high oil prices. In 2015, the enhanced oil recovery credit was fully phased out, as the reference price for oil ($87.39, based on 2014 prices) exceeded the phaseout threshold amount ($28, adjusted for inflation, or $45.49) by $41.90. The phaseout for the marginal wells credit begins once the price of oil exceeds $18 (the $18 amount is adjusted for inflation after 2005). It is possible, however, if oil prices remain low, that these incentives could become available. The expensing allowance for tertiary injectants is also estimated to cost less than $50 million over the 2015 through 2019 budget window. There are also coal-specific energy tax provisions. These include certain coal production credits, as well as tax credits to support the development of clean coal facilities. The tax credits for investing in clean coal facilities are estimated to cost $1.0 billion over the 2015 through 2019 budget window. There are also provisions that provide for 5-year amortization for investments in pollution control facilities associated with certain coal-fired power plans. This provision has an estimated revenue cost of $1.7 billion between 2015 and 2019. The credit for alternative fuels and alternative fuels mixtures is a 50-cent per gallon tax credit available to several fossil-based non-petroleum fuels. The credit is anticipated to have a revenue cost of $1.5 billion between 2015 and 2019, although that cost could increase if the credit is extended beyond its current 2016 expiration date. Renewables Several tax incentives subsidize the production of energy from renewable sources. While the specific incentives differ in design, they generally work to increase the after-tax return on an investment in renewable energy production by providing tax incentives on the condition of eligible investment or production. Between 2015 and 2019, the total cost of tax-related provisions supporting the production of renewable energy (tax expenditures and grants designed to replace tax expenditures) is estimated to be $50.7 billion. Of this total, $4.2 billion is for outlays under the Section 1603 grants in lieu of tax credits program. Thus, the cost of tax expenditure and excise tax incentives for renewables is estimated to be $46.5 billion between 2015 and 2019. Historically, the primary tax incentive for renewable electricity has been the production tax credit (PTC). For wind, the PTC is available for projects that begin construction before the end of 2019, although the credit begins to phase out (the credit amount is reduced) after 2016. For other eligible technologies (e.g., biomass, geothermal, etc.) construction must begin by December 31, 2016, to qualify for the credit. The PTC is expected to reduce federal revenues by $19.9 billion between 2015 and 2019. The energy credit, commonly referred to as the renewable energy investment tax credit (ITC), also supports investment in certain renewable energy technologies. The tax credit is 10% or 30%, depending on the technology. For most technologies, the credit is set to expire at the end of 2016, meaning to qualify property must be placed in service by December 31, 2016. There is a permanent 10% ITC for solar and geothermal. Additionally, the 30% tax credit for solar is available through 2019, with the credit rate phasing down between 2019 and 2021. The ITC is expected to reduce federal revenues by $10.0 billion between 2015 and 2019. The American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) substantially modified renewable energy incentives, allowing projects eligible for the renewable PTC or ITC to, temporarily, claim a one-time grant in lieu of the tax credits. This grant was available for projects that were under construction before the end of 2011. Since grants will be paid out when facilities are placed in service, outlays will continue through 2017. Since the grant is paid once a project is completed, the cost of the grant program will be partially offset by reduced PTC claims over time (since the PTC is awarded during the first 10 years of production). Allowing investors to take a one-time grant instead of future tax credits was intended to address uncertainty renewable energy investors may have regarding their future tax positions. Several other tax expenditures related to renewable energy have budgetary effects. The residential energy-efficient property credit provides a tax credit for the installation of renewable electricity generating property for a residential dwelling. For non-solar technologies, the credit is scheduled to expire at the end of 2016. For solar property, the credit is available through 2021, although the credit begins to phase out after the end of 2019. The residential energy-efficient property credit is expected to reduce federal revenues by $4.9 billion between 2015 and 2019. Certain renewable energy property also benefits from accelerated depreciation. The five-year cost recovery for renewable energy property is a permanent part of the tax code, and is estimated to reduce federal revenues by $1.3 billion between 2015 and 2019. Several income and excise tax credits are designed to support renewable fuels. Like other incentives for renewable energy, renewable fuels incentives are temporary. They are currently set to expire at the end of 2016. In recent years, biodiesel and renewable diesel and second generation biofuels, including cellulosic and algae-based biofuels, have qualified for tax credits. These credits are projected to cost $4.5 billion over the 2015 through 2019 budget window. Extending these incentives beyond 2016 will increase their cost. ARRA also provided $2.3 billion in tax credits for advanced energy manufacturing. Most of these tax credits were allocated to projects in 2009, although $150 million was available for a second allocation round in 2013. The federal government is expected to realize revenue losses as investors that were awarded these tax credits make qualifying investments over time. Between 2015 through 2019, revenue losses associated with this provision are estimated to be $1.2 billion. Energy Efficiency Incentives for energy efficiency are designed to encourage owners of residential and commercial property to make energy-efficient upgrades. Between 2015 and 2019, the total cost of tax expenditures related to energy efficiency is estimated to be $3.1 billion. The majority of revenue loss from tax expenditures related to energy conservation is attributable to three incentives for property owners to undertake energy-efficiency improvements on existing buildings. Certain residential energy-efficiency improvements made before the end of 2016 may qualify for a 10% tax credit of up to $500. Energy-efficient improvements for commercial property, including upgrades to a building's envelope, heating and cooling, or lighting system, are eligible for a tax deduction, limited to $1.80 per square foot. Incentives for both residential and commercial energy efficiency expired at the end of 2016. The exclusion from income of subsidies provided by utility companies to energy consumers undertaking energy-efficiency upgrades increases the value of such subsidies, encouraging individuals to undertake such improvements. Taken together, these three incentives for building energy efficiency are projected to cost $2.2 billion between 2015 and 2019. Extending these tax incentives for residential and commercial energy efficiency will increase their projected revenue costs. Manufacturers of energy-efficient new homes may also be eligible for a tax incentive. The incentive is also scheduled to expire at the end of 2016. The cost of this incentive between 2015 and 2019 is estimated to be $0.6 billion, but would increase should the provision be extended. Qualified Energy Conservation Bonds (QECBs) also encourage energy conservation, by providing subsidized financing to energy conservation projects and other renewable energy projects. All available QECB funds have been allocated to the states, with states responsible for making sub-allocations and selecting qualifying projects. Alternative Technology Vehicles Currently, the primary tax incentive for alternative technology vehicles is the up to $7,500 tax credit for plug-in electric vehicles. The credit will begin to phase out for each manufacturer once 200,000 qualifying vehicles have been sold. In addition, since 2006, the tax code has at times provided incentives for other alternative technology vehicles. Vehicles eligible for tax incentives have included qualified fuel cell vehicles, hybrid vehicles, advanced lean burn technology vehicles, and alternative fuel vehicles, with credit amounts varying by the specific technology and vehicle type. The tax credit for hybrid vehicles, advanced lean burn technology vehicles, and other alternative fuel vehicles expired at the end of 2010. The tax credits for qualified fuel cell vehicles and two-wheeled electric drive vehicles are scheduled to expire at the end of 2016. Through the end of 2016, taxpayers installing alternative fuel refueling property may also qualify for a tax credit. Other Provisions There are a number of other energy tax provisions that arguably do not fall under the fossil fuels, renewable energy, energy efficiency, or alternative technology vehicles categories. The largest of these incentives, in terms of revenue cost, is the special tax treatment for energy-related publicly traded partnerships, costing an estimated $5.9 billion between 2015 and 2019. Special depreciation periods for certain energy property, other than renewable energy property, are estimated to cost $2.8 billion between 2015 and 2019. Excluding interest from private activity bonds related to energy production is estimated to cost $0.1 billion between 2015 and 2019. The deferral of gains from the sale of electric transmission property associated with a Federal Energy Regulatory Commission (FERC) restructuring policy is estimated to cost $0.2 billion between 2015 and 2019. Energy Tax Issues in the 114th Congress Several expired energy tax incentives were extended as part of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). Most energy-related provisions were extended for two years, through the end of 2016. Incentives for wind and solar were given longer-term extensions, with credits scheduled to phase out over a multi-year period in the future. One issue is whether energy-related tax incentives currently scheduled to expire at the end of 2016 will be further extended. This question has been of particular interest with respect to the PTC and ITC, where wind and solar were awarded longer-term extensions, while other technologies face a 2016 expiration. Recent Obama Administration budget proposals have included a number of energy tax policy changes, which may or may not be considered by Congress. The President's FY2017 budget's energy-tax proposals are summarized below. Expiring Energy Tax Provisions Several energy-related tax provisions are scheduled to expire at the end of 2016. Many of the provisions scheduled to expire at the end of 2016 had expired at the end of 2014, before being retroactively extended for two years, through 2016, by the Protecting Americans from Tax Hikes (PATH) Act of 2015. The PATH Act was enacted as Division Q of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). Table 2 lists the energy-related tax provisions scheduled to expire at the end of 2016, notes whether the provision was extended in the PATH Act, and the cost of that extension. Note that the PATH Act extended all expired energy tax provisions. Thus, certain energy-related tax provisions scheduled to expire in 2016 had not expired in 2014. These provisions are noted in Table 2 as provisions that were not extended by the PATH Act. There were a number of other energy tax policy changes in P.L. 114-113 . Specifically, Division P of the law provided longer-term extensions with scheduled phaseouts of tax credits for wind and solar. Specifically, the renewable electricity PTC was extended through 2019, with the phaseout starting for facilities beginning construction in 2017. The 30% ITC for business solar was extended through 2019 and the deadline changed from a placed-in-service deadline to a construction start date. The business solar ITC was set to be 26% for facilities beginning construction in 2020, and 22% for facilities beginning construction in 2021, so long as these facilities are placed in service before the end of 2023. The business solar ITC is scheduled to return to 10% in 2022. The tax credit for residential solar was extended through 2021, with a phaseout starting in 2020. The President's FY2017 Budget Proposal The President's FY2017 budget contained a number of energy-tax related proposals (see Table 3 ). Specifically, the budget proposed to provide $41.5 billion in new or extended energy tax incentives between 2016 and 2026. Nearly half of this cost is attributable to a permanent extension of the renewable PTC and ITC, at a cost of $19.8 billion. Additionally, the President's budget proposed new tax credits for carbon sequestration, advanced technology and alternative fuel vehicles, and advanced energy manufacturing, and incentives for biofuels and energy-efficient buildings. Similar to previous years, the President's FY2017 budget proposed eliminating certain tax incentives that support fossil fuels, while also raising and adding new taxes on fossil fuels (see Table 3 ). Eliminating certain provisions for oil, natural gas, and coal would raise an estimated $41.2 billion between 2016 and 2026. The President's FY2017 budget proposed to raise revenues to "support critical infrastructure and climate resiliency needs" through a new per-barrel fee on crude oil. This fee would equal $10.25 per barrel, adjusted for inflation from 2016, and be phased in over a five-year period beginning October 1, 2016. The fee would apply to domestically produced and imported petroleum products, but not to exported petroleum products. Home heating oil would also be temporarily exempt. The fee would raise an estimated $273.4 billion between 2016 and 2026. Under the proposal, revenue from the fee would be used to fund infrastructure and transportation system upgrades, invest in cleaner transportation technologies, and to provide relief for households with "particularly heavy energy costs." The President's FY2017 budget also proposed to modify several other environmental taxes. Specifically, the budget proposed to (1) increase the Oil Spill Liability Trust Fund (OSLTF) excise tax by one cent and expand the scope of the tax to include crudes produced from bituminous deposits and kerogen-rich rock; (2) reinstate and extend the Superfund excise taxes, including a 9.7-cents-per-barrel excise tax on domestic crude oil and imported petroleum products and a tax on hazardous chemicals and imported materials used in the manufacture of hazardous chemicals, at a rate ranging from 22 cents to $4.87 per ton; and (3) reinstate the corporate environmental income tax, which would levy a 0.12% income tax on the amount by which corporate modified alternative minimum taxable income exceeds $2 million. JCT estimates that the proposed modifications to the OSLTF excise tax would raise $1.2 billion between 2016 and 2026, with the Superfund excise tax proposals raising $6.2 billion and the Superfund environmental income tax raising $14.8 billion over the same budget window. Also included in the President's FY2017 budget proposal were several provisions that would affect the energy sector, but are not targeted specifically to energy. For example, the President's FY2017 budget proposed to repeal last-in, first-out (LIFO) inventory accounting methods. Repealing LIFO would increase tax liability for firms holding inventories that are expected to increase in value over time (e.g., oil). The President's FY2017 budget would also have modified the tax treatment of dual-capacity taxpayers, a proposal that would affect oil and gas companies operating abroad. These provisions are not listed in Table 3 . Selected Energy Tax Legislation and Proposals50 Enacted Legislation in the 114th Congress As discussed above, the Protecting Americans from Tax Hikes (PATH) Act of 2015, enacted as Division Q of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), extended energy tax provisions that had expired at the end of 2014, for two years, through 2016. Separately, Division P of P.L. 114-113 provided a longer-term extension for wind and solar tax credits, with those tax credits scheduled to phase out (the credit amounts gradually reduced) over time. Division P of P.L. 114-113 also temporarily modified the Section 199 deduction for independent refiners. These tax policy changes were enacted alongside provisions that removed crude oil export restrictions. The 114 th Congress also passed legislation reauthorizing current law tax rates on motor fuels, which fund the Highway Trust Fund (HTF) and Leaking Underground Storage Tank (LUST) trust fund (the Fixing America's Surface Transportation [FAST] Act [ P.L. 114-94 ]). In addition to extending current law, the FAST Act changed the way excise taxes are levied on liquefied natural gas (LNG), liquefied petroleum gas (propane), and compressed natural gas (CNG). Specifically, the legislation specifi ed that excise taxes on these fuels be levied on an "energy equivalent" as opposed to per gallon basis. Energy Tax Proposals in the 114th Congress Members of the 114 th Congress have introduced various pieces of energy-tax-related legislation. This section briefly reviews selected legislation and proposals. Taxes or Fees on Carbon Emissions53 On June 10, 2016, the House passed H.Con.Res. 89 , expressing the sense of Congress that a carbon tax would be detrimental to the United States economy. Earlier in the 114 th Congress, S.Con.Res. 1 was introduced to express the sense of Congress that a carbon tax is not in the economic interest of the United States. S.Amdt. 350 to S.Con.Res. 11 , proposed and withdrawn on March 25, 2015, would have created a point of order against carbon tax or carbon fee legislation. Similar resolutions were introduced in the 113 th Congress, as was legislation that sought to prohibit the Secretary of the Treasury or the Environmental Protection Agency from implementing a carbon tax (see H.R. 1486 in the 113 th Congress). Legislation has been introduced in both the House and Senate that would impose a tax or fee on carbon or greenhouse gas emissions. In the House, H.R. 309 would impose a tax on CO 2 emissions from highway fuels, with the idea that the tax on emissions would replace the current federal excise tax on fuels. Other legislation ( H.R. 972 ) would require emissions permits be purchased from the Treasury, and impose a tax on persons failing to obtain such permits. H.R. 1027 would take a "cap and dividend" approach to requiring emissions permits. H.R. 2202 proposes an excise tax on greenhouse gas emissions, while H.R. 3104 proposes an excise tax on any taxable carbon substance. The American Opportunity Carbon Fee Act of 2015 ( S. 1548 ) would assess fees on major sources of greenhouse gas emissions. Other Legislation in the 114 th Congress proposes repealing various energy tax incentives, using revenues to reduce the corporate tax rate (see the Energy Freedom and Economic Prosperity Act [ H.R. 1001 ]). Legislation has also been proposed that would repeal a subset of energy tax expenditures, specifically those available to certain oil and gas companies (e.g., the Close Big Oil Tax Loopholes Act, S. 1907 ). In the House, similar provisions have also been included in legislation that would repeal the excise tax on medical devices ( H.R. 1533 ). Other legislation has proposed repealing certain tax incentives for oil and gas while either temporarily extending ( H.R. 4040 ) or making permanent incentives for renewables ( H.R. 3733 ). There has also been congressional interest in ensuring that tar sands oil is subject to the Oil Spill Liability Trust Fund (OSLTF) excise tax. S.Amdt. 123 to S. 1 (the Keystone XL Pipeline Act) expressed the sense of the Senate that all forms of unrefined and unprocessed petroleum should be subject to the OSLTF excise tax. Similar provisions were proposed as a revenue offset in the Student Loan Affordability Act ( S. 953 ) in the 113 th Congress. Appendix. Energy Tax Legislation in Past Congresses This appendix describes legislation during the 108 th through 113 th Congresses that shaped current energy tax policy. Enacted Legislation in the 108 th and 109 th Congresses The Working Families Tax Relief Act of 2004 ( P.L. 108-311 ) Several energy tax incentives were extended as part of the Working Families Tax Relief Act of 2004, a $146 billion package of middle class and business tax breaks. This legislation, which was signed into law on October 4, 2004, retroactively extended four energy tax subsidies: the Section 45 renewable energy production tax credit, suspension of the 100% net income limitation for the oil and gas percentage depletion allowance, the $4,000 tax credit for electric vehicles, and the deduction for clean fuel vehicles (which ranges from $2,000 to $50,000). The Section 45 tax credit and the suspension of the 100% net income limitation had each expired on January 1, 2004, but were retroactively extended through December 31, 2005. The electric vehicle credit and the clean-vehicle income tax deduction were in the process of being phased out (phaseout had begun on January 1, 2004). The Working Families Tax Relief Act of 2004 suspended the phaseout—providing 100% of the tax breaks—through 2005. The tax breaks were resumed beginning on January 1, 2006, when only 25% of the tax break was available. The American Jobs Creation Act of 2004 ( P.L. 108-357 ) The American Jobs Creation Act of 2004 was enacted on October 22, 2004. It included about $5 billion in energy tax incentives primarily targeted at renewable energy as well as alcohol and biofuels. In particular, the act created the production tax credit, eliminated reduced tax rates for most blended alcohol fuels, established the biodiesel fuel and small refiner tax credits, and allowed a credit for oil and gas produced from marginal wells. The Energy Policy Act of 2005 ( P.L. 109-58 ) The Energy Policy Act of 2005 was enacted on August 8, 2005. It included an estimated $9 billion, over five years, in tax incentives distributed among renewable energy, conservation, and traditional energy sources. Among the larger provisions of the act, in revenue cost terms, were the enactment of several alternative technology vehicle credits, enactment of three investment credits for clean coal, and the extension of the production tax credit. The Tax Increase Prevention and Reconciliation Act ( P.L. 109-222 ) The Tax Increase Prevention and Reconciliation Act ( P.L. 109-222 ) was enacted May 17, 2006. It reduced the value of the subsidy by raising the amortization period from two years to five years, still faster than the capitalization treatment before the 2005 act, but slower than the treatment under that act. The higher amortization period applies only to the major integrated oil companies—independent (unintegrated) oil companies may continue to amortize all geological and geophysical (G&G) costs over two years—and it applies to abandoned as well as successful properties. This change increased taxes on major integrated oil companies by an estimated $189 million over 10 years, effectively rescinding about 20% of the nearly $1.1 billion 11-year tax for oil and gas production under the Energy Policy Act of 2005. The Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ) At the end of 2006, the 109 th Congress enacted a tax extenders package that included extension of numerous renewable energy and excise tax provisions. Many of the renewable energy provisions in this bill had already been extended under the Energy Policy Act of 2005 and were not set to expire until the end of 2007 or later. The Tax Relief and Health Care Act of 2006 provided for one-year extensions of these provisions. Enacted Legislation in the 110 th and 111 th Congresses Energy tax policy in the 110 th Congress represented a shift towards increased tax burden (via the removal of subsidies) on the oil and gas industry while also emphasizing energy conservation and alternative and renewable fuels, as opposed to conventional hydrocarbons. This policy direction appeared to be the result of high crude oil and petroleum product prices and oil and gas industry profits, along with the political realignment of the Congress after the 2006 congressional elections. The shift was manifested by proposals to reduce oil and gas production incentives or subsidies, which were initially incorporated into, but ultimately dropped from comprehensive energy policy legislation. Later in the 110 th Congress, enacted legislation focused on increasing incentives for renewable energy production, rather than reducing tax incentives available to the oil and gas industries. The fact that tax incentives for oil and gas were left in place is in part a reflection of the deteriorating business climate during 2008. Energy tax legislation in the 111 th Congress continued to provide additional support for renewables and energy efficiency. As was the case in previous Congresses, much of the energy tax legislation enacted during the 111 th Congress extended expired or expiring energy-related tax incentives. The American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) introduced new incentives for renewable energy and advanced energy manufacturing, while providing enhanced incentives for residential energy efficiency. The 111 th Congress also eliminated the "black liquor loophole." Energy Independence and Security Act of 2007 ( P.L. 110-140 ) The Energy Independence and Security Act of 2007 ( P.L. 110-140 ; H.R. 6 ) contained a number of provisions designed to increase energy efficiency and the availability of renewable energy. Specifically, the act increased the target fuel efficiency for combined fleets of cars and light trucks, increased renewable fuel standards, and increased a number of energy-efficiency standards for household and commercial appliance equipment. Energy Tax Provisions in the Food, Conservation, and Energy Act of 2008 ( P.L. 110-234 ) The Food, Conservation, and Energy Act of 2008 ( P.L. 110-234 ), otherwise referred to as the 2008 Farm Bill, contained two energy tax provisions. The first provision promotes cellulosic biofuels through a production credit of $1.01 per gallon, which applies to fuels produced from qualifying cellulosic feedstocks. The second provision, the ethanol blender's tax credit (which applies to both domestic and foreign sourced ethanol), was reduced from $0.51 per gallon to $0.45 per gallon. The Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ) The Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ), included $17 billion in energy tax incentives. These provisions were primarily extensions of existing provisions (extenders), but also including several new energy tax incentives. The new provisions included $10.9 billion in renewable energy tax incentives aimed at clean energy production, $2.6 billion in incentives targeted toward cleaner vehicles and fuels, and $3.5 billion in tax breaks to promote energy conservation and energy efficiency. The cost of the energy tax extenders legislation in the Emergency Economic Stabilization Act of 2008 was fully financed, or paid for, by raising taxes on the oil and gas industry (mostly by reducing oil and gas tax breaks) and by other tax increases. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) ARRA modified incentives for renewable energy production, energy conservation, alternative technology vehicles, as well as a number of other energy tax incentives. Collectively, ARRA's energy tax provisions lowered the cost of selected renewable energy relative to energy from other sources, such as oil and gas. Provisions enacted under ARRA extended and expanded a number of incentives for investment in renewable energy. The renewable energy production tax credit (PTC) was extended through 2012 for wind and 2013 for other eligible technologies, the energy credit (ITC) was expanded for small wind property, and taxpayers were given the option of receiving a direct grant from the Treasury in lieu of tax credits under the Section 1603 grant program. Renewable energy production was also encouraged by ARRA's provision increasing the funds available for the issuance of new clean renewable energy bonds. Residential incentives for renewable energy property were expanded under ARRA, as property-specific credit caps for residential renewable energy property were removed. ARRA contained two tax provisions intended to encourage energy conservation. The first provision modified the tax credits for energy-efficient improvements to existing homes by temporarily increasing the credit rate and removing credit caps previously associated with specific types of property. For qualified energy-efficiency improvements, such as the installation of energy-efficient building envelope components, furnaces, or boilers, installed during 2009 and 2010, taxpayers could claim a 30% tax credit. ARRA also removed property-by-property caps on the tax credit and replaced them with a $1,500 cap for the total amount of the credit claimed during 2009 and 2010. The second energy conservation provision increased funds available for the issue of qualified energy conservation bonds. To further promote alternative technology vehicles, tax provisions enacted under ARRA modified the credits for alternative fuel vehicles and plug-in electric vehicles. Additionally, a tax credit for plug-in vehicle conversion was enacted. Tax credits for advanced energy manufacturing (IRC §48C) were also introduced under ARRA. This provision provided $2.3 billion in tax credits to be competitively awarded to qualifying projects. The Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ) Energy tax policy—like all tax policy—can lead to unanticipated consequences. Notably, this issue arose in the 111 th Congress in its deliberations concerning "black liquor." In the context of taxes, the term "black liquor" referred to a process in which pulp mills use a mixture of conventional fuel and a byproduct of the pulping process as an energy source for the mill. According to changes enacted in The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users ( P.L. 109-59 ; SAFETEA-LU), "black liquor" was eligible for the alternative fuels tax credit, which was not the congressional intent of the provision. The IRS later ruled that black liquor would be eligible for the cellulosic biofuel producer credit after the alternative fuels mixture credit expired at the end of 2009. Recognizing the unintended consequence, Senate Finance Committee Chairman Max Baucus stated in response to draft legislation, "Our measure ensures this tax credit is used consistently as the law intended, not through an unintended loophole." Senator Charles Grassley made similar statements, noting "The paper industry was not intended to receive the alternative fuels tax credit when the credit was enacted." Under The Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ), black liquor was made ineligible for the cellulosic biofuel producer credit, reducing revenue losses by $23.6 billion between 2011 and 2019. In addition, with the passage of The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 ( P.L. 111-312 ) at the end of 2010, black liquor could no longer qualify for the alternative fuels tax credit. However, taxpayers may still be claiming tax credits for black liquor, as previously unused credits may be carried forward. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) A number of expiring energy tax provisions were temporarily extended in the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ). The one-year extension of tax credits for alcohol fuels, including ethanol, was estimated to cost $4.9 billion. Extending the Section 1603 grant in lieu of tax credits program for one year was estimated to cost $3.0 billion. The retroactive extension of tax incentives for biodiesel and renewable diesel, which had expired at the end of 2009, was estimated to cost $2.0 billion. Other provisions that were extended included tax credits for residential energy efficiency improvements, energy efficient appliance manufacturers, and energy efficient new homes. Tax provisions related to refined coal, alternative fuel mixtures, electric transmission restructuring, percentage depletion for oil and gas production, and alternative fuel vehicle refueling property were also extended. Enacted Legislation in the 112 th Congress Energy tax legislation enacted in the 112 th Congress included measures to extend expired or expiring energy tax incentives. Notably, a number of energy provisions were not extended, including tax credits for ethanol and the Section 1603 grants in lieu of tax credits. Both of these provisions had expired at the end of 2011. The provision allowing for the suspension of the 100%-of-net-income limitation on percentage depletion, which had been part of multiple past tax extenders packages, was also not extended. The American Taxpayer Relief Act of 2012 ( P.L. 112-240 ) Several expired and expiring energy tax incentives were temporarily extended as part of the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ). While most expiring energy tax provisions were simply extended through the end of 2013 under ATRA, substantive changes were made to the renewable energy production tax credit (PTC). Specifically, the expiration date for the PTC was changed from a placed-in-service deadline to a construction start date for all qualifying technologies. Extending the PTC for wind for one year and changing the deadline from a placed-in-service to construction start date was estimated to cost $12.2 billion over the 10-year budget window. Other provisions that were extended include credits for biodiesel, renewable diesel, alternative fuels, and second generation (cellulosic) biofuels. The tax credit for cellulosic biofuels was modified to include algae-based fuels. Other incentives related to energy efficiency, including the tax credit for nonbusiness energy property and the credit for the manufacture of energy-efficient appliances, were also extended. Enacted Legislation in the 113 th Congress Like the 112 th Congress, the primary energy tax legislation in the 113 th Congress was to extend expired energy tax provisions. The Tax Increase Prevention Act of 2014 ( P.L. 113-295 ) Several expired energy tax incentives were temporarily extended as part of the Tax Increase Prevention Act of 2014 ( P.L. 113-295 ). Certain provisions were extended through the end of 2014, while others were allowed to expire. A majority of expiring energy tax incentives were preserved as part of the Tax Increase Prevention Act across multiple energy sectors, including fossil fuels, renewables, efficiency, and alternative technology vehicles. Select provisions related to alternative vehicles (credit for electric drive motorcycles and three wheeled vehicles) and energy efficiency (credit for energy efficient appliances) were allowed to expire.

Current U.S. energy tax policy is a combination of long-standing provisions and relatively new incentives. Provisions supporting the oil and gas sector reflect desires for domestic energy production and energy security, long-standing cornerstones of U.S. energy policy. Incentives for renewable energy reflect the desire to have a diverse energy supply, also consistent with a desire for domestic energy security. Incentives for energy efficiency are designed to reduce use of energy from all energy sources. Incentives for renewable energy, energy efficiency, and alternative technology vehicles reflect environmental concerns related to the production and consumption of energy using fossil-based resources. Many energy-related tax provisions are temporary, with a number scheduled to expire at the end of 2016. Most recently, expired energy tax incentives were extended as part of the Consolidated Appropriations Act, 2016 (P.L. 114-113). Most energy-related provisions were extended for two years, through the end of 2016. Incentives for wind and solar were given longer-term extensions, with credits scheduled to phase out over a multi-year period in the future. One issue is whether energy-related tax incentives currently scheduled to expire at the end of 2016 will be further extended. Energy-related tax incentives reduce the amount of federal tax revenue collected. Between 2015 and 2019, it is estimated that incentives for fossil fuels will reduce revenues by $21.5 billion. For renewables, the cost of energy-related tax incentives is an estimated $46.5 billion over the same time period. The cost of tax incentives for energy efficiency is estimated to be $3.1 billion in federal revenue loss between 2015 and 2019. These estimates reflect the recent extensions enacted in P.L. 114-113. However, further extensions of energy-related tax provisions currently scheduled to expire would increase the cost of these incentives. The Obama Administration has also proposed a number of changes to energy tax policy as part of its annual budget proposal. Similar to past budgets, the FY2017 proposal suggests repealing a number of existing tax incentives for fossil fuels, while providing new or expanded incentives for carbon sequestration, alternative and advanced technology vehicles, renewable electricity, energy efficiency, and advanced energy manufacturing. The FY2017 budget also proposes a per-barrel fee on oil. Energy tax policy involves the use of one of the government's main fiscal instruments, taxes (both as an incentive and as a disincentive) to alter the allocation or configuration of energy resources and their use. In theory, energy taxes and subsidies, like tax policy instruments in general, are intended either to correct a problem or distortion in the energy markets or to achieve some economic (efficiency, equity, or even macroeconomic) objective. The economic rationale for government intervention in energy markets is commonly based on the government's perceived ability to correct for market failures. To correct for these market failures governments can utilize several policy options, including taxes, subsidies, and regulation, in an effort to achieve policy goals. In practice, energy tax policy in the United States is made in a political setting, determined by fiscal dictates and the views and interests of the key players in this setting, including policymakers, special interest groups, and academic scholars. As a result, enacted tax policy embodies compromises between economic and political goals, which could either mitigate or compound existing distortions.

Introduction On August 5, 2004, the United States entered into the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic (hereafter the CAFTA-DR countries). Congress engaged in a full year of debate before narrowly passing the implementing bill. On July 28, 2005, after assurances from Bush Administration officials on many issues, the House approved it by a two-vote margin (217 to 215), followed by passage in the Senate (55-45), clearing the measure for presidential signature on August 2, 2005 ( P.L. 109-53 ). Implementing the agreement proved equally challenging and occurred on a rolling basis after each country made legal, regulatory, and rule changes to comply with the accord's obligations. CAFTA-DR entered into force with El Salvador, Honduras, Nicaragua, and Guatemala by July 1, 2006, the Dominican Republic on March 1, 2007, and Costa Rica on January 1, 2009. This report follows up on congressional interest by providing an analysis of the trends in trade and investment since CAFTA-DR entered into force six years ago. Changes in rules governing issues such as intellectual property rights, government procurement, services, labor and others are not easily measured and will require a longer-time frame to evaluate. The report concentrates on trends in all countries, with close attention paid to the CAFTA-DR partner economies. The marginal effects on the U.S. economy are expected to be small by comparison because the CAFTA-DR countries are economically about the size of the Denver metropolitan area, and they already had duty-free access to the U.S. market under various unilateral preference programs. Background and Rationale for CAFTA-DR Historically, the United States has entered into free trade agreements (FTAs) and unilateral trade preference programs with developing countries in the pursuit of both economic and foreign policy goals. In 1983, the U.S. Congress passed the Caribbean Basin Initiative (CBI—formally the Caribbean Basin Economic Recovery Act— P.L. 98-67 ) to support political and economic stability in the Caribbean at a particularly vulnerable time (see Figure 1 , Map of Central America and the Caribbean). The CBI included limited unilateral trade preferences, which required periodic congressional reauthorization. CAFTA-DR builds on this precedent, but makes preferential access comprehensive, reciprocal, and permanent while also enhancing rules and other disciplines on trade. It is intended to strengthen economic relations as a way to stimulate growth, to foster stability, and, in the words of Congress, "to lay the foundation for further cooperation." The economic rationale rests on preferential access for agricultural and manufactured goods produced in the region. By removing regional barriers to trade, CAFTA-DR encouraged the development of specialized co-production in assembly manufacturing between the United States and CAFTA-DR countries based on comparative advantage and economies of scale. This strategy has increased the productivity (a major benefit of trade) of firms in all countries. Firm competitiveness rests on value-added supply chain relationships, particularly in the area of apparel manufacturing, later extended to automobile parts, medical equipment, integrated circuits, and other products. Tariff preferences under CAFTA-DR (and CBI previously) have helped firms remain marginally competitive with Asian and other low-cost global producers. By moving from limited unilateral trade preferences to comprehensive bilateral free trade under CAFTA-DR, U.S. exporters also stood to benefit from reduced trade barriers, both for final goods and the increasingly large intermediate goods trade characteristic of the supply chain model. Market access, therefore, was central to the FTA negotiations. Equally important for the United States were enhanced rules covering multiple disciplines including trade in services, intellectual property rights, sanitary and phytosanitary regulations, investment, government procurement, labor, and environment, among others. From the Central American and Dominican perspectives, permanently reducing barriers to the U.S. market was the core objective, assuring investors that exports would have permanent duty-free access to the large U.S. market, while ensuring lower-cost imports (including capital and intermediate goods) for consumers and producers alike. Increased trade can raise a country's long-term growth rate through multiple channels including increased market size, production specialization, scale economies, transfer of technology and managerial/worker expertise, more efficient resource use, and increased investment. With these factors in mind, the agreement takes on an added importance given the dominant role of the U.S. economy for the CAFTA-DR countries. Market access in a reciprocal trade agreement works both ways, however, so countries also face certain challenges. In the United States, CAFTA-DR raised concerns over negative effects on import-competing firms. This is often part of the cost inherent in a free trade agreement, though it is expected to be small relative to the U.S. economy as a whole. For CAFTA-DR countries, U.S. agricultural exports, including staples such as corn and rice, increasingly compete with local production of basic grains. A transition period was built in with an extended tariff phase-out schedule and safeguards as a partial response to this concern. As a matter of development policy, however, CAFTA-DR countries also envision diversifying agricultural sectors into higher value nontraditional exports, and integrating rural economies more deeply with other sectors. CAFTA-DR's success will in part be judged by how well this transition is made, and so far, results have not been uniform among the six countries. CAFTA-DR Trade Rules Market access is at the center of free trade agreements and refers to provisions that govern barriers to trade such as tariffs and quotas. Rules of origin determine which goods are eligible for tariff preferences based on their regional content, and are particularly relevant for textile and apparel trade. CAFTA-DR requires that each country accord national and most favored nation treatment (non-discrimination) to all parties. The FTA also replaces and consolidates in a permanent bilateral agreement trade preferences formerly extended unilaterally under the Generalized System of Preferences (GSP), the Caribbean Basin Economic Recovery Act (CBERA), and the Caribbean Basin Trade Partnership Act (CBTPA). CAFTA-DR calls for the progressive elimination of nearly all customs duties. Each country negotiated a list of its most sensitive products for which duty-free treatment is delayed, including separate provisions for certain apparel and agricultural products. For non-textile manufactured goods, duties on 80% of U.S. exports were eliminated immediately, with the rest phased out over a period of up to 10 years. For agricultural goods, duties on over 50% of U.S. exports were eliminated immediately, with the rest phased out over a period of up to 20 years. In some cases, duty-free treatment is "back loaded," meaning it will not begin for seven years or more after the agreement takes effect. For the CAFTA-DR countries, 100% of non-textile and non-agricultural goods began to enter the United States duty free upon implementation. Safeguards are retained for certain agriculture and textile goods over the period of duty phaseout, but antidumping and countervailing duties were not addressed in the CAFTA-DR, leaving all U.S. and other country trade remedy laws fully enforceable under the World Trade Organization (WTO). Apparel Rules CAFTA-DR apparel enters the United States under a "yarn forward rule," with some exceptions, building on the standard developed for the region under the CBTPA in 2001. Yarn production and all operations that follow, from fabric production through cutting and apparel assembly, must be done in either the United States or a CAFTA-DR country, if the good is to qualify for duty-free treatment. From 2008 to 2011, 82% of qualifying textile and apparel imports from CAFTA-DR countries entered the United States under this rule. There are numerous exceptions including the "cut and assemble" rule, which allows for use of third country inputs (typically lower-cost Asian yarns and fabrics) for certain specified goods provided they are cut and assembled in a CAFTA-DR country. A de minimis rule permits duty-free entry of goods in which up to 10% of the weight of the fibers and yarns may come from third country sources. Separate rules (tariff preference levels—TPLs) for Nicaragua and Costa Rica allow for specified quantities of duty-free apparel imports that may be assembled from limited amounts of third country materials. A "short supply" list allows for use of fibers, yarns, and fabrics from third countries when not available in commercial quantities in the region, and CAFTA-DR allows for "cumulation" or the use of inputs from the various countries within the region, with limitations on the use of Mexican yarns and fabrics for wool, denim, cotton, and man-made fiber. Other exceptions exist for hand-loomed fabric of a cottage industry, folklore handicrafts, and other products. A "fabric-forward" rule allows for wool yarn from third countries to be used in certain textile and apparel goods and more detailed rules exist for specific cases of apparel manufacturing. Another 15% of qualifying imports entered duty free under these rules. Agriculture Rules Under agriculture, domestic support programs are not addressed in the CAFTA-DR, which focuses instead on reducing tariffs and defining quota levels, the most costly trade-distorting policies. Average applied tariffs on agricultural goods by most CAFTA-DR countries range from 7% to 23%. Most agricultural imports face no tariff in the United States. But for select products in all countries, the pressing challenge was negotiating tariff rate quotas (TRQs—see below), or limits on the quantity of imports that can enter the United States before higher tariffs are applied. Tariffs for sensitive agricultural products have the most generous phase-out schedules, with up to 20 years for some products (e.g., rice and dairy). This approach acknowledges that the agricultural sectors bear most of the trade adjustment costs and so are given more time to make the transition to freer trade. All agricultural trade eventually becomes duty-free except for sugar imported by the United States, fresh potatoes and onions imported by Costa Rica, and white corn imported by the other Central American countries. These goods will continue to be subject to quotas that will increase by approximately 2% each year in perpetuity, with no decrease in the size of the above-quota tariff. Over half of current U.S. farm exports to Central America became duty free upon implementation, including cotton, wheat, soybeans, certain fruits and vegetables, processed food products, wine, and high quality cuts of beef. Trends in CAFTA-DR Merchandise Trade Following is a discussion of the major trends in merchandise trade from 2000 to 2011. For comparative purposes, this encompasses a period of time before and after the agreement entered into force. It is a starting point for raising questions over the possible effects of CAFTA-DR. CAFTA-DR Direction of Trade There have been three major changes in the direction of CAFTA-DR trade over the last decade, including the period of time the agreement has been in force: first, although the United States remains the CAFTA-DR countries' dominant trade partner, U.S. trade has fallen relative to other countries; second, trade with China and Mexico has increased; and third, intra-Central America trade and integration has increased and deepened. As seen in Table 1 , in 2000, the United States accounted for 73% of CAFTA-DR exports and 55% of its imports. By 2010 (latest available data), these figures had fallen to 43% and 46%, respectively, the decline occurring in all CAFTA-DR countries. From 2000 to 2010, exports to China rose from near zero to 6% of CAFTA-DR exports, and the import share increased from 2% to 7%. Intra-Central America trade rose from 2% to 11% of the region's exports, with imports climbing similarly, making Central America, in the words of one analysis, the hemisphere's "region that trades the most with itself." CAFTA-DR plays a supporting, rather than leading, role in these evolving trade patterns. The rise in exports to China, for example, is accounted for entirely by Costa Rican semiconductor exports. Increased intra-Central American resulted from a long-sought effort to deepen subregional integration. In addition to CAFTA-DR, the effort came to fruition with the signing of the Mexico-Central America Free Trade Agreement on November 22, 2011. The deepening integration resulted in a nearly four-fold increase in Mexico-Central America trade over the past decade that is in part supported by the supply chain relationships that U.S. and other firms have developed in the Caribbean, Central America, and Mexican economies (particularly in automobile, apparel, and computer electronics industries). CAFTA-DR reinforces regional integration with rules of origin that allow greater cumulation of production between Central American and Mexican producers using U.S. inputs. With increased harmonized rules of origin, the region becomes globally more competitive by increasing co-production relationships, reducing delays at the border, and allowing for greater economies of scale in production. New cumulation rules also allow for U.S. duty-free treatment of imports assembled from inputs produced in Central America or Mexico. This relationship is evident in the production of integrated circuits, automobile parts, and apparel, in which the United States ships parts from all these industries to the region for further processing. For example, Mexico imports integrated circuits from Costa Rica, apparel from Guatemala, and wire harness sets for automobiles from Nicaragua, all transformed from U.S. inputs. These goods are used for assembly of computers, apparel, and automobiles for export to the United States and elsewhere in Latin America. Similarly, fabric produced in the United States, the Dominican Republic, Honduras, and Guatemala is used in apparel production in many of the CAFTA-DR countries, with final goods receiving duty-free treatment when they enter the United States. So unlike previous commodity-driven export growth, much of region's trade reflects global supply chain manufacturing related to U.S. production and global consumption. In addition, analysis of the technology content of CAFTA-DR country exports suggests that the agreement supports the trend of the United States being the largest market for technology-enhanced exports, ranging from low-technology apparel to high-technology medical equipment and integrated circuits. Exports from Costa Rica and the Dominican Republic have the highest concentration of technology intensiveness, Guatemala and Nicaragua the lowest. The potential for future benefit from technology-enhanced exports is uncertain, however, given the need for CAFTA-DR countries to increase productivity and adopt complementary policies to become more globally competitive and take fuller advantage of the trade agreement. U.S.-CAFTA-DR Bilateral Trade Aggregate U.S.-CAFTA-DR bilateral trade is presented in Figure 2 . Two trends dominate: Trade and U.S. economic growth trend together, reflecting only modest growth for much of the decade until the 2010 recovery from the global recession; and, Growth in U.S. exports has outpaced U.S. imports, resulting in a U.S. trade surplus each year since CAFTA-DR entered into force. U.S. demand is a key factor defining trade growth, influencing both imports and exports because of significant intra-industry trade. Also, because a large portion of CAFTA-DR exports entered the United States duty free prior to implementation of the agreement, the United States International Trade Commission (USITC) model predicted that the marginal trade effects of the accord would be a relatively larger increase in U.S. exports, as appears to be the case, so far. U.S. Exports by Country Figure 3 shows the value of U.S. exports by country, reflecting a modest, but upward trend for all countries except during the 2008-2009 global recession. In recent years, the trend in U.S. export growth has been skewed by the rise in price and volume of refined petroleum products, which on a value basis increased from 3.2% of total exports to the region in 2000 to 23.7% in 2011. U.S. Imports by Country U.S. imports from CAFTA-DR countries reflect demonstrably different trends since 2000. As seen in Figure 4 , there has been little real growth in U.S. imports from the region in most cases. Interestingly, in percentage terms, U.S. imports have also grown the most from Costa Rica and Nicaragua, the richest and poorest CAFTA-DR countries, respectively, whereas U.S. imports from the other four countries have shown much slower growth, with the Dominican Republic actually registering a decline. These trends are also seen in Figure 5 , which compares the relative position of each CAFTA-DR country with respect to U.S. imports and exports in 2000 and 2011. As may be seen, most countries that experienced a relative increase or decline in U.S. exports between these two years also experienced a similar increase or decline in U.S. imports (another indication of importance of intra-industry trade common in the manufacturing sector). Costa Rica accounted for 36% of U.S. imports from the region in 2011, up from 22% in 2000 and Nicaragua's portion rose from 4% to over 9%. The remaining four countries experienced a counterbalancing decline in their share of U.S. imports, particularly the Dominican Republic. Composition of U.S.-CAFTA-DR Trade Examining the trade data at the product level provides shows changes in the composition of U.S. trade among these countries. This focus also points to the possible development aspects of trade liberalization to the extent that the value added of a country's exports increases by transitioning away from traditional to nontraditional, and from low-tech to high-tech intensive products. Figure 6 compares the composition of U.S.-CAFTA-DR trade for the years 2000 and 2011. Product groups have been combined by Harmonized Tariff System (HTS) codes to provide an indication of broad trends in trade composition. The first category is defined as apparel, yarns, and fabrics. It includes knit, woven, and footwear goods plus yarns and fabrics (HTS 52, 55, 60, 61, 62, 63, and 64). The second category comprises electrical and non-electrical machinery products (HTS 85 and 84). The third category constitutes agriculture products such as fish, vegetables, fruit, coffee, sugar, and tobacco (HTS 03, 07, 08, 09, 17, and 24). Finally, optical and medical equipment capture imports of HTS 90. Key trends from Figure 6 and Table 2 include the structure of U.S. exports has not shifted dramatically, with the notable rise in the value of petroleum products; U.S. imports have shifted from apparel to higher value-added manufactures; Costa Rica stands alone as a non-apparel, high tech exporter; Honduras, El Salvador, and Nicaragua export large amounts of low tech apparel; Guatemala splits major exports between agriculture and apparel; and, the Dominican Republic has the most diversified export structure with medical manufactures, mining, apparel, and processed agricultural goods. Textiles and Apparel From 2000 to 2011, aggregate U.S. exports of apparel, yarns, and fabrics declined from 33.4% to 12.4% of total U.S. exports to the CAFTA-DR countries. Although all categories declined, it was particularly steep for knit and woven apparel parts shipped for further assembly. Basic fibers, yarns, and fabrics declined as well, but less in relative terms. This relative shift away from apparel exports towards more yarn and fabric suggests that more of the production process (e.g., computerized design and cutting) is being done in the CAFTA-DR countries. Similarly, although apparel is still the largest U.S. import sector in 2011, capturing 30.4% of total merchandise imports from the region, this is notably smaller than the 56.1% of 2000. Apparel rules under CAFTA-DR are intended to support trade from the region. To qualify for duty-free treatment, most apparel enters under a yarn forward rule. Nonetheless, the decline in apparel as a percentage of total U.S. imports from the region coincides with the growing U.S. import penetration from Asian and other low-cost producers, and may be seen in the slowed growth of U.S. imports from the major apparel producers: Honduras, El Salvador, and Guatemala. These countries are vulnerable to competition from lower-wage countries and without a shift in investment to higher value-added production, they may continue to see limited growth in their exports to the United States, despite preferential access accorded apparel under CAFTA-DR. By contrast, U.S. imports in general from Costa Rica and Nicaragua have shifted for two very different reasons. With the exception of some specialty high-end products, Costa Rica, the most developed of the CAFTA-DR countries, has ceded the apparel trade to other countries. It has shifted to other higher value-added goods. Nicaragua, the poorest and least developed of the group, is expanding into apparel exports to the United States for two reasons in particular. First, it is the beneficiary of CAFTA-DR tariff preferences levels (TPLs), which allow Nicaragua to export apparel goods assembled from limited amounts of third country materials (e.g., less expensive Asian yarns). Second, relatively low wages in Nicaragua mean its firms are still competitive with those in Asian countries for the lower-skilled sector of the industry (see Table A-10 , International Hourly Wage Rates, in the Appendix ). The Dominican Republic appears to be in transition, moving away from apparel except for footwear, as seen in its diversified export structure. Machinery and Other Manufacturing Machinery and electrical machinery goods, by contrast, display a different pattern. U.S. exports in this group have declined from 20.5% to 16.2% as a percentage of total exports, from 2000 to 2011, but have continued to grow in dollar terms at a modest rate. U.S. imports, however, have grown dramatically, from 10.9% of total imports in 2000 to 28.8% in 2011. In addition, U.S. imports in the medical instruments category have also grown, the more technology-intensive products coming from Costa Rica and the Dominican Republic. One key factor is Costa Rica's so-called "Intel Effect," as seen in the country's strong growth in exports despite the global recession. It points to the transformation of the Costa Rican economy away from not only traditional agricultural exports, but traditional apparel manufacturing as well. Costa Rica has moved toward more sophisticated manufacturing processes involving integrated circuits, medical equipment, and machine parts (e.g., specialized aviation motors) destined for the U.S. market and based on U.S. inputs. In addition, as a matter of policy, Costa Rica has identified and encouraged the development of related industries, such as specialized packaging for electronics goods that previously had been contracted to foreign suppliers. Although still dependent on agriculture, Nicaragua also deserves a special note for transitioning to assembly-type manufacturing, including wire harnesses for automobiles. Nicaragua is the poorest country in Central America, but appears to be undergoing economic transformation, moving into low-skilled assembly manufacturing even as Costa Rica exits the industry. In both cases, these are signs of economic development. U.S. import data for the Dominican Republic reflect a sharp decline in apparel, except for footwear, falling from 55% of total U.S. imports in 2000 to 17% in 2011 (data not shown). At the same time, there has been an increase in imports of medical equipment and other manufactures, perhaps indicating the country may also be undergoing transition in economic production. Agriculture The United States has experienced strong growth in agricultural exports since CAFTA-DR entered into force. Cereals account for only 6% of U.S. exports, but have increased from $508 million in 2000 to $768 million in 2005 and $1,800 million in 2011. Corn represents over half of the cereals exports in 2011, followed by wheat and rice. Meat exports increased from $60 million in 2000 to $91 million in 2005 and $290 million in 2011, a three-fold increase since the FTA was implemented. Agricultural exports may be expected to rise further as the phased-in tariff reductions continue to be implemented over time. In the aggregate, U.S. imports of agriculture from the CAFTA-DR region have grown modestly from 2000 to 2011, rising from 10.9% to 15.5% of total U.S. imports. Costa Rica has experienced a decline in total agricultural exports to the United States, but has distinguished itself again in making the transition to more value-added, nontraditional agriculture exports, particularly pineapple. The Dominican Republic has seen little agricultural export growth except for sugar and tobacco, and Guatemala, Nicaragua, and Honduras have seen slight increases in fruit, fish, and specialized coffee exports, demonstrating some shift in production to nontraditional exports. A key problem has been the limited ability to make the transition to nontraditional exporting more fully, reflecting a need for further structural reforms and support for the sector in order for agriculture to take greater advantage of CAFTA-DR. There is an ongoing debate over CAFTA-DR's effects on small agricultural producers in the region. Early estimates suggested that overall increased agricultural trade could be an important source of rural development. In addition to increasing CAFTA-DR country agricultural exports, the majority of households are net consumers of agricultural goods and stand to gain from lower prices, the equivalent to an increase in family income. Because subsistence farmers' generally produce little for sale, they are unlikely to be greatly affected by changes in market prices. Still, some small producers of agricultural goods may be harmed, and many economists argue that adjustment policies are necessary to increase productivity in this segment of agricultural producers. The tariff transition period is intended to provide space to do this. The alternative is to protect certain industry groups, by maintaining artificially high domestic prices, while delaying and making more difficult necessary competitive adjustment, a deficient strategy often associated with Mexico under the North American Free Trade Agreement (NAFTA). It may be a problem for certain CAFTA-DR industries as well. Costa Rica, for example, supports domestic rice production with subsidies and price controls, delaying and perhaps eventually compounding the adjustment that will be needed as the tariff rate quotas for U.S. rice phase out over 20 years. Foreign Direct Investment in CAFTA-DR Countries FTAs are often considered as much about investment as trade, and foreign direct investment (FDI) is one measure of a country's foreign attractiveness. An FTA can encourage FDI through two channels. First, permanent preferential access to the U.S. market reassures potential investors that access to the largest market is more stable. Second, enhanced investment rules protect investors. Investment is a critical component of a country's economic growth and development, and where domestic savings rates are low, or opportunities are readily apparent, FDI is one way to meet demand for capital. There are potentially many economic benefits to FDI, although their realization depends on where and how FDI is invested, and the policies governing its use. In general, however, there appears to be broad recognition that the benefits of FDI outweigh the costs in most cases for developing countries. Trends in FDI vary among the six CAFTA-DR countries and total net foreign direct investment is shown in Figure 7 , with the United States the largest investor in the region. Trends suggest that a formal investment agreement alone is not sufficient to guarantee uniform results. Three trends stand out: first, FDI increased in all CAFTA-DR countries immediately prior to and after the FTA entered into force, but magnitudes differed widely; second, investment is also influenced by macroeconomic conditions, as reflected in the decline following the 2007-08 global financial crisis; and, third, Costa Rica and the Dominican Republic outdistanced the rest of the countries in attracting new FDI. They have the highest labor rates (see Table A-10 in the Appendix ) and level of manufactured exports, indicating that investment is not necessarily drawn to low-cost producers, but rather to countries that have relatively higher levels of stability, education, and productivity. An Analysis of Trade and Investment Trends Both theoretical and empirical literature on trade presents differing viewpoints on the benefits of liberalizing commercial exchange in small developing countries. Trade can promote growth through increased productivity, and firm-level studies corroborate the strong link between firm productivity and exporting, but they often argue that the benefit from trade comes from "facilitating the growth of high-productivity plants, not by increasing productivity growth at those plants." That is, productivity may increase trade more than the other way around, although both directions of influence are likely. Many economists also argue that trade liberalization can increase a country's long-term growth rate through other channels including increased market size, production specialization, scale economies, transfer of technology and managerial/worker expertise, more efficient resource use, and increased investment. Case studies, however, offer contradictory evidence, pointing up examples where growth has or has not followed trade opening. Such seemingly irreconcilable outcomes raise fundamental questions over how and why the benefits of trade seem to be more robust in some cases, but not in others. CAFTA-DR countries comprise an economically heterogeneous group and seem to mirror the disparate responses to trade liberalization found in the economic literature. Country- and product-specific trade and FDI trends vary significantly. Noticeable differences exist with respect to a number of variables that may affect a country's ability to manage openness under an FTA. For the export model of development to succeed, productivity improvements are necessary, which in addition to private sector initiatives implies an important public sector role in creating a solid business environment. Failure to do so may be equivalent to restricting many of the CAFTA-DR countries to a diminished development model of trade in which they are locked into low-level manufacturing and low-value agricultural production, competing with the poorest countries of the world. In such a scenario, improving economic well-being will be a slow process. Managing openness implies encouraging macroeconomic stability, investment, and complementary policies to enhance economic growth directly, which can improve chances for reaping the benefits of trade liberalization. Stated otherwise, developing countries may respond less to trade liberalization because they are less invested in policies that, in and of themselves, promote growth more directly than trade. A non-exhaustive list includes support for private sector investment, infrastructure, education, and good governance, including an efficient and predictable regulatory framework. As discussed below, the fiscal commitment to accomplish these goals has been lacking, with the possible exception of Costa Rica. To the extent that these, and perhaps other non-trade policy areas, function to improve economic growth and efficiency, they can directly and indirectly support a country's ability to take fuller advantage of trade liberalization. Differences in growth of exports and FDI seem to correlate closely with similar trends in these variables. Macroeconomic Factors Maintaining macroeconomic stability, particularly when an international economic crisis occurs, may be one of the most important goals to ensure long-term growth and higher benefits from trade liberalization. Macroeconomic stability, in short, supports competitiveness. Over the last two decades, the CAFTA-DR countries reinforced this theme with their own reform agendas, which have contributed to relatively higher economic growth and stability, despite recent global volatility. They have experienced solid, but not spectacular economic growth since 2002 (see Table A-1 in the Appendix ). Costa Rica, Honduras, and the Dominican Republic show above average expansion for the region, while El Salvador and Nicaragua tend to lag. These economies have become increasingly open, particularly among themselves and with the United States, setting a sound development foundation to begin to utilize the opportunities of CAFTA-DR. The downside of this relationship is that as small, open economies, they are heavily dependent on the U.S. economy and susceptible to global shocks, particularly through price channels. The sharp fluctuations in commodity prices and global recession of 2008-2009, for example, disrupted growth trends in trade and output. Microeconomic Factors In addition to macroeconomic reforms and stability, so-called "second generations reforms" are essential for trade to become an engine of growth and development. Since CAFTA-DR was first proposed, new microeconomic indicators have been developed to analyze the regulatory environment for business, a critical variable for assessing competitiveness or readiness to undertake the obligations and benefit from a U.S. reciprocal free trade agreement. Doing Business Indicators The World Bank calculates a series of measures referred to as Doing Business Indicators, which provide a comparative measure of the business regulatory environment. These metrics add an important dimension for assessing economic competitiveness, particularly for countries that have achieved other important goals such as peace and macroeconomic stability. These indicators compare the efficiency, accessibility, and implementation of a country's regulations, a key consideration in evaluating a country's ability to fulfill its CAFTA-DR obligations. In addition, having good rules, the World Bank argues, is a key to supporting small and medium-sized businesses, which are an important avenue for achieving income growth, equality, and social inclusion. As shown in Table 3 , the CAFTA-DR countries do not rank high on improving the business environment over time, and regulatory reform still tops the list of concerns for the region. Although strides have been made in regulatory reform in recent years, the CAFTA-DR countries have not kept pace with many other developing countries. Should businesses find operating in CAFTA-DR countries more difficult than others, the countries are in a relatively weaker position to take full advantage of the FTA, and evaluations of CAFTA-DR effectiveness will likely understate its potential impact absent improvements in these indicators. In general, trends in foreign direct investment shown in Figure 7 are consistent with the relative Doing Business rankings in Table 3 , with the exception of Costa Rica. Logistics Performance Index The World Bank has recently begun to produce a Logistics Performance Index (LPI), which summarizes performance in six areas: customs efficiency; trade and transport infrastructure; ease of arranging competitively-priced shipping; logistics services; tracking and tracing shipments; and frequency with which shipments reach destination on time. This information points to a critical factor in evaluating a country's ability to trade efficiently and can be used to identify major supply-chain bottlenecks. The composite index might best be thought of as conveying an overall assessment of the "time and cost burdens of import and export transactions." Table 4 summarizes the rankings of composite LPI index for the CAFTA-DR countries. For the region, Costa Rica, the Dominican Republic, and Honduras all rank in the top half of the LPI midpoint. By contrast, El Salvador, Guatemala, and Nicaragua rank in the bottom half of the group. Differences among countries can be large, with Costa Rica clearly outperforming the group on logistics capabilities, while Nicaragua lags. This stark difference may reflect various issues including level of economic development and political decisions to support trade, in general, and CAFTA-DR in particular. Security, Governance, Corruption, and Economic Freedom Many CAFTA-DR countries suffer from structural problems in governance. First, tax systems in many countries are regressive and provide inadequate revenue to meet public needs, hindering development. The Costa Rican tax burden is roughly 23% of GDP, twice that of Guatemala, and significantly higher than the other countries except Nicaragua. Inadequate and regressive tax systems, combined with a general bureaucratic ineffectiveness, are incapable of helping make adjustments that might diminish the region's high levels of inequality. These deficiencies have been directly linked to the growing violence and crime, much related to drug trafficking, which threatens the social fabric of society. The inability to counter the extreme violence and security violations in the northernmost countries of Central America has been costly—one estimate ranges between 7.5% to 8.0% of GDP. The long-term cost lies in the region's inhibited development, persistent poverty, and inequality. In many areas, organized crime operates with virtual impunity, in part a result of weak national government bureaucracies and corruption. These broad problems diminish the business climate, inhibiting countries from taking full advantage of CAFTA-DR. The level of national insecurity, most prevalent in the "Northern Triangle" countries of Honduras, El Salvador, and Guatemala, appears highly correlated with low levels of FDI (see Figure 7 ). Business investment at the firm level provides corroborating evidence, with some business executives pointing to, for example, production shifts from violence-prone Mexico and Colombia to Costa Rica largely because of security concerns. Two indicators provide additional evidence of the problems. The Index of Economic Freedom, prepared by the Heritage Foundation and the Wall Street Journal, is a composite number reflecting 10 indicators. The criteria provide a business perspective and the overall score gives a broad indication of how countries may rank (see Table 5 ), but should not be given too much weight without understanding how countries perform with the individual indicators. A summary of this performance suggests that the CAFTA-DR countries do reasonably well on macroeconomic and trade reform, but with the exception of Costa Rica, come up short on two important indicators: upholding property rights and dealing with corruption. Both these indicators point to traditionally weak judicial branches of government, among other problems. Transparency International produces the Corruption Perceptions Index. It measures perceptions based on extensive survey work, and is the basis for the corruption indicator used in the Index of Economic Freedom. As may be seen in Table 5 , some of the CAFTA-DR countries still rank low, suggesting corruption may be hindering the conduct of business and inhibiting progress on attracting investment, promoting development, and reducing poverty. The Office of the United States Trade Representative (USTR) corroborates concerns over corruption throughout the region, particularly for Honduras and Nicaragua. These indicators seem to correlate closely with the CAFTA-DR countries' overall economic performance over the long run, and over time the worst performers may see investment and trade trends lag relative to their CAFTA-DR neighbors. Outlook and Issues for Congress Although it is still early to pass judgment on the success or failure of CAFTA-DR, the accord has provided enhanced incentives to deepen a trade partnership built on a model of trade preferences that stretches back nearly three decades. The crowning features of CAFTA-DR include transitioning to a reciprocal agreement, making tariff preferences permanent, creating more flexible rules of origin, liberalizing trade rules in new areas and commerce, and promoting institutional capacities in many areas to support the new trade and investment arrangement. The data suggest that CAFTA-DR has supported a long-term trend in the region toward trade and investment liberalization, encouraging diversification into higher value-added, and in some cases, technology-enhanced goods. U.S. exports have grown, with gains in agriculture and more modest growth in manufactured goods. Part of this growth appears to be related to CAFTA-DR and will likely continue as the trade agreement is fully implemented over time. There are two major challenges to CAFTA-DR operating better. First, the longer-term need for deeper structural transformation in the CAFTA-DR region may be hindering the development potential of the FTA. As suggested by the trends identified in this report, the level of transformative change varies dramatically among the six countries, and to a large extent appears to reflect national business climates and the degree to which national strategies and complementary policies are instituted to support productivity enhancements necessary to be competitive in a global market, a difficult and long-term proposition. Deteriorating security and governance capabilities in some countries further complicate the trade and investment environment. Over time, however, expectations of CAFTA-DR's success rely on policy changes that will improve chances for all countries to benefit more from this deepening and still evolving trade arrangement. Second, there are a number of issues that are being addressed in the short term, and which Congress may wish to continue monitoring. At the top of the list is enhancing trade facilitation, which refers to improving the rules and capacity of firms and countries to apply them to take full advantage of a trade agreement. Officials in CAFTA-DR countries, and firms operating there, have identified numerous important obstacles to the full and effective implementation of the trade agreement: rules of origin, which can be highly complex for textile trade, are frequently the object of firm complaints. Many specific rules seek to protect U.S. producers from third country competition. For example, multiple cases have been identified in which U.S. producers are no longer capable or willing to supply the yarn or fabric covered by the rule, resulting in CAFTA-DR products having to use inputs that are subject to high tariffs or to forgo production entirely. In other cases, rules covering U.S. inputs do not match up clearly, causing delays at the U.S. border. customs determinations for these and other matters have caused delays at the U.S. and CAFTA-DR country borders. In order to meet production deadlines, U.S. importers have at times decided to pay tariffs rather than wait for determinations that would have likely been made in their favor. Also, in some cases, U.S. customs procedures and rules have not been well understood by CAFTA-DR exporters. In other cases, CAFTA-DR country customs modernization has been an issue. Assistance has been provided under USAID contracts to ensure U.S. exports are not delayed unnecessarily, but in some cases, further resources and dedication are needed to ensure a continuous smooth flow of U.S. goods. the short supply list is also intended to protect U.S. producers, but the "first come" rule for use of tariff rate quotas has been criticized as inequitable and complicating production planning. To the extent that these rules unnecessarily inhibit competitive trade, the agreement falls short of meeting its goals. Other challenges include interpretation and application of highly technical rules in areas such as intellectual property rights, sanitary and phytosanitary regulations, and telecommunications. The complexities of the CAFTA-DR make for many operational challenges, with new ones emerging periodically. Over time, the trade data will likely reflect the extent to which the CAFTA-DR countries and the United States make use of the trade agreement, in part enhanced by addressing these and possibly other issues. It is still early to pass judgment on this FTA, but indicators to date suggest that both long- and short-term policy decisions may go a long way to improving the conditions that will allow CAFTA-DR to provide economic benefits for all participants. Appendix. CAFTA-DR Country Economic Data

On August 5, 2004, the United States entered into the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). Congress passed the implementing bill on July 28, 2005 (P.L. 109-53) and CAFTA-DR entered into force with El Salvador, Honduras, Nicaragua, and Guatemala by July 1, 2006, the Dominican Republic on March 1, 2007, and Costa Rica on January 1, 2009. This permanent, comprehensive, and reciprocal trade agreement eliminates tariff and non-tariff barriers to two-way trade, building on unilateral trade preferences begun under the 1983 Caribbean Basin Initiative (CBI). It enhances rules and other standards for services, intellectual property rights, government procurement, and investment, and other disciplines. It also reinforces Congress's historical support for trade as a foundation of broader foreign economic, political, and security policies in the region. This report supports congressional interest with an analysis of the trade and investment trends since CAFTA-DR entered into force. CAFTA-DR reinforces trade and investment trends that have been emerging at least over the past decade. The United States remains the region's dominant trade partner, but its share of total trade has begun to decline. Intra-Central America trade and trade with China have seen the largest growth. Still, the United States (1) has vibrant trade in intermediate goods reflecting increasingly integrated production with the region; (2) provides the largest portion of foreign direct investment to the region; and, (3) remains the largest market for high-technology content exports. Because U.S. tariffs were already relatively low, the United States International Trade Commission model predicted that U.S. exports would rise slightly faster than imports, which so far has been the case. One important indicator is the change in composition of trade. The United States has seen strong growth in exports of mineral fuels, machinery, cereals, yarns, and fabrics. Historically, the CAFTA-DR region has exported agricultural products and later apparel and other assembled goods to the United States. For over the past decade, more sophisticated and higher-value exports have grown, including specialized machinery goods (e.g., small aviation motors), electrical goods (e.g., integrated circuits), and medical equipment, while exports of light manufactures such as apparel have stagnated, or in some cases, declined. Agricultural trade has increased moderately and remains a combination of traditional exports (e.g., coffee and bananas) with little growth in higher value nontraditional goods (e.g., pineapple and sweet peppers). These aggregate trends, however, mask important country differences. As examples of moving up the value chain, Costa Rica has increased nontraditional production in both its manufacturing and agricultural sectors, and so has experienced the largest growth in exports. Similarly, Nicaragua has begun to enter the assembly manufacturing sector and so experienced the second highest rate of trade growth. The other four countries have seen their exports stagnate or decline for multiple reasons, including dependence on the highly competitive apparel trade, lower levels of investment, public security problems, and broader governance and policy concerns. CAFTA-DR reinforces the idea that growth in trade correlates closely with policies that promote economic stability, private investment in production, public investment in education, infrastructure, logistics, and good governance in general. Countries with worsening security and governance problems face additional problems in benefitting from CAFTA-DR. It is also important to promote productivity in part by avoiding delays in making necessary adjustments to trade liberalization, focusing public and private resources on trade facilitation, developing strategies for trade diversification, and examining CAFTA-DR trade rules (especially for textiles and apparel) that have perhaps inadvertently hindered trade growth expected from the accord.

Introduction Within a week of each other, Senator Grassley and Representative Goodlatte, respective chairmen of the Senate and House Judiciary Committees, introduced parallel sentencing reform bills with bipartisan cosponsors. By and large in identical language, the two would amend existing mandatory minimum sentence provisions found in federal drug and firearms laws. The differences between S. 2123 and H.R. 3713 , occasioned by the manager's amendment adopted before the Senate Judiciary Committee passed S. 2123 , are noted in the prefatory remarks for each chart, and in the remarks relating to the inventory of federal crimes. The subjects of their proposals appear in earlier proposals including (1) H.R. 2944 , which Representatives Sensenbrenner and Scott, the chairman and ranking minority Member of the House Judiciary Committee's crime subcommittee, respectively, introduced for themselves and others, and (2) S. 502 / H.R. 920 , introduced by Senator Lee and Representative Labrador with additional bipartisan cosponsors. Their common components notwithstanding, the bills have some varying features. Mandatory Minimums Controlled Substances The Controlled Substances Act and the Controlled Substances Import and Export Act establish a series of mandatory minimum sentences for violations of their prohibitions. Trafficking—that is, importing, exporting, or manufacturing, growing, possessing with the intent to distribute—a very substantial amount of various highly addictive substances, such as more than 10 grams of LSD (§841(b)(1)(A)), is punishable by imprisonment for not less than 10 years or more than life. When substantial but lesser amounts are involved, such as 1 gram of LSD (§841(b)(1)(B)), sentences of imprisonment for not less than 5 years or more than life are called for, and imprisonment for not less than 10 years or more than life in the case of a subsequent conviction. Penalties for both sets of offenses increase if the crime results in a death or if the defendant has a prior conviction for a drug felony. The proposed amendments are noted and compared in Table 1 . S. 502 / H.R. 920 would reduce the mandatory minimum for the high volume §841(b)(1)(A) and §960(b)(1) offenses to imprisonment for not less than 5 years from not less than 10 years, and the mandatory minimums for the medium volume §841(b)(1)(B) and §960(b)(1) offenses to not less than 2 years from not less than 5 years. H.R. 2944 would eliminate the mandatory minimum for the high volume §841(b)(1)(A) and §960(b)(1) offenses, except when the defendant was the organizer or leader of a 5 member or more drug enterprise. It would eliminate as well the mandatory minimum for the medium volume §841(b)(1)(B) and §960(b)(2) offenses, except when the defendant was the organizer, leader, manager, or supervisor of a 5 or more member drug enterprise. Moreover, the recidivist enhancement would only come into play when the prior conviction for an offense carrying a maximum penalty of imprisonment for 10 years or more; resulting in a sentence of imprisonment for 13 months or more; and from which the defendant had been released within 10 years of the commission of the subsequent drug offense. H.R. 2944 would allow the court to treat each of its amendments, here and throughout the course of the bill, as grounds for reduced sentencing, on the motion of the court, the defendant, the prosecutor, or the Bureau of Prisons. S. 2123 / H.R. 3713 would create a mini-safety valve to reduce the mandatory minimum for the high volume §841(b)(1)(A) and §960(b)(1) offenses to imprisonment for not less than 5 years, unless the offender had used violence in the commission of the offense; had acted as a supervisor or leader of a drug enterprise; sold to minors; failed to fully reveal all the information or evidence at his disposal relating to the offense or related offenses; and had no prior serious drug or violent felony convictions. S. 2123 / H.R. 3713 would both expand and contract drug recidivist mandatory minimums under the high volume and medium §§841(b)(1)(A), 841(b)(1)(B), 960(b)(1), and 960(b)(2) offenses. Under existing law, any prior drug felony conviction triggers the enhanced recidivist mandatory minimum. Under S. 2123 / H.R. 3713 , only drug convictions carrying a maximum penalty of 10 years or more and resulting in a sentence of a year or more would trigger the increased recidivist mandatory minimums. On the other hand, convictions for kidnapping, burglary, arson or other serious violent crimes would also serve as a basis for the recidivist mandatory minimums. The bills would allow the courts, on their own motion or that of the defendant or the Bureau of Prisons, to resentence defendants, convicted prior to S. 2123 / H.R. 3713 's enactment, as though the bills' reduced recidivist mandatory minimums were in place at the time of prior sentencing. In doing so, the courts would be compelled to consider: the nature and seriousness of the risks to an individual or the community; the defendant's conduct following his initial sentencing; and the statutory sentencing factors which they must ordinarily weigh before imposing punishment. S. 2123 , but not H.R. 3713 , would make it clear that resentencing proceedings would be subject to the victims' rights provisions of 18 U.S.C. 3771, and that an inquiry into facts and circumstances associated with the initial sentencing would be a prerequisite to consideration of a resentencing motion. Section 3771 assures victims of the rights "to reasonable, accurate, and timely notice of any public court proceeding, involving the crime ..." and "to the right to be reasonably heard at any public proceeding in the district court involving ... sentencing ..." H.R. 3713 , but not S. 2123 , would insist on a sentence of imprisonment for not more than 5 years to be added to, and to be served after, any sentence imposed for the drug trafficking, exporting, or importing offenses, when heroin or fentanyl are involved. In addition, H.R. 2944 provides that no person shall be sentenced to enhanced punishment under the Controlled Substances Act if the conviction was for possession of a controlled substance, was classified as a misdemeanor in the relevant jurisdiction, or the conviction has been set aside. Further, the government bears the burden of proof in proving beyond a reasonable doubt the existence of the prior conviction. Safety Valve The so-called safety valve provision of 18 U.S.C. 3553(f) allows a court to sentence qualified defendants below the statutory mandatory minimum in controlled substance trafficking and possession cases. To qualify, a defendant may not have used violence in the course of the offense. He must not have played a managerial role in the offense if it involved group participation. The offense must not have resulted in a death or serious bodily injury. The defendant must make full disclosure of his involvement in the offense, providing the government with all the information and evidence at his disposal. Finally, the defendant must have an almost spotless criminal record, that is, not more than 1 criminal history point. Criminal history points and categories are a feature of the U.S. Sentencing Commission's Sentencing Guidelines. The Guidelines assign points based on the sentences imposed for prior state and federal convictions. For example, the Guidelines assign 1 point for any past conviction that resulted in a sentence of less than 60 days incarceration; 2 points for any conviction resulting in a sentence of incarceration for at least 60 days; and 3 points for any conviction resulting in a sentence of incarceration of more than a year and a month. The Sentencing Commission's report on mandatory minimum sentences suggested that Congress consider expanding safety valve eligibility to defendants with 2 or possibly 3 criminal history points. The report indicated that under the Guidelines a defendant's criminal record "can have a disproportionate and excessively severe cumulative sentencing impact on certain drug offenders." The commission explained that the Guidelines are construed to ensure that the sentence they recommend in a given case calls for a term of imprisonment that is not less than an applicable mandatory minimum. In addition, the drug offenses have escalated mandatory minimums for repeat offenders. Moreover, similarly situated drug offenders may be treated differently, because the states punish simple drug possession differently and prosecutors decide when to press recidivism qualifications differently. S. 502 / H.R. 920 would raise the qualification threshold to 3 criminal history points from 1 criminal history point and make no further changes. H.R. 2944 would expand the safety valve to mandatory minimums associated with the use of firearm during and in furtherance of a drug trafficking cases as well as to drug trafficking mandatory minimums. The bill would also raise the criminal history point threshold to 3 as long as the defendant's prior criminal record did not consist of convictions for violence, firearms, racketeering, terrorism, or sex offenses. H.R. 2944 would also discount convictions that were the product of a reduced, distressed, or coerced state of mind. S. 2123 and H.R. 3713 would change the safety valve as well. First, a defendant would be safety valve eligible with 3 or fewer criminal history points if he had not been convicted previously of either a drug trafficking offense, a violent offense, or a "3-point offense" (i.e., one for which he was incarcerated for 60 days or more). Second, the two proposals would permit the court to waive the criminal history disqualification, in cases other than those involving a past serious drug felony or serious violent felony conviction, if it concluded that the defendant's criminal history score overstated the seriousness of his criminal record or the likelihood that he would commit other offenses. Firearms There are two firearms-related offenses that call for the imposition of a mandatory minimum sentence of imprisonment. One, the so-called three strikes provision, also known as the Armed Career Criminal Act (ACCA), imposes a 15-year mandatory minimum sentence on an offender convicted of unlawful possession of a firearm who has three prior convictions for a drug offense or a violent felony. The other, 18 U.S.C. 924(c), imposes one of a series of mandatory terms of imprisonment upon a defendant convicted of the use of a firearm during the course of a drug offense or a crime of violence. The ACCA limits qualifying state and federal drug offenses to those punishable by imprisonment for more than 10 years. The qualifying federal and state violent felonies are burglary, arson, extortion, the use of explosives, or any other felony which either has the use or threat of physical force as an element. S. 2123 and H.R. 3713 would reduce the mandatory minimum penalty from 15 years to 10 years. They would also make the modification retroactively applicable in the same manner as the proposed mandatory minimum reductions in the case of controlled substances. That is, they would also permit federal courts to reduce the terms of imprisonment of defendants previously sentenced, after considering the defendant's conduct after his initial sentence, "the nature and seriousness of the danger to any person or the community," and the generally applicable sentencing factors of 18 U.S.C. 3553(a). Again, however, H.R. 3713 's retroactivity would only apply to defendants without a prior serious violent felony conviction. In contrast, H.R. 2944 does not reduce these mandatory minimum penalties. However, it alters the definition of a "serious drug offense" to one punishable by imprisonment for not more than 10 years, resulting in a sentence of more than 13 months, conviction for which occurred within the last 10 years not counting time in prison. In addition it alters the definition of "violent felony" to require a sentence of imprisonment for 13 months. Further, it provides that an individual may not be sentenced under the provision unless the U.S. Attorney files an information with the court—served on the defendant or counsel—specifying the previous convictions to be relied upon. Section 924(c) brings firearm mandatory minimum tack-on status to any federal drug felony and to any other federal felony, which either has the use of physical force or threat of physical force as an element or which by its nature involves a substantial risk of the use of physical force. While the ACCA calls for a single 15-year mandatory minimum, §924(c) imposes one of several different minimum sentences when a firearm is used or possessed in furtherance of another federal crime of violence or of drug trafficking. The mandatory minimums, imposed in addition to the sentence imposed for the underlying crime of violence or drug trafficking, vary depending upon the circumstances: imprisonment for not less than 5 years, unless one of the higher mandatory minimums below applies; imprisonment for not less than 7 years, if a firearm is brandished; imprisonment for not less than 10 years, if a firearm is discharged; imprisonment for not less than 10 years, if a firearm is a short-barreled rifle or shotgun or is a semi-automatic weapon; imprisonment for not less than 15 years, if the offense involves armor-piercing ammunition; imprisonment for not less than 25 years, if the offender has a prior conviction for violation of §924(c); imprisonment for not less than 30 years, if the firearm is a machine gun or destructive device or is equipped with a silencer; and imprisonment for life, if the offender has a prior conviction for violation of §924(c) and if the firearm is a machine gun or destructive device or is equipped with a silencer. One of §924(c)'s distinctive features is that its repeat offender provision has been construed to include conviction of an earlier count within the same prosecution. Under this stacking of counts, a defendant convicted of several counts arising out of a single crime spree involving the robbery of several convenience stores, for example, may face a mandatory term of imprisonment of well over 100 years. S. 2123 and H.R. 3713 would make clear that a conviction must have become final before it could be counted for purposes of enhancing the mandatory minimum. They would also reduce the repeat offender mandatory minimum from imprisonment for not less than 25 years to not less than 15 years. The proposals, however, would expand the repeat offender mandatory minimum to include recidivists with prior violent state crime convictions. And with one exception, they would both permit courts to apply the changes retroactively to cases that had become final, provided they took into account the defendant's post-conviction conduct, the nature and seriousness of threats to individual or community safety, and the generally applicable sentencing factors. H.R. 3713 differs from S. 2123 in one respect. It would not afford retroactive application to a defendant who has a prior conviction for a serious violent felony. S. 2123 differs from H.R. 3713 in one respect. As it would do in case of drug mandatory adjustments, it would make it clear that resentencing proceedings would be subject to the victims' rights provisions of 18 U.S.C. 3771, and that an inquiry into facts and circumstances associated with the initial sentencing would be a prerequisite to consideration of a resentencing motion. Section 3771 assures victims of the rights "to reasonable, accurate, and timely notice of any public court proceeding, involving the crime ..." and "to the right to be reasonably heard at any public proceeding in the district court involving ... sentencing ..." While H.R. 2944 also requires that a conviction be final to be counted for purposes of enhancing the mandatory minimum, it does not reduce the repeat offender mandatory minimum from imprisonment. In addition, the bill would modify the current statutory trigger's "during and in relation to any crime of violence or drug trafficking crime" language to "not include any possession not on the person of, or within arm's reach and otherwise readily and immediately accessible to the defendant at the time and place of the offense." S. 2123 and H.R. 3713 each have a third firearms amendment that, although not a strict mandatory minimum amendment, would increase the likelihood of imprisonment by operation of implementing sentencing guidelines by simply increasing the maximum sentence authorized for the offense or offenses. The two bills would increase from imprisonment for not more than 10 years to not more than 15 years the sentences for the following firearms offenses: false statements in connection with the purchase of a firearm or ammunition; sale of a firearm or ammunition to, or possession by, a convicted felon or other disqualified individual; while in the employ of a disqualified individual, receipt or possession of a firearm or ammunition; knowing transportation of stolen firearms or ammunition; knowing sale, possession, or pledge as security of stolen firearms or ammunition; or transfer or possession of a machine gun under certain circumstances. In contrast, H.R. 2944 contains no such provision. Fair Sentencing Act Originally, the Controlled Substances Act made no distinction between powder cocaine and crack cocaine (cocaine base). The 1986 Anti-Drug Abuse Act introduced a 100-1 sentencing ratio between the two, so that trafficking in 50 grams of crack cocaine carried the same penalties as trafficking in 5,000 grams of powder cocaine. The 2010 Fair Sentencing Act (FSA) replaced it with the present 500-28 ratio, so that trafficking in 280 grams of crack cocaine carries the same penalties as 5,000 grams of powder cocaine. The Sentencing Commission subsequently revised the Sentencing Guidelines to reflect the change and made the modification retroactively applicable at the discretion of the sentencing court. The FSA reductions apply to cocaine offenses committed thereafter. They also apply to offenses committed beforehand when sentencing occurred after the time of enactment. Federal courts have discretion to reduce a sentence imposed under a Sentencing Guideline that was subsequently substantially reduced. The FSA, however, does not apply to sentences imposed prior to its enactment, and it does not apply in sentence reduction hearings triggered by new Sentencing Guidelines. In such proceedings, the courts remain bound by the mandatory minimums in effect prior to enactment of the FSA. S. 2123 and H.R. 3713 , in roughly the same terms, would change that and would allow a court to reduce a sentence, imposed for an offense committed prior to the FSA, to reflect its provisions, unless the court had already done so or unless the original sentence was imposed consistent with the FSA amendments. H.R. 2944 would simply make the FSA retroactively applicable. New Mandatory Minimums H.R. 3713 and H.R. 2944 would create no new mandatory minimum sentencing provisions. S. 2123 , on the other hand, would establish two: one for interstate domestic violence offenses and another for certain violations of the International Emergency Economic Powers Act (IEEPA). Existing federal law criminalizes interstate domestic violence and interstate stalking, and penalizes them equally. S. 2123 would establish a mandatory minimum sentence of imprisonment for not less than 10 years when death resulted from interstate domestic violence. In addition, it would increase the maximum penalties for interstate domestic violence from imprisonment for not more than 20 years to not more than 25 years when life-threatening or permanent disfigurement resulted and from imprisonment for not more than 10 years to not more than 15 years when a dangerous weapon was used or serious bodily injury resulted. Otherwise, the Senate proposal would leave the penalties for interstate domestic violence and interstate stalking unchanged. IEEPA authorizes the President to exercise various authorities to "deal with any unusual and extraordinary [overseas threat] ... to the national security, foreign policy or economy of the United States." Presidents have used this authority to issue executive orders banning various unlicensed transactions with various countries, entities, and individuals. IEEPA violations are punishable by imprisonment for not more than 20 years. S. 2123 would create a separate mandatory minimum sentence of imprisonment for not less than five years for three types of IEEPA violations. One prohibits IEEPA violations that involve providing defense articles or services as defined by the Arms Export Control Act to countries under an arms embargo. Another prohibits IEEPA violations that involve supplying goods or services for the foreign development of weapons of mass destruction. The third prohibits IEEPA violations that furnish certain foreign entities with goods and services that are subject to export restrictions. In contrast, H.R. 2944 does not create new mandatory minimum sentences for crimes. Inventory of Federal Crimes S. 2123 would call for an inventory of federal crimes. Section 109 of the bill would direct the Attorney General to prepare and provide the House and Senate Committees on the Judiciary an inventory of federal statutory crimes and of federal regulatory offenses. The compilation of federal statutory crimes would have to identify for each offense: the attendant penalties and mens rea; the number of referrals for prosecution, prosecutions, convictions, and sentences imposed; as well as the number of prosecutions which did not require proof of a mens rea. The compilation of federal regulatory offenses would be organized by enforcing agency and would require the same information for regulatory offenses as required for statutory offenses. The Attorney General and pertinent agency head would also be responsible for the creation of a publicly available online index of such offenses. Similarly, H.R. 2944 requires the Attorney General to produce and publish a list of "the various Federal law violations that carry criminal penalties." In addition, federal agencies must obtain the Attorney General's approval to add a criminal penalty to an agency regulation. Finally, the Attorney General must develop procedures to provide coordination between the Department of Justice and other federal agencies to determine whether criminal or civil penalties are most appropriate to address unlawful conduct that involves federal agencies; and to coordinate between federal and state law enforcement officers to reduce duplicative prosecutions.

This is a comparison of selected criminal sentencing reform bills as introduced: H.R. 3713, H.R. 2944, S. 502, and H.R. 920; and S. 2123 as passed by the Senate Judiciary Committee with a manager's amendment. It consists of narrative and charts comparing the bills with respect to adjustments in the mandatory minimum sentencing provisions that apply to controlled substance and firearms offenses, the safety valve, and retroactive application of the Fair Sentencing Act (FSA).

Introduction U.S. actions in a foreign country in wartime can have effects that go far beyond the immediate situation. Building a power plant may not be just about generating power—it may be about employing local nationals who otherwise might join the insurgency, developing relationships with the local population, or developing the economic capacity of the region. U.S. government contracting efforts encompass a significant portion of U.S. activity in Afghanistan and are a key component of the current counterinsurgency (COIN) effort. From FY2005 through 2011, the U.S. government obligated over $50 billion for contracts performed primarily in Afghanistan. As U.S. General Allen, Commander, International Security Assistance Force – Afghanistan (ISAF), wrote in September 2011, "Integrating contracting into intelligence, plans, and operations, can serve as a force multiplier in obtaining our campaign objectives.... We must improve our contracting practices to ensure they fully support our mission." Because the primary goal of defense contracting in Afghanistan is to support the overall mission, which in turn is intended to promote U.S. interests abroad, it is deemed essential that contracting is not only thought of as a response to immediate practical needs but also as part of the larger strategy. Wartime Contracting Versus Peacetime Contracting U.S. government contracting in Afghanistan and other wartime environments is different than contracting in peacetime. In peacetime, the goal of contracting is generally to obtain the good or service that is required. The measurements of success are generally getting the right good or service, on schedule and at a fair price. In wartime, however—and particularly in a counterinsurgency environment—cost, schedule, and performance are often secondary to the larger strategic goals of promoting security and denying popular support for the insurgency. For example, in peacetime, the primary purpose of building a road is often to have the road built to specification in the most efficient and least expensive way. Other policy considerations may be factored in (such as small business or environmental concerns), but if the road is built on time, on schedule, and to the required specifications, the contract is usually deemed a success. In wartime, however, these may not be the right measures, as other goals may be equally or more important. Winning the support of the local village is often more important than staying on schedule. Helping train local nationals and building up the technical capabilities of local firms may be well worth a substantial increase in contract costs. Contract risks can also differ greatly between peacetime and wartime. Peacetime risks generally include cost overruns, schedule slips, and poor performance. Additional risks that must be considered when awarding a contract in an environment such as Afghanistan include diverting millions of dollars to warlords, criminal networks, or insurgents; hiring private security and other contractors who may engage in abuses that undermine the legitimacy of coalition forces; and the inflow of large sums of poorly managed contracting dollars fueling corruption. As General Allen stated in his contracting guidance to commanders in Afghanistan, it is important to "look beyond cost, schedule, and performance. Evaluate the success of a contract by the degree to which it supports the Afghan people and economy and our campaign objectives. Include operational criteria in decisions to award contracts, such as the effect of the contract on security, local power dynamics, and the enemy." For these reasons, contracting in wartime is often far more complex than contracting in peacetime. Some of the weaknesses of the current federal government acquisition process can be exacerbated by and exploited in a wartime environment, making it more difficult to adhere to best practices. These weaknesses include inadequate acquisition planning, poorly written requirements, and an insufficient number of qualified and capable acquisition and contract oversight personnel. For example, in a wartime environment, it is more difficult to write a good contract that incorporates the sometimes competing goals of counterinsurgency (COIN) contracting, more difficult to research and evaluate companies bidding on a contract, and more difficult to conduct oversight of projects being built in dangerous locations. It is also more difficult to protect against contracting fraud and corruption in countries that have weak law enforcement and judicial systems. Corrupt officials and warlords can exploit these weaknesses to divert contracting funds to their own coffers. Challenges of Wartime Contracting The challenge in Afghanistan is to ensure that U.S. funded contracts not only meet the stated requirements of customers, but do so without undermining the overall mission. Ideally, contracts will fulfill requirements while simultaneously contributing in other ways to the overall U.S. and International Security Assistance Force-Afghanistan (ISAF) mission of promoting security and building Afghan economic and government capacity. DOD contracts in Afghanistan are generally written to 1. sustain the force (base support, LOGCAP ), 2. build physical infrastructure (roads, power plants, cell towers, buildings), 3. develop the capacity of Afghans to sustain government operations and economic growth (training and mentoring Afghans, building technical capabilities of Afghan companies), or 4. create a secure environment and diminish violence. Because defense contracting in Afghanistan is intended to support the overall U.S. military and coalition mission, it is more difficult to write contract requirements that truly capture the underlying goals of the commander. As the example of the road construction project illustrates, while the specific requirement may be for a road, the broader requirement of the commander may be to promote security, economic development, and winning over the local community. Writing a requirement that captures the overall needs of the commander, and structuring a contract that advances the overall mission, is more difficult than writing requirements and structuring a contract for a road. Some contract provisions that can promote counterinsurgency goals include providing incentives to the non-Afghan prime contractor to train Afghan subcontractors in advanced engineering (meeting the goal of developing the economic capacity of Afghans), restricting competition or requiring contractors to employ locals (meeting the goal of promoting security by providing jobs to Afghans who might otherwise join the insurgency or turn to criminal activity), or ensuring that funds are reserved for long-term maintenance and operation of the road (ensuring sustainability of the effort). Even if the broader intent of the commander is addressed and a project is approached with COIN effects in mind, there is a larger question of how a given project coordinates with other projects to contribute to the overall national strategy. For example, if one area commander focuses on power generation, another focuses on road infrastructure, and a third focuses on irrigation, the result may be that millions of dollars are spent to create a patchwork of uncoordinated and ill-conceived projects that do not substantially contribute to economic development. Some observers believe that such fragmentation of effort is particularly pronounced in Afghanistan, where projects are funded by numerous agencies and organizations, including DOD, Department of State, U.S. Agency for International Development (USAID), the Afghan government, the United Nations, the Asia Development Bank, the governments of other coalition partners, and many others. Another factor further complicating project development and contracting writing, even when an overarching strategy is in place, is the challenge of figuring out how to create a project to best fit the unique needs and resources of Afghanistan. A number of projects built in Afghanistan were built to Western standards; these standards are not always appropriate for Afghanistan. For example, building a school according to American specifications may not be appropriate for Afghanistan if the lighting specifications require bulbs that are not readily available in Afghanistan. Building to Western standards also often results in higher operation and maintenance costs—costs that the Afghan government cannot afford to underwrite. Determining what are the most appropriate standards and quality of work in Afghanistan for a specific project further complicates the job of U.S. acquisition personnel who are accustomed to American standards and specifications. The State of Government Contracting in Afghanistan Personnel System Challenges U.S. government personnel rotate in and out of Afghanistan for tours generally ranging from 4 to 12 months, and sometimes for as little as 3 weeks. The constant rotation in and out of theatre makes it difficult to sustain long-term development strategies. For example, one military officer stated that when he was responsible for a region in Afghanistan, he implemented a micro-loan program to stimulate the economy. According to the officer, most loan recipients were repaying their loans. When the brigade rotated out of the region, the incoming brigade instituted a program that offered micro-grants instead of loans. The effect of the micro-grant program was to create divisions within the local community because many locals were upset that they had to repay loans when their neighbors received grants. In another instance, an officer stated that his strategy was to use micro-grants to help nurture the local economy and then graduate to other types of assistance. However, when his unit rotated out, the new unit decided to start a new micro-grant policy, resulting in some of the same people receiving additional grants. These examples illustrate the disruption and lack of coordination caused by constant troop rotation. The constant rotation of U.S. personnel also makes it difficult to plan, implement, and oversee contracts. An important aspect of wartime contracting is understanding the local political and economic landscape to ensure that contracts do not have a negative impact on the community, such as inflating prices or undermining the existing political structure. As General Allen wrote, commanders and contracting personnel must "consider both the potential positive effects of contract spending on the Afghan economy and potential negative effects, in concert with the Commander's campaign plan." However, it is difficult for commanders, acquisition personnel, and contracting officer representatives to understand the contracting landscape when they have only been in theatre for a short period. Another personnel-related challenge results from the way staff are assigned to positions in Afghanistan. Often, individuals are assigned to positions or given tasks to perform when they have no relevant background or experience in the subject matter—for example, an officer with a PhD in urban planning who was assigned to work at the Afghan Customs Department. As a result of the sometimes ad hoc nature of assigning people in the military, people who have no contracting experience have been assigned to develop contracting strategy, and contracting officer representatives with no construction experience oversee minor construction projects. Some senior ranking officers are assigned ad hoc to lead contracting efforts when they have no relevant experience in the subject matter. Insufficient Contract Oversight According to some government officials, there are simply not enough contracting officer representatives (CORs) in theatre to conduct adequate oversight. Insufficient numbers of oversight personnel increase the risk of poor contract performance. In Afghanistan—where corruption is rampant, criminal networks are thriving, and an insurgency is actively seeking to disrupt and undermine coalition efforts—insufficient contract oversight creates opportunities for criminals and insurgents to enrich themselves to the detriment of coalition goals. Contract management and oversight are therefore more important in Afghanistan than in peacetime settings. At the same time, actually performing contract oversight in Afghanistan is more difficult. In some instances the problem is not the number of contracting officer representatives, but the lack of expertise of those assigned to conduct oversight. According to DOD officials, the current training may qualify CORs, but it does not necessarily make them sufficiently capable for their particular assignments. According to a senior contracting official in Afghanistan, CORs with no construction experience are often assigned to oversee minor construction projects. These CORs may be called upon, for example, to determine whether a concrete slab meets the requirement of withstanding 3,000 psi of pressure without the expertise to make such a judgment. As previously discussed, the shortage of capable CORs is exacerbated by a wartime environment that results in a constant rotation of personnel in and out of theatre, as well as by a security environment that makes it difficult to conduct project oversight in remote locations. The constant rotation of military and civilian personnel means that there is weak continuity of oversight and that the contractors, who have been in Afghanistan for years, have a better understanding of the contracting landscape. Sometimes there are gaps between when one COR leaves theatre and another COR is appointed to a contract. In addition, the lack of security means that even if there are capable oversight personnel in place, it may be difficult to get to the location where a project is being built or a service is being performed. In September 2011, a contracting officer representative working for the Army Corps of Engineers was kidnapped and killed by an Afghan security guard. The victim is not the first American believed to have been killed as a result of efforts to conduct oversight. Because many contractors and their employees are Afghan, effective oversight is further hampered by the inability of most contract oversight personnel to speak to workers without an interpreter. All these factors combine to create an environment where there is insufficient oversight of many U.S. funded projects currently underway in Afghanistan. As a result, some contracts are not being performed to required specifications and tens of millions of dollars' worth of equipment, repair parts, and supplies are stolen. According to numerous government officials, intelligence sources, and contractor reports, significant amounts of contracting funds flow to criminal networks and insurgents. The lack of effective oversight also enables corruption and fraud. According to acquisition officials in Afghanistan, documents are signed accepting the work of contractors even when government officials have not inspected the goods or services being delivered and without rejecting work that does not meet the contract requirements. A number of analysts and officials have argued that until commanders view contract performance as a priority, contract oversight will continue to suffer. Corruption and Criminal Activity Another challenge is contracting in an environment that is rife with corruption, defined in this context as the misuse of a position of authority for personal gain, to the detriment of society and the goals of the mission. Many analysts believe that firms and individuals in Afghanistan are able to operate within the existing U.S. and ISAF procurement processes without fear of prosecution due to connections to corrupt power brokers and government officials . Studies have shown that Afghanistan regularly ranks as one of the most corrupt countries in the world and one of the most difficult countries in which to do business. One USAID official estimated that on some projects, up to 30% of contracted project costs can be attributed to corruption. A number of government and industry officials stated that corruption is the "price of doing business" in Afghanistan. Corruption takes many forms, including government officials charging bribes for transporting goods across the border and extorting protection payments. Many analysts view large swaths of the judicial sector and the attorney general's office as corrupt, as evidenced by the lack of prosecutions against high-ranking government officials or warlords accused of being involved in criminal activity or rampant corruption. In other instances, members of the Afghan security forces use their position to demand bribes and extort shipping companies at Afghan borders and airports. According to many analysts, substantial sums of aid money flowing into Afghanistan are being pocketed by corrupt officials and criminal networks, and are being diverted out of the country into bank accounts in Dubai and other overseas destinations. According to one joint Afghan government-ISAF estimate, the amount of goods flowing into Afghanistan should generate approximately $2 billion of customs revenue annually; instead, approximately $1 billion flows to the government and $1 billion is being diverted by local officials at the border. Approximately $70 million a week (more than $3.5 billion annually) flows out of Afghanistan legally, and many analysts believe that the illegal flow of money is substantially higher. This compares to the Afghan government's total core budget of $3.4 billion in FY2010. At a strategic level, the extent of corruption in Afghanistan raises questions as to how much of the money spent on U.S. government contracting is having a positive impact on the Afghan economy, and how much of the funds is actually staying in country. At a project level, the threat of corruption raises a number of questions for commanders and contracting officers, including whether a given project is an appropriate use of funds if the "corruption cost" is high, and how contracts can be structured or oversight can be performed to mitigate the threat of corruption. Among many Afghans, there is a perception that U.S. government contracting practices have enriched a select few at the expense of the general population. Current Efforts to Improve Contracting in Afghanistan Numerous reports have been written about the state of contracting in Iraq and Afghanistan. Some of these reports have highlighted the failure of ISAF and DOD to incorporate contracting into strategy, vet contractors, and conduct oversight of contractor performance. Many of these reports issued recommendations calling for better acquisition planning, more competition, better cost estimating and market research, and improved oversight. Other recommendations have called for mechanisms for improving interagency coordination or elevating the importance of contracting by creating senior agency positions responsible for contingency contracting matters. Other analysts have argued that nothing short of a culture shift in the military is required to improve contracting during contingency operations. A report commissioned by the Army and published in 2008 (the Gansler Report) found that despite the importance of acquisitions to military performance, "the Army apparently has not valued the skill and experience required to perform those processes…. [W]ithout significant systemic change, the Army acquisition processes [contracting process] can be expected to inevitably return to below-mediocrity." The Government Accountability Office (GAO) has stated that improving contracting at the strategic level sets the stage for improving contracting at the transactional, or project, level. According to a GAO report, the first step in improving contracting at the strategic level is senior leadership articulating the importance of contracting—the first step in changing the culture. In Afghanistan, an effort is currently underway to set the stage for better contracting. This effort, which is being spearheaded at the general officer level, seeks to take a strategic approach to contracting by (1) articulating the role of contracting in current operations; (2) identifying specific acquisition weaknesses and creating the infrastructure to address them; and (3) using more reliable data to make better acquisitions decisions. Senior military officials acknowledge that elements of the overall effort are still in the early stages of development and that ISAF should have pursued these and other initiatives years earlier. The effectiveness of the efforts to improve contracting can have an impact on the overall success of the U.S. mission in Afghanistan. The counterinsurgency manual written by then Lieutenant Generals David Petraeus (Army) and James Amos (Marine Corps) states "In COIN [counter-insurgency], the side that learns faster and adapts more rapidly—the better learning organization—usually wins." Given the role that contracting plays in supporting U.S. efforts in Afghanistan, the questions emerge: After more than 10 years in Afghanistan, what has been learned about contracting in a wartime environment? Are these lessons being used to adapt contracting efforts? Is the United States adapting fast enough to achieve mission objectives? Articulating the Role of Contracting Over the last year, senior DOD and U.S. Embassy leadership in Afghanistan has begun to articulate a clear contracting policy and emphasize the importance of contracting in the overall ISAF mission. On September 8, 2010, COMISAF General David Petraeus issued COIN Contracting Guidance. The guidance articulated the importance of contracting in the overall mission, stating that contracting is "commander's business." The guidance set forth clear and specific goals for contracting, including an emphasis on improving contract oversight, pursuing an Afghan First policy, and making contracting decisions that support overall COIN objectives. U.S. Ambassador Carl Eikenberry issued similar contracting guidance to Department of State and U.S. Agency for International Development personnel in November of the same year. On September 18, 2011, within three months of assuming command of ISAF, General John Allen updated COMISAF Contracting Guidance, with the intent of reinforcing the message that contracting plays a critical role in the overall mission. According to a U.S. Embassy official in Afghanistan, updated contracting guidance to Department of State and U.S. Agency for International Development personnel is being developed and should be issued in December. The guidance issued by the ISAF commanders, as well as comments made by other military commanders and high-ranking officials, was intended to highlight the importance of contracting to the overall mission in Afghanistan. The message was, if done right, contracting is a powerful way of supporting and promoting the mission; if done wrong, contracting can undermine the mission. This message is reinforced when commanders discuss contracting as part of overall discussions, as was recently done when General Allen discussed the new National Afghan Trucking contract in the daily COMISAF standup briefing. According to analysts and government officials, the contracting guidance has raised the awareness of the importance of contracting and the impact that contracting can have, both positive and negative, on the overall mission in Afghanistan. To many, the contracting guidance represented a philosophical shift requiring operational commanders to be more actively involved in contracting decisions and ensuring that contracting is more integrated with logistics, operations, intelligence, and COIN strategy. The role of contracting was also elevated when responsibility for contracting strategy and execution became the responsibility of generals. Under General Petreus, the position of Senior Contracting Official-Afghanistan was elevated from a colonel to a brigadier general. Under General Allen, implementation and coordination of COIN contracting guidance is the responsibility of several brigadier generals (see discussion below). Some analysts and military personnel believe there is room for senior leadership to engage even more on contracting issues, such as requiring contracting and economic development to be more fully integrated into daily leadership briefings. A number of general officers and acquisition personnel believe that the current level of leadership engagement is starting to change the way people think about how contracting is being done in Afghanistan. According to these officials, a critical part of leadership engagement is the increase in resources being dedicated to developing contracting strategy, coordinating contracting across agencies and governments, and conducting better contract management and oversight. Building the Institutional Infrastructure to Support Contracting in Wartime According to GAO and others, a key step in improving government contracting is building infrastructure that supports integrating contracting efforts into operational plans, improving intra- and interagency coordination, and improving contract execution (including writing better requirements and contracts and improving oversight). This infrastructure becomes more important in a wartime environment. As the Senior Contracting Officer-Afghanistan stated, the key to improving contracting in Afghanistan is to identify the most glaring weaknesses in the acquisition process and build the right infrastructure and support to overcome those weaknesses. The importance of establishing infrastructure to support contracting activities in wartime can be seen in a current effort underway to improve contracting oversight. Task Force 2010, discussed in greater detail below, is implementing an initiative to train CORs at the various regional commands throughout Afghanistan. However, because of the constant rotation of personnel, there is no guarantee that Task Force 2010 will always have experienced and qualified personnel to train CORs in theatre. Without putting infrastructure in place that perpetuates the program, the effort could fail. One option for perpetuating the program is to create a permanent billet in Afghanistan filled by Defense Acquisition University. Such an approach would ensure that Task Force 2010 has the infrastructure to perpetuate COR training beyond the tour of a single individual. Building the Infrastructure to Improve How Contracts Are Awarded and Investigate Misconduct A number of different task forces and organizations have been created to improve how requirements are written, market research is conducted, vendors are vetted, and oversight is conducted. The two major efforts in this area are Task Force 2010 and the Vendor Vetting Cell. DOD established Task Force 2010 in July 2010 to help commanders and acquisition personnel better understand with whom they are doing business, to conduct investigations to gain visibility into the flow of money at the subcontractor levels, and to promote and distribute best contracting practices. Task Force 2010 also supports efforts to track and recover goods that are stolen while in the possession of contractors providing logistics support to the U.S. government. It is the ISAF and U.S. Forces-Afghanistan link to the U.S. Army Procurement Fraud Branch, which leads the suspensions and debarment effort for Afghanistan. According to government officials, as of October 2, 2011, Task Force 2010 had assisted in the recovery of over 180,000 pieces of equipment worth over $170 million and successfully suspended or debarred over 120 companies or individuals. The Afghanistan Vendor Vetting Cell was established to ensure that government contracts are not awarded to companies with ties to insurgents, warlords, or criminal networks. The cell was set up in the fall of 2010 and is based in CENTCOM headquarters in Tampa, FL. In June 2011, the vendor vetting cell consisted of 14 analysts capable of vetting approximately 15 companies a week. The cell is expected to have 63 analysts by December 2011. The cell uses public and classified information to vet non-U.S. companies competing for U.S. government contracts in Afghanistan. The information is used to evaluate and rate companies according to risk levels. Vendors deemed unacceptable are proposed for suspension or debarment. In July-August of 2011, 520 companies were vetted, of which 44 were rejected. Only prime contractors with contracts estimated to be worth more than $100,000 are vetted. The vetting cell has a backlog of approximately 2,500 companies, which with current resources would take approximately two years to clear. Because of the backlog, companies are prioritized for vetting based on risk. Priority is given to vetting companies vying for information technology contracts, security contracts, transportation contracts, and high-value contracts (those over $1 million). Subcontractors are generally not vetted. Building the Infrastructure to Take a Strategic Approach to Contracting Senior military leaders in Afghanistan have recognized that there is no coordinated, strategic approach to government contracting and are working to develop one. COMISAF contracting guidance calls for integrating contracting into intelligence, plans, and operations, and for coordinating contracting efforts in the battle space. The ISAF COIN Contracting Economic Enterprise (ICCEE) was established to implement and coordinate the COMISAF COIN contracting guidance theatre-wide. This enterprise is responsible for integrating contracting into the overall ISAF economic development effort, gathering and using data to measure the effectiveness of contracting, and coordinating contracting efforts across coalition partners. There are three distinct groups within the ICCEE effort: the Executive Steering Committee, the Economic Enterprise Board, and the Economic Enterprise Cell. The Executive Steering Committee meets every other month and is a forum for coordinating contracting efforts across government and military organizations, including ISAF, USFOR-A, USAID, and other civilian governmental agencies and coalition partners. Part of the coordination effort includes gathering data, determining the appropriate benchmarks for measuring success, and comparing the data against these benchmarks. For example, the Steering Committee seeks to measure the effectiveness of the Afghan First policy (a policy that calls for hiring Afghan workers and Afghan companies whenever possible) by measuring what percentage of contracts are awarded to Afghan firms and what percentage of contract employees are Afghan. Representatives from the regional commands participate via teleconference in the Steering Committee meetings to try to connect higher headquarters coordination to regional activities. Whereas the Executive Steering Committee is a forum for government agencies to coordinate contracting efforts at a strategic level, the Economic Enterprise Board is a forum for coordinating ISAF and government contracting efforts with the Afghan government and non-governmental organizations. The Economic Enterprise Cell is the action arm that supports the Steering Committee and the Enterprise Board. The cell is responsible for developing and refining the metrics used to measure the effectiveness of Contracting and Economic Development efforts, create a common operating picture of contracting across the Afghan theatre, and draft and implement contracting policy. The cell is responsible for coordinating the development of an overarching economic plan that supports the ISAF operational plan. This plan is intended to create the strategic framework for contracting activities. The ICCEE effort has senior leadership involvement. The Executive Steering Committee is co-chaired by three brigadier generals, including representation from Task Force 2010, and the Senior Contracting Official-Afghanistan. The Economic Enterprise Board is chaired by a major general and co-chaired by two brigadier generals. The ICCEE effort is in early stages of development. There have been some meetings of the Executive Committee and the Enterprise Board, and the ICCEE cell is still bringing on staff. It remains to be seen how effective the ICCEE effort will be in implementing COMISAF contracting guidance throughout Afghanistan, particularly at the regional level. To address the issue of implementing contracting guidance at the regional level, there is an effort underway to establish a Commander's Interagency COIN Management Board (CICMB) at every regional command. The Commander's Interagency COIN Management Board is intended to ensure that contracting efforts support regional strategic priorities, and coordinate projects among the various agencies, governments, and NGOs. The first CICMB was stood up in Regional Command East in the fall of 2011. Improving Data to Measure the Impact of Contracting Billions of dollars are being spent on contracts in Afghanistan. Without gathering data and using it to evaluate the effect of contracts, it is difficult to know to what extent contracting efforts are successful. For example, ISAF has a stated policy that whenever possible, contracts should be awarded to Afghan companies. However, without good data, it is impossible to determine what percent of contracts are in fact going to Afghan firms and whether steps need to be taken to increase the number of Afghan firms winning contracts. ISAF and the U.S. government do not accurately or sufficiently track data upon which to make strategic contracting decisions in Afghanistan. Current databases are not sufficiently customized to track important contract data. For example, there is no consolidated theatre-wide database capable of tracking the amount of money spent on reconstruction or the amount of money spent on contracting in Afghanistan. Further, because people are often assigned to perform tasks in areas where they have little or no experience, officials who should have the information are not always aware that the data exist. A number of military and civilian personnel involved in developing COIN contracting strategies and policies were not aware of the existence of the CENTCOM quarterly contractor census that is released by the office of the Deputy Assistant Secretary of Defense (Program Support). Many of these officials are also unfamiliar with the contracting data contained in the Federal Procurement Data System (FPDS-NG). These sources include information directly related to contracting in Afghanistan. Within the last few months, U.S. government and coalition partners have made a concerted effort to identify the type of data needed to make good contract decisions, identify sources of data, and to gather the identified data. Senior officials within ISAF and DOD, in coordination with USAID, State, and a number of other coalition partners, have started gathering data on contracting, including data on the number and value of contracts in Afghanistan, how contracts are being written, and to what extent Afghan firms and Afghan employees are benefitting from ISAF, DOD, civilian agency, and coalition contracting. Not only are these data being collected, they are beginning to be used to measure the effectiveness of contract efforts in Afghanistan. Even when information is tracked, however, questions remain as to the reliability of the information. One reliability concern is that data are not getting put into the appropriate databases. According to database managers, a lot of data are kept at the local level and do not flow up to the central database. Even when data are tracked and sent to the central database, the data are often incomplete and unreliable. For example, there are five required data elements for reconstruction projects: (1) project start date; (2) project end date; (3) project type; (4) amount spent; and (5) project location. According to the managers of the theatre-wide database, in one instance, of approximately 59,000 records submitted to the database, only about 8,000 (14%) contained all five required elements. Some areas of data are more accurately tracked than others. For example, data managers stated that situation reports (sitreps), such as IED attacks, are entered fairly consistently and accurately. CERP (Commanders Emergency Response Program) data were not accurately tracked until 2009, when an emphasis was placed on accurately tracking CERP data. ISAF data managers estimated that overall, only about 10% of all data records are eventually put into the central database and that the error rate of data that are in the system is approximately 50%. Given current concerns over the reliability of contracting data, the information in the central database may not be sufficiently reliable for decision making at the strategic level. Highlighting questions of data reliability, different sources of government contracting information sometimes appear to contain conflicting information. The FPDS-NG database contains information on the number and value of contracts awarded to Afghan firms that appears to conflict with information compiled in Afghanistan. And the CENTCOM quarterly census contains information on the number of Afghans employed by DOD contractors and subcontractors that conflicts with information compiled in Afghanistan. According to GAO, DOD officials are aware of the conflicting sources of information and are working to reconcile the data and improve their reliability. The Host Nation Trucking Contract: A Case Study53 The Host Nation Trucking Contract has become a lightning rod for what is perceived as wrong with contracting in Afghanistan. The Department of Defense signed this contract for ground transportation to provide over 70% of the total dry goods and fuel for U.S. and coalition troops. The contract was awarded to eight prime contractors: two U.S., three Afghan, and three multi-national joint-venture companies. According to the contract, each contractor was responsible for its own security. The contract started in March 2009 and ended on September 15, 2011. Over $700 million was paid to eight transportation companies for delivery of services because of what DOD acquisition officials believe were inflated U.S. government cost estimates. Several Host Nation Trucking vendors are believed to have directed money through subcontractors to warlords and insurgents. Vendors were linked to criminal networks. According to military officials in Afghanistan, poor accountability and enforcement of supply procedures made cargo loads susceptible to fraud and pilferage. But because there were only eight prime contractors available to bring in large volumes of goods, there was little option but to use all of the contractors regardless of how well they performed or what they did. Because deliveries were not awarded based on performance, the U.S. government had limited ability to affect contractor behavior. Eventually, most of the prime contractors were suspended or debarred. In September 2011, the Host Nation Trucking Contract was replaced with a new contract, the National Afghan Trucking Contract. Leveraging some of the infrastructure that was put in place to improve contracting in Afghanistan, the new contract is viewed by many DOD officials and analysts as more effectively tailored to account for the unique wartime environment. Task Force 2010 reviewed the Host Nation Trucking contract and found that the way the statement of work was structured created opportunities for excessive profit and waste. For example, the same fee was paid without regard to whether security was actually used, and the payment structure inflated the market price, thus adversely impacting the local economy by adversely distorting market prices. With the help of Task Force 2010 and with senior leadership attention at military headquarters in Afghanistan, the new contract includes a number of different strategies, including providing separate cost structures depending on the specific security needs associated with the convoy in question, to ensure that the government only pays for actual security costs; inserting contract clauses that require prime contractors to provide information on subcontractors; and increasing the number of transportation companies from 8 to 20 to provide more flexibility in giving work to good companies and limiting the need to subcontract. Other changes include an order-of-merit list that awards new missions based on contractor performance and incorporation of new technologies aimed at getting better in-transit visibility and timely delivery. While many analysts consider the new contract to be an improvement over the previous contract, only time—and effective oversight—will tell to what extent these changes are effective. Issues for Congress The allocation of billions of contracting dollars to support military operations and reconstruction efforts in Afghanistan raises a number of potential questions for Congress that may have significant policy implications for current and future overseas operations. To what extent are U.S. government development and CERP contracts contributing to the overall mission in Afghanistan? Billions of contracting dollars have been spent to support U.S. interests in Afghanistan, yet it is not always clear to what extent these contracting efforts are actually supporting strategic-level campaign goals. For example, an April 2011 report by the Counterinsurgency Advisory & Assistance Team – ISAF, stated Despite hundreds of millions in investments, there is no persuasive evidence that the Commander's Emergency Response Program (CERP) has fostered improved interdependence relationships between the host government and the population – arguably the key indicator of counterinsurgency success. Given the extent of corruption in Afghanistan, the lack of effective planning and coordination of many projects, and the inability of the Afghan government to sustain the projects that have already been completed, Congress may wish to examine more closely the extent to which U.S. contracting activities effectively meet overall strategic objectives. To what extent is DOD taking the appropriate steps to improve contracting in Afghanistan? Many of the problems with contracting in Afghanistan are partly a result of the difficulties inherent in contracting in a wartime environment. These weaknesses include a lack of reliable data upon which to make contracting decisions, failure to sufficiently integrate contracting into operational plans, insufficient oversight, and the difficulty in executing contracts quickly. This raises a number of issues which may be of interest to Congress, including: What are DOD and other agencies doing to gather reliable data upon which to coordinate activities and to make critical contracting decisions? What steps are being taken to understand the root causes of the weaknesses in the way DOD acquires goods and services? What is DOD doing to improve wartime contracting? To what extent are the efforts being taken to improve contracting addressing the underlying problems with the contracting effort as it is performed in Afghanistan? Is legislation required to address some of the differences between peacetime and wartime contracting? How will development projects be sustained? According to the Commission on Wartime Contracting, the U.S. government has built many projects in Iraq and Afghanistan that have proved unsustainable. As the World Bank noted, these investments and programs are creating substantial expenditure liabilities for the future that the Afghan government cannot afford. Senior U.S. officials have publicly acknowledged that Afghanistan cannot sustain its own security budget. This raises a number of issues which may be of interest to Congress, including: Given the inability of the Afghan government to independently sustain existing projects, should contracts for new or ongoing projects be suspended until the Afghan government can afford to maintain the projects? Instead of funding new or completing current projects that cannot be sustained, should aid money be deposited into an account that will fund future operations and maintenance? Do all appropriate reconstruction projects require that Afghan firms be sufficiently trained and capable of operating and maintaining the completed project? Should all new and ongoing contracts be structured to ensure that sufficient funds are set aside to guarantee that the project can be sustained for a specified number of years? Should funding and authorization documents include operation and maintenance funds when procurement or military construction funds are committed? How will contract oversight be impacted by the drawdown in Afghanistan? According to U.S. military officials, in some instances, contractors will be used to replace uniform personnel who are withdrawing from Afghanistan. Replacing uniform personnel with contractors could result in an increase in the proportion of contractors in Afghanistan. In addition, the drawdown could result in fewer acquisition personnel and fewer resources dedicated to contract management and oversight. To what extent will the drawdown result in an increased reliance on contractors? To what extent is the drawdown being planned to account for contract management and oversight? Will Task Force 2010 and other task forces or organizations involved in acquisitions be disproportionally affected by the drawdown? To what extent is DOD preparing for the role of contractors in future military operations? As a number of congressional reports have pointed out and DOD officials have acknowledged, many lessons can be learned from the experience in Iraq and Afghanistan. Yet there does not appear to be a clear, comprehensive strategy to capture contracting lessons learned and incorporate those lessons into training, education, and doctrine. To what extent is DOD integrating the use of contractors into future planning? How are lessons learned being used to update doctrine? To what extent is the development of the future force structure being informed by a well-thought-out plan for how contractors will be used in future operations? To what extent is DOD adapting what is taught in military educational institutions and how field exercises are conducted to prepare the operational force for how contractors will be used in future operations?

Government contracting in Afghanistan and other wartime environments is different than contracting in peacetime. In peacetime, the goal of contracting is generally to obtain the good or service that is required. The measurements of success are generally getting the right good or service, on schedule, and at a fair price. In wartime, however—and particularly in a counterinsurgency environment—cost, schedule, and performance are often secondary to larger strategic goals of promoting security and denying popular support for the insurgency. From FY2005 through 2011, the U.S. government obligated more than $50 billion for contracts performed primarily in Afghanistan. Because a primary goal of defense contracting in Afghanistan is to support the overall mission, it is deemed essential that contracting is not only thought of as a response to immediate needs but also as part of the larger strategy. As General Allen, Commander, International Security Assistance Force, recently wrote, "We must improve our contracting practices to ensure they fully support our mission." Many of the weaknesses of the current government acquisition process can be exacerbated and exploited in a wartime environment, making it more difficult to adhere to best practices. These weaknesses include inadequate acquisition planning, poorly written requirements, and an insufficient number of capable acquisition and contract oversight personnel. For example, in a wartime environment, it is more difficult to research and evaluate companies bidding on a contract and more difficult to conduct oversight of projects built in dangerous locations. In Afghanistan, an effort is currently underway to improve contracting. This effort, led by senior military officers, seeks to take a strategic approach to contracting by (1) articulating the role of contracting in current operations; (2) identifying specific acquisition weaknesses and creating the infrastructure to address them; and (3) using reliable data to make better acquisitions decisions. Two of the major initiatives to improve contracting in Afghanistan that are well underway are Task Force 2010 and the Vendor Vetting Cell. Task Force 2010 was established in 2010 to help DOD commanders and acquisition personnel better understand with whom they are doing business, to conduct investigations to gain visibility into the flow of money at the subcontractor level, and to promote best contracting practices. The task force also supports efforts to track and recover goods stolen while in the possession of contractors providing logistics support. As of October 2, 2011, Task Force 2010 assisted in recovering over 180,000 pieces of equipment worth over $170 million and successfully suspended or debarred over 120 companies or individuals. The Afghanistan Vendor Vetting Cell was established to ensure that government contracts are not awarded to companies with ties to insurgents, warlords, or criminal networks. The cell was set up in the fall of 2010 and is based in CENTCOM headquarters in Tampa, FL. In June 2011, the vendor vetting cell consisted of 14 analysts capable of vetting approximately 15 companies a week. The cell is expected to have 63 analysts by December 2011. The billions of contracting dollars spent to support military operations and reconstruction efforts in Afghanistan raise a number of potential questions for Congress that may have significant policy implications for current and future overseas operations. These questions include (1) to what extent are U.S. government development and CERP contracts contributing to the overall mission in Afghanistan; (2) how will contract oversight be impacted by a troop drawdown; and (3) to what extent is DOD preparing for the role of contractors in future military operations?

Introduction The end of the Cold War altered the U.S.-French relationship. Before the collapse of the Soviet Union, the United States, France, and their NATO allies viewed the USSR as the principal threat to security. France was known for its independent streak in policy-making, both with its European counterparts and the United States, notably under President Charles de Gaulle in the 1960s. Nonetheless, there was cohesion throughout the alliance at such moments as the Berlin crisis of 1961, the Cuban missile crisis the following year, and the debate over basing "Euromissiles" in the 1980s. Several factors shape French foreign policy that may be of interest during the 112 th Congress. After several years during which Jacques Chirac contested elements of George W. Bush Administration policy, French President Nicolas Sarkozy has sought to improve bilateral relations. Sarkozy has pursued what he considers a more practical policy than his Gaullist predecessors, such as Chirac and President de Gaulle himself, who anchored elements of their nationalism by defining France as a country that selectively stood against U.S. influence in the world. By contrast, Sarkozy has expressed an acceptance of, and even admiration for, U.S. global leadership. He lauds American culture, has vacationed in the United States, and contends that European security must have a U.S. component. Nonetheless, differences between the United States and France in the approach to foreign policy are likely to persist. France has a self-identity that calls for efforts to spread French values and views, many rooted in democracy and human rights. France prefers to engage most international issues in a multilateral framework, above all through the European Union (EU). France is also a highly secular society, a characteristic that influences views on the state's relation to religion. Since the conclusion of the Cold War, the perspectives of France and the United States have diverged in some cases. Most core interests remain similar. Both countries' governments have embraced the opportunity to build stability in Europe through an expanded EU and NATO. Each has accepted the need to ensure that Russia remain constructively engaged in European affairs. Each has also recognized that terrorism and the proliferation of weapons of mass destruction are the most important threats today. Post-Cold War developments have brought new challenges, which have affected the U.S.-French bilateral relationship. German unification and the entry of central European states into the EU and NATO may have shifted the continent's balance of political and economic power away from the French-German "engine" and towards central and eastern Europe. While French-German initiatives remain of great importance in Europe, German perspectives are increasingly eastward; and, in some eyes, central European states feel closer strategically and politically to the United States than they do to France. Nonetheless, France remains a key player in European affairs and few initiatives can succeed without its support and participation. The United States, a global superpower since the Second World War, has remained deeply involved in European affairs. In the view of some Europeans, however, by the mid-1990s, Washington appeared to be slowly disengaging from Europe, while wanting at the same time to maintain leadership on the continent. French and German efforts to form an EU security policy potentially independent of NATO and the United States emerged and evolved in this period. The Europeans based this policy in part on the belief that the United States had growing priorities beyond Europe, and in part because Americans and Europeans were choosing different means to protect their interests. The U.S. decision to go into Afghanistan in October 2001 with initially minimal allied assistance was one example of this trend; the U.S. war against Iraq, with overt opposition from France and several other allies, was another. During the George W. Bush Administration, France, with other European allies, pressed the United States to confront emerging crises within a multilateral framework. Terrorism and proliferation are threats that cross borders, and often involve non-state actors. France, where possible, normally attempts to engage elements of the international community in responding to such threats, and to "legitimize" actions ranging from economic sanctions to political censure to military action at the United Nations. Past French Presidents have promoted a view of a "multipolar" world, with the EU and other institutions representing poles that encourage economic development, political stability, and policies at times at odds with the United States. While Jacques Chirac was president, Bush Administration officials reacted with hostility to such efforts, charging that "multipolar" is a euphemism for organizing opposition to U.S. initiatives. The election of President Obama was welcomed in France, and strong popular support for Obama suggests that many in France view the Obama Administration as having distanced itself from the perceived unilateralism of the Bush Administration. In the aftermath of the United States' 2003 invasion of Iraq, some U.S. observers characterized France as an antagonist. In 2004, the previous French ambassador reportedly charged that some U.S. officials deliberately spread "lies and disinformation" about French policies in order to undercut Paris. Occasional mutual antagonism was already evident during the first years of the Fifth Republic (1958-present), when President de Gaulle sometimes offered singular views on international affairs, often at odds with Washington and other allies, and in 1966 withdrew France from the military structures of NATO. In the 1960s, France began to develop its own nuclear deterrent force. As alluded to earlier, Sarkozy has made a concerted effort to draw France closer to the United States and distance himself and the country from past disputes with the United States. Most notably, in April 2009, Sarkozy announced France's full reintegration into NATO's military command structure as part of a broader realignment and modernization of French security and defense policy. French assertiveness is generally seen in a different light in Europe. In the past, France has been credited for driving the European integration project; Paris played a major role, for example, in the conception and implementation of the EU's Economic Monetary Union (EMU). That said, some in Europe, including Germany's Chancellor Angela Merkel, have reportedly been frustrated by what they consider Sarkozy's tendency to pursue EU-wide initiatives without first consulting other European leaders. Traditional French assertiveness accounts in some ways for France punching above its weight on the international scene. France is a country of medium size with relatively modest resources. Yet it has consistently played a leadership role, for example, in establishing EMU, forging a common European foreign, security, and defense policy (CFSP and CSDP), and in orchestrating opposition to the U.S.-led Iraq war. Most recently, in early 2011, France, along with the United Kingdom (UK), led the diplomatic effort at the United Nations to impose an arms embargo and economic sanctions on the regime of Muammar Qadhafi in Libya and to gain international approval of a military mission to protect Libyan civilians from the regime's forces. France launched the first airstrikes against the Qadhafi regime and France and the UK are by far the biggest contributors to ongoing military operations. While U.S.-French relations have at times been contentious, there is also a complementarity and an intertwining of U.S. and French interests and actions. Nowhere is this more clear than in the realm of commercial interactions. Trade and investment ties between the countries are extensive, providing each side a big stake in the vitality and openness of their respective economies. Through trade in goods and services, and, most importantly, through foreign direct investment, the economies of France and the United States have become increasingly integrated. Over $1 billion in commercial transactions take place every business day of the year between the two sides. This huge amount of business activity, in turn, is responsible for creating several million American and French jobs. The United States and France also have a long military relationship dating back to the Revolutionary War, when France aided the United States in its battle for independence. Today, some analysts believe France and Britain are the only two European allies with flexible, mobile forces that can sustain themselves long distances from their territories. U.S. military officials say that French forces have improved substantially in the past decades, and have a highly educated and motivated officer corps. Former U.S. National Security Advisor and NATO Supreme Allied Commander Europe (SACEUR) James Jones has said that "France probably has the military in Europe most able to deploy to distant theaters." Officials in both Washington and Paris report that French and American troops have excellent relations in the field, notably in Afghanistan . Other areas of complementarity include the ongoing NATO missions in Afghanistan and Libya, peace operations in the Balkans, the Middle East Peace Process and efforts to counter the Iranian nuclear program, and the fight against terrorism—all challenges where France has played a central role. A major split occurred over Iraq, however, with many countries either supporting or independently sharing French ideas of greater international involvement. This report examines the key factors that shape French foreign policy. From that context, it analyzes some of the reasons for the tensions in and the accomplishments of U.S.-French relations. The report is illustrative, rather than exhaustive. Instead, the report reviews issues selected because they exemplify some of the essential features of the U.S.-French relationship. Some issues, such as the effort by the United States and the EU-3 (France, Britain, and Germany) to curb Iran's military nuclear program are analyzed more extensively elsewhere by CRS. Current Domestic Context President Sarkozy, of the center-right Union for a Popular Movement ( Union pour un Mouvement Populaire, or UMP), was elected to a five-year term in May 2007 and is expected to stand for re-election in the spring of 2012. His presidency has been marked by his seemingly unbridled ambition and limitless energy, earning him the nickname "hyper-president." However, a steady decline in his popularity — an April 2011 public opinion poll gave Sarkozy a 70% disapproval rating — suggests that French voters expected more substantive results from the numerous initiatives he has advanced during his term. Sarkozy continues to enjoy the solid public backing of his UMP party and the party holds a significant majority in France's bicameral legislature. Nonetheless, as the 2012 election approaches, he will face growing pressure from the left-wing Socialist Party ( Parti Socialiste , or PS), which scored a decisive victory over the UMP in local elections held in March 2011. Perhaps more disconcerting for Sarkozy and the UMP, is the rise of the far-right, anti-immigrant National Front ( Front National , or FN), which has been gaining in popularity and appears to be increasingly attracting support from Sarkozy's traditional conservative base. The National Front last sent shock waves through the French political establishment during the 2002 presidential election when its then-leader, Jean-Marie Le Pen, who had in the past been convicted of anti-Semitic crimes, beat the Socialist candidate, Lionel Jospin, in the first round of voting. Le Pen has since been succeeded by his daughter, Marine Le Pen, whose efforts to distance the party from her father's caustic xenophobia appear to be having significant success. Sarkozy's continued emphasis on the importance of French national identity and his calls for a national debate of the role of Islam in France (discussed in more detail below) are widely seen as an effort to shore up conservative support ahead of the 2012 presidential election. Analysts agree that Sarkozy's domestic struggles are primarily the result of widespread dissatisfaction with the climate of fiscal austerity and high unemployment following the global economic downturn in 2008 and 2009. The president's biggest challenges have been to stimulate a French economy that contracted by 2.5% in 2009 while trying to reduce a budget deficit that reached 7.5% of GDP in 2010. His administration aims to bring the deficit down to 3% of GDP by 2013, largely by phasing-out stimulus measures introduced in 2009 and 2010 and by enacting additional spending cuts, including a nominal freeze on most government spending. In the face of these measures, observers expect economic growth to stagnate at about 1.5% of GDP for the next two to three years, with unemployment forecast to drop slightly from 9.3% in 2010 to 8.8% in 2012. The Sarkozy government continues to face strong public opposition to spending cuts and efforts to liberalize what remains a highly regulated economy, including measures aimed at bringing more flexibility to the labor market, promoting competition, and streamlining the public administration. Enacting such reforms has historically been a difficult proposition in France, where strikes and public protest feature famously in the national character. This was evident in 2010, over the course of a national debate on the retirement age. Although the government ultimately enacted its proposal to raise the retirement age from 60 to 62, the unpopularity of the initiative and Sarkozy's low public standing ahead of the 2012 election suggest his government may be unlikely to pursue further structural reforms on this scale. In the face of the sluggish economy and other domestic political troubles, Sarkozy has vigorously sought to boost his and his country's profile on the world stage by pursuing an assertive foreign policy agenda. Sarkozy won broad praise for his handling of France's presidency of the European Union in 2008, during which he moved quickly to seek to end Russia's invasion of Georgia and convened European leaders to confront the oncoming economic crisis. As mentioned above, France, along with the UK, led diplomatic efforts at the U.N. to win international approval for military action to protect civilians in Libya, and Paris has taken the lead in ongoing military operations there. Sarkozy has also placed great emphasis on France's current chairmanship of the G8 and G20 groups of advanced and emerging economies in 2011. Religion and the State: Laïcité and the debate over the role of Islam in French society France has a long history of religious violence. Political factions went to war in the 16 th century over religious differences and dynastic claims; the conflict left many thousands dead and the society badly divided. One cause of the Revolution was a desire by many to end the Catholic Church's grip on elements of society and dismantle a church hierarchy widely viewed as corrupt and poorly educated. In the late 19 th and early 20 th centuries, the government sought to ensure that public schools did not become embroiled in religious controversies. Parliament passed a law in 1905 intended to ensure separation between religion and politics. The law enshrined laïcité as a principle of French life. Laïcité is not simply secularism, but rather an attempt to balance religious freedom and public order. The government protects freedom of religion, and there is no state church in France; at the same time, there is an effort to ensure that religious groups do not engage in political activism that would be disruptive of public life. A 2004 ban on the wearing of religious symbols in schools and a July 2010 parliamentary decision that would bar women from wearing full face veils in public have caused controversy in France and pitted some Muslims against the government. In March 2004, after an extended debate, France enacted a law banning "conspicuous" religious symbols in public schools through the secondary level. The law prohibits the wearing of head scarves. It also bans religious symbols such as large crosses and the yarmulke. The government argued that the bill was necessary to "set limits" in the face of growing religious militancy in French society. Proponents of the law, including some moderate Muslim groups in France, supported it as a means to reduce tensions in the school system and broader society. Critics of the ban warned that it was essentially a negative instrument that could alienate Muslims in French society. In September 2010 the upper house of the French parliament overwhelmingly passed government-supported legislation that would forbid the wearing in public of garments that cover the face (the lower house passed the legislation in July 2010). The ban, which officially entered into force in April 2011, applies to dress worn by an estimated 2,000 Muslim women in France, including the burqa , a full body veil with mesh over the eyes, and the niqab , which also covers the face, but leaves an unobstructed opening for the eyes. The ban imposes a €130 (about $170) fine on anyone wearing a face covering in public, and a €30,000 (about $39,600) fine and up to one year in prison for anyone who forces someone to wear such a face covering. French government officials and other proponents of the full-face-vail-ban cite principles of human dignity and equality between men and women as well as public safety concerns in justifying the policy. Among other things, they argue that the full face veil is a symbol of female submission that prevents the wearer from integrating into French society. They also contend that the veil could present a security threat by preventing law enforcement officers from identifying individuals in public places. Public opinion polls indicate that the proposed legislation enjoys the support of over 80% of the French population. Critics of the veil ban, including many French Muslims, have argued that the new law will do more to stigmatize French Muslims than address real integration problems. They point out that relatively few French Muslims support the full face veil as religious prescription, as evidenced by the fact that only a small minority of French Muslims wear the burqa or niqab . Indeed, some critics contend that in advocating the ban, President Sarkozy may have been mostly concerned with garnering political support from conservative voters and in demonstrating to the public "that the government is doing something" to address concerns about the integration of Muslims in France. Sarkozy has had a difficult relationship with the Muslim community. As Interior Minister in 2005, he referred to rioters of Muslim descent as "scum" who should be "washed away by a power hose." Since becoming president, Sarkozy has offered strong rhetoric on the need for those of foreign descent to respect the law, learn the French language, and adopt French cultural norms. Although he has also at times signaled a willingness to pursue a policy of "positive discrimination" to assist the economically disadvantaged, his more recent efforts to address integration issues have been strongly criticized by Muslims and immigrant rights advocates and have reinvigorated debate in France over the role of Muslims in French society. In March 2011, Sarkozy fired his advisor on diversity, Abderrahmane Dahmane, after Dahmane openly criticized the president, calling his party "a plague for Muslims." In November 2009, the Sarkozy government launched a nationwide "debate on national identity" that was to consist of a series of over 100 town-hall meetings across the country to address the question of what it means to be French in the 21 st century. In the view of many observers, the open debates often provided a platform for offensive and racist rhetoric, that, if anything, served to heighten tensions between Muslims and "native" French. Critics contend that Sarkozy sought to use the initiative to ignite nationalist sentiment and to gain votes from the right wing of the political spectrum in regional elections held in March 2010. These criticisms have continued, particularly as Sarkozy faces pressure from Marine Le Pen and the National Front. In April 2011, Sarkozy sponsored a follow-up convention to the national identity debate entitled the "Convention on Islam and Laïcité, " which has been the object of similar criticism. In comments that led to his firing, Sarkozy's former diversity advisor charged that the Convention was planned by a "handful of neo-Nazis." Factors Shaping French Foreign Policy A Global Perspective France, like the United States, believes that it has a special role in the world. The core perceptions of France's role in the world stem from the Revolution that began in 1789. The Revolution was an event of broad popular involvement: widespread bloodshed, expropriation of property, and execution of the king fed the notion that there could be no turning back to monarchical government. Not only was the monarchy overthrown and a powerful church structure forcibly dismantled, but French armies, and ultimately French administrators in their wake, transformed much of the continent into societies where more representative, democratic institutions and the rule of law could ultimately take root. The Revolution was therefore a central, formative element in modern European history, notably in Europe's evolution from monarchical to democratic institutions. The cultural achievements of France before and since the Revolution have added to French influence. French became the language of the élite in many European countries. By 1900, French political figures of the left and the right shared the opinion that France was and must continue to be a civilizing beacon for the rest of the world. The view that France has a "civilizing mission" ( la mission civilisatrice) in the world endures today. For many years, the French government has emphasized the message of human rights and democracy, particularly in the developing world and in central Europe and Eurasia. Many French officials, particularly Gaullists, have been highly assertive in seeking to spread French values throughout the world. Dominique de Villepin, the last prime minister under Sarkozy's predecessor Jacques Chirac, wrote that "at the heart of our national identity, there is a permanent search for values that might be shared by others." France's rank and influence in the world are important to French policymakers. Membership on the U.N. Security Council, close relations with parts of the Arab world and former worldwide colonies, aspects of power such as nuclear weapons, and evocation of human rights are central to France's self-identity in international affairs. Others sometimes contest France's evocation of values. By the mid-20 th century, some French colonies, such as Algeria and Morocco, sharply disputed whether actual French policy met the ideals of Paris's message. Algeria fought an eight-year war for independence—a brutal guerilla war of terrorism, counterinsurgency, and torture which left tens of thousands of French and hundreds of thousands of Algerians dead. Multilateralism Multilateralism is important to all 27 members of the European Union, which is itself a multilateral entity painstakingly put together over a fifty-year period. For Europeans, decision-making in international institutions can lend legitimacy to governmental policies. Member states of the EU share certain areas of sovereignty and pursue joint policies intended to provide political and economic stability, goals that the United States has supported since the 1950s. Globally, Europeans perceive the U.N. as the locus for decision-making that can provide an international imprimatur for member states' actions in international security. The U.N. carries special significance for European countries that experienced two world wars. Europeans see the EU and the U.N. as belonging to a civilizing evolution towards cooperation rather than confrontation in world affairs. France is in a key position in the framework of multilateral institutions. It enjoys a permanent seat and holds a veto in the U.N. Security Council. Important EU policies are not possible without French support. French officials play central roles on the European Commission, in the European Central Bank, and the IMF, and are eligible to lead, and have led, each of these institutions. Sarkozy subscribes to this tradition that emphasizes multilateralism. Shortly after his victory in the presidential elections on May 6, 2007, he expressed his admiration for the United States, but added that the United States should reverse course and lead the effort to combat global climate change. He has since emphasized the importance of U.N. backing for peacekeeping operations in Lebanon and the NATO mission in Libya. As discussed in more detail below, Sarkozy has also reaffirmed France's commitment to NATO by bringing the country back into the alliance's integrated military command structure. During the George W. Bush Administration, France, with other European allies, pressed the United States to confront emerging crises within a multilateral framework. France was particularly critical if the U.S. invasion of Iraq, which was seen as a unilateral action that undermined the notion of collective security. In a speech to the U.N. General Assembly in clear reference to the U.S. invasion of Iraq, Chirac said, "In today's world, no one can act alone in the name of all and no one can accept the anarchy of a society without rules. There is no alternative to the United Nations.... Multilateralism is essential.... It is the [U.N. Security Council] that must set the bounds for the use of force. No one can appropriate the right to use it unilaterally and preventively." For the most part, France's record over the past decade has been consistent in following the precept that the U.N. must endorse the use of force in a crisis. For example, France, along with other countries, since 1990 has obtained a U.N. resolution for the potential or actual use of force for interventions in the first Gulf War, Bosnia, Afghanistan, Congo, the Ivory Coast, Haiti, and the ongoing NATO mission in Libya. One notable exception came in 1999, when France joined its NATO allies in going to war against Serbia in an effort to prevent ethnic cleansing in Kosovo. In that case, until the eleventh hour, the French government sought a U.N. resolution for NATO's use of force. At the same time, in the face of an increasingly likely Russian veto, French officials and counterparts from several other European allies began indicating that Serbian actions had reached a stage where using force to prevent a humanitarian catastrophe in Kosovo would be justifiable without a U.N. resolution. The European Union France was one of the founding members of the European Union (initially known as the European Coal and Steel Community, and then the European Community) in the 1950s. Central economic objectives were improved trade and development after the dislocation of the Second World War. Overarching political objectives from the beginning were rapprochement between Germany and its former enemies, and stability on the continent. The EU was conceived in this context, with strong U.S. support. France has been a catalyst in achieving greater political unity and economic strength within the European Union. Sarkozy's predecessor, Jacques Chirac, altered the traditional Gaullist view that France could act alone as a global power and be the Union's most important member. Rather, today, the Gaullists believe that France can best exert its power through the EU. Some French officials say that France "does not wish to be resigned to a Europe which would only be a space of internal peace." In their view, the EU should become a force for positive, broad-reaching change in Europe and the world. At the same time, France wishes to maintain a powerful position within the Union. Gaullists have sought to embed French views in EU initiatives, most often in concert with Germany (and occasionally Britain), but sometimes alone. In the past, French officials have called for an "inner circle" of a small number of states around France and Germany that must move forward to secure Economic Monetary Union (EMU), a common foreign and security policy, and a military force able to protect the Union's interests. Some European governments object to the view that such a select group of EU member states can and should guide EU policies. They describe the claim for leadership by the three countries as an effort to dominate the EU and push smaller member states to follow the three governments' lead. For their part, French officials cite a range of examples where such a "pioneer group" of EU countries has succeeded in forging forward-looking policies. France, Germany, and other countries led the way in implementing the Schengen agreement (open borders for people) and EMU. France, Germany, and Britain have led EU efforts to curb the Iranian nuclear program, and France and Germany are currently at the forefront of the EU's response to fiscal crises in some its member states. The EU's enlargement over the past decade to include 27 member states, many of them former Eastern Bloc countries, has both diminished Franco-German decision-making power within the Union and compelled the two countries to at times shift their diplomatic focus to managing relations with other EU members states. In the face of the recent global economic downturn and resulting debt crises in several EU member states, France and Germany have at times struggled to find common ground on EU policies. While both Sarkozy and his German counterpart, Angela Merkel, appear eager to implement economic and financial reforms to boost Europe's global competitiveness, each has also displayed a willingness to protect national interests and industries. Several widely publicized disagreements between Sarkozy and Merkel, on issues ranging from French proposals for increased national political control over European monetary policy to German calls for greater fiscal austerity, have led some observers to criticize both leaders for putting narrowly defined domestic interests ahead of their countries' long-standing commitment to European unity and integration. Evolving Security and Defense Policy20 French defense and national security policy has evolved substantially over the past 20 years. In the 1990s, France began a multi-year effort to downsize and professionalize its military force into smaller, more flexible units. President Sarkozy has sought to build on these efforts, and has shown unwavering support to strengthening France's defense and national security capacities. He has pledged to maintain France's defense expenditures at a minimum of 2% of GDP, in line with NATO recommendations, and has encouraged other European countries to do the same. That said, the French government, like many of its allies, could struggle to realize ambitious defense spending goals in the face of severe budgetary constraints. Against this backdrop of fiscal austerity, France has heightened calls for increased defense cooperation both within NATO and the European Union. Paris has also shown a willingness to pursue enhanced military cooperation with individual countries, as evidenced by what some consider a watershed November 2010 defense cooperation agreement with the United Kingdom. As of February 2011, close to 9,000 French troops were deployed to a range of multilateral military operations across the globe. This includes 4,000 troops serving as part of NATO's International Security Assistance Force (ISAF) in Afghanistan, almost 1,500 military personnel as part of a U.N. peacekeeping mission in Lebanon, and at least 1,000 soldiers in the Ivory Coast. As of late March 2011, French forces have also been leading air operations to protect civilians in Libya; and in April 2011, French special forces reportedly led military operations to drive the outgoing President of Ivory Coast, Laurent Gbagbo, from power. Commentators note that this is the first time since the Second World War that French forces are simultaneously engaged in three separate combat operations—in Afghanistan, Ivory Coast, and Libya. Whether and at what level France can sustain such commitments could be driven largely by the results of ongoing defense reforms and efforts to enhance defense cooperation within NATO, the EU, and through structured cooperation with selected allies. In 2008, a high-level commission appointed by President Sarkozy released the so-called French White Paper on Defen c e and National Security , intended to serve as a comprehensive, 15-year, national security strategy for France. The new blueprint for French security and defense policy—the first of its scope since 1994—was deemed a "necessity" in an increasingly interconnected world in which non-state actors wield significant power and the distinction between "internal" and "external" security is blurred. Though the new defense policy calls for a significant shift in resources, it reinforces many of the same themes that have traditionally guided French foreign policy, such as multilateral cooperation and the importance of the European Union. Perhaps most significantly from the U.S. point of view, the White Paper called for the reintegration of France into NATO's integrated command structure. The 2008 White Paper on Defense and National Security The 2008 White Paper identifies possible threats to France's national security and outlines a military strategy for the country's defense. It is rooted in the premise that current and emerging threats to French national security are global in nature and could take any form; rather than a traditional invasion of France by another sovereign nation, attacks are more likely to be chemical, biological, nuclear or cyber attacks perpetrated by terrorists or non-state actors. The new French national security strategy details a movement away from personnel-heavy military operations towards a "knowledge-based security." It calls for a heightened focus on intelligence, observation, and advanced technology, while maintaining the French nuclear deterrent. In order to realize its vision, the White Paper calls for significant reallocation of resources, including significant personnel cuts to the French armed forces. This includes a 54,000-person reduction by 2014 in a force currently totaling about 320,000. Resources would be redirected toward programs in line with the new intelligence and technology-focused vision. The Sarkozy government has doubled the annual national funding for intelligence, satellite and space programs. A new cyber-security agency has been established, as has a new intelligence academy. Though French combat units will continue to sustain personnel losses, their equipment is being modernized or replaced. France's nuclear program—often called its "life insurance policy" by military officials—has not been cut. Nuclear warheads are being upgraded and developed, as are new ballistic missiles and a satellite monitoring and early-warning system. The White Paper also identifies new geographic areas of concern, including an "arc of crisis" beginning in the Atlantic Ocean, spanning the Mediterranean and ending in the Indian Ocean via the Persian Gulf. In concert with this shift of interest, France is reconfiguring the "staging points" for its missions. This includes deemphasizing France's traditionally strong role in sub-Saharan Africa, and shifting focus toward the Middle East. In 2010, France handed over control of a long-standing permanent military base in Senegal—one of three permanent French bases in Africa—to the Senegalese authorities. In 2009, France opened a new permanent military base in the United Arab Emirates. The base in Abu Dhabi hosts all three military components: the army, navy and air force. This is the first time that France has opened a base in the Gulf, and the first time one has been established in the region by a Western country besides the United States. Since the White Paper's release, budgetary concerns have prompted debate over how to enact the prescribed reforms. Defense expenditures were slated to increase by 1% per year beginning in 2012, but have since been frozen until 2013. There is also some doubt that the envisioned personnel cuts will save as much money as projected, as the cuts are politically difficult to enact and the severance packages expensive. The Ministry of Defense has reportedly been asked to generate savings of €3,5 billion (about $5.1 billion) over the next three years, a number it hopes to bring down by selling off some of its assets, like army barracks and telecom frequencies. France is also pursuing bilateral defense cooperation agreements with other cash-strapped European countries, most notable the UK, but also Italy, and Germany. Proposed joint projects are largely technical in nature, and include new satellites, missiles, drones, and anti-IED technologies. The French hope is to reduce duplication and increase interoperability among EU allies. France in NATO At NATO's 60 th anniversary summit in April 2009, France announced its full reintegration into NATO's integrated military command structure. France is currently the fourth largest contributor of troops to alliance operations and a significant financial contributor to NATO. However, it had only very limited participation in the alliance's military decision-making structures after then-President de Gaulle withdrew the country from NATO's integrated command structure in 1966. Despite domestic opposition from critics who fear that the move could limit French military independence, the French parliament approved Sarkozy's decision by a vote of 329-238 on March 17, 2009. U.S. officials have welcomed French reintegration as an important step toward improving alliance cohesion and strengthening the European role within NATO. Several factors in the 1990s contributed to renewed French doubts about NATO. Some French officials did not want the United States exercising strong leadership in the alliance when Washington appeared to be giving Europe diminished priority after the Cold War. U.S. positions on involvement in the Balkan conflicts of the early 1990s led some French and other European officials to question the alliance's efficacy, given that Europeans saw the Balkan wars as a major threat to security. The United States eventually engaged its forces in the Balkans in several NATO operations, including in the Kosovo conflict in 1999. Some French officials believe that the Bush Administration distanced the United States from NATO in its efforts to create "coalitions of the willing," a practice that in their view undermines the principles of collective defense, allied unity, and the rationale behind enlarging the alliance to bring in a broad spectrum of new governments. French officials also recognize that military self-sufficiency in an era of global threats is not possible, and that EU defense efforts may eventually have a regional but not world-wide reach. Put simply, France and the EU lack the military resources to resolve major crises on their own. For these reasons, France in the last several years has become more engaged in NATO operations, despite the absence of officers in the command structure. For many years, French governments had opposed proposals for NATO "out-of-area" operations, meaning military operations outside the Treaty area in Europe, or operations beyond Europe. The crises in the former Yugoslavia in the 1990s, which required a large military capacity to bring stability, and post-September 11 operations in Afghanistan, which required a military force able to sustain combat operations in a distant theater, altered French thinking. Former President Chirac, reflecting on these developments, said, "You have to be realistic in a changing world. We have updated our vision, which once held that NATO had geographic limits. The idea of a regional NATO no longer exists, as the alliance's involvement in Afghanistan demonstrates." French officials hope that full reintegration into NATO will give France a level of influence in determining the strategic direction and planning decisions of the alliance that is proportional to its participation in alliance operations. As of February 2011, France was contributing more close to 5,000 soldiers to NATO operations, including almost 4,000 troops in Afghanistan, and 765 in Kosovo. Since then, France, along with the UK, has contributed the bulk of the forces to the NATO mission in Libya. French four-star generals have filled two NATO command posts—Allied Command Transformation (ACT) in Norfolk, Virginia and the Allied Joint Command regional headquarters in Lisbon, Portugal—and approximately 800 French officers are reportedly being integrated into command structures at NATO headquarters. There are differing views on what role France will play in determining the strategic direction of the alliance. Some observers draw attention to France's past opposition to U.S. and UK calls for a more "global NATO" defined by enhanced partnerships with countries outside the core NATO area such as Australia and Japan. French officials have also argued that NATO should consult more closely with Russia before considering further enlargement and have at times indicated that NATO should concentrate on its core mission of defense and leave political and reconstruction activities to other international institutions (such as the EU and U.N.). Other observers point to Sarkozy's willingness to break with tradition to argue that past policy positions could be of little consequence in France's future approach to the alliance. Sarkozy has sought alliance and U.S. support for a strong European Security and Defense Policy (CSDP). France has argued that a robust and independent European defense capacity could reinforce and enhance NATO. After some reservation (outlined below), U.S. officials have welcomed French calls to develop Europe's security and defense capacity, which they view as a complement to, not a substitute for, NATO. As one U.S. supporter of French reintegration notes, "Every step taken by France to improve the cohesiveness and efficiency of NATO will sooner or later benefit European defense as well—in terms of capabilities, interoperability and operational performance." European Security and Defense Policy: CSDP In addition to outlining an enhanced French role in NATO, the 2008 White Paper on Defense and National Security emphasizes the need for stronger European cooperation in security matters. President Sarkozy has urged other EU members to increase their defense spending and build greater combat capability to undertake missions outside Europe. France has long been at the forefront of efforts to build an EU security structure that could potentially act independently of NATO. In the 1990s, the EU began to implement a Common Foreign and Security Policy (CFSP) to express common goals and interests on selected issues and to strengthen its influence in world affairs. Since 1999, with France playing a key role, the EU has attempted to develop a defense identity outside of NATO to provide military muscle to CFSP. The European Security and Defense Policy (now known as Common Security and Defense Policy, or CSDP) is the project that gave shape to this effort. CSDP's development has been increasingly driven by an emphasis on boosting civilian crisis management and police training capacity. Since January 2003, the EU has launched a total of over 20 civilian crisis management, police, and military peacekeeping operations in areas ranging from the Balkans, to the Congo and the coast of Somalia. At the operational level, the EU has committed to creating what would ultimately become a rapid reaction force of 60,000 troops. The force includes "battle groups" of 1,500 troops to act as "insertion forces" in the beginning stages of a crisis. The groups are expected to be able to deploy within 15 days of a decision to use them, and to sustain themselves for four months before a larger force replaces them. The forces are also available to NATO. France and Germany, with some support from Britain, have sought to enhance EU decision-making bodies and a planning staff for EU military forces under CSDP. The United States initially opposed elements of this effort, particularly the proposal for a planning staff. These bodies were considered duplicative of NATO structures and a waste of resources. NATO and the EU have since reached a compromise: there are now two planning staffs, each with representation from the other organization. Officers from EU states form a planning cell at NATO's Supreme Headquarters Allied Command Europe (SHAPE), and NATO officers are attached to a new, separate EU planning cell. CSDP remains a work in progress. The EU includes several self-described "neutral" governments that do not have a strong interest in European defense structures. In addition, a number of governments, including several central European governments that joined the EU in May 2004, continue to look first to the United States in defense matters and view NATO as central to their strategic interests. For the foreseeable future, these governments are unlikely to follow any effort by an EU member to distance EU defense from NATO and Washington. Perhaps of more concern to proponents of a stronger European defense identity are shrinking national defense budgets and a climate of fiscal austerity throughout the EU. As national governments are seeking to reduce large budget deficits, many are significantly reducing military spending, in many cases decreasing the military capabilities available for EU military operations. U.S. views toward an independent European defense identity have evolved over time. In the past, American officials were wary of CSDP, as they worried that it could duplicate—or worse, marginalize—NATO. Part of this skepticism may have been due to Gaullist rhetoric from then-President Jacques Chirac, who talked of building up the EU as a counterbalance the United States and creating "a multi-polar world." However, U.S. officials appear increasingly optimistic that CSDP will not undercut NATO, but could enhance allied contributions to alliance operations. Some also believe that Sarkozy is more pragmatic on European security issues than Chirac. 30 France's reintegration into NATO command structure has lent strength to this view. Proposals by the Sarkozy government for an "autonomous military capacity" within the European Union have been endorsed by U.S. officials. Secretary of State Hillary Clinton has said that a strong Europe is "critical to US security and prosperity" and "an essential partner with NATO and with the United States." Selected Issues in U.S.-French Relations The NATO Mission in Afghanistan The stabilization of Afghanistan remains NATO's key mission and a top foreign policy priority of the Obama Administration and the U.S. Congress. As of March 4, 2011 there were 132,203 allied and partner country forces deployed to NATO's International Security Assistance Force (ISAF); of the almost 99,800 total U.S. forces on the ground in Afghanistan, about 82,000 serve under ISAF command. During NATO's November 2010 summit, alliance leaders reaffirmed their commitment to the Afghan mission while emphasizing the need to transfer responsibility in the country — first and foremost in the security sector — to the Afghan government. This includes a commitment to begin a phased transition of lead security responsibility to Afghan forces in selected provinces in 2011, with a goal of having the Afghan government lead security operations in all provinces by the end of 2014. With almost 4,000 troops serving under ISAF command, France is the fourth largest troop contributor to the NATO mission in Afghanistan. France's military is generally recognized as one of Europe's most effective and deployable, and U.S. and NATO officials consistently give French forces high marks for their ability and willingness to engage in combat. During the first years of the NATO operation, French officials tended to view ISAF primarily as a combat force intended to buttress the efforts of the Afghan government to build legitimacy and governance. Over the past several years, however, they have increasingly sought to enhance NATO efforts to train Afghan security forces and to boost the capacity of the police and judicial system. In January 2010, French President Nicolas Sarkozy reiterated a 2009 commitment not to send additional French combat forces to Afghanistan. At the same time, France has increased its development aid budget to Afghanistan and Sarkozy has indicated a willingness to send additional non-combat military personnel to assist in training the Afghan National Security Forces. In November 2009, France transferred the main land component of its mission from Regional Command Capital (RC-C) in and around Kabul to eastern Afghanistan. Close to 3,000 French soldiers are deployed as part of Task Force Lafayette in eastern Afghanistan. This includes combat troops working alongside U.S. and Afghan forces in Kapisa and Surobi provinces. These forces receive consistent praise from U.S. commanders in Afghanistan. France has also boosted its efforts to train the Afghan National Security Forces. In 2009, France also boosted its efforts to train the Afghan National Security Forces. About 600 French troops have been training the Afghan National Army and Afghan National Police Force, including in five Operation Mentor and Liaison Teams (OMLTs) and at least four Police OMLTs. France lifted the operational caveats placed on its forces in early 2008, and later that year began to deploy combat troops to serve along with U.S. forces in eastern Afghanistan. Although President Sarkozy has ruled out sending additional combat troops to the country, France spearheaded the 2009 effort to establish the NATO Training Mission-Afghanistan (NTM-A). Paris has also significantly increased what has widely been considered a relatively small annual financial aid package to Afghanistan. While total civilian aid between 2002 and 2008 was reportedly about $150 million, France has pledged an additional $136 million through 2011. French officials say they will seek to focus development aid in eastern Afghanistan, Kabul and Kunduz and Balkh provinces in the northern part of the country. Aid covers primarily the health, education, agricultural, and rule of law sectors. As is the case in most European countries, the French public tends to oppose French military engagement in Afghanistan, with 57% saying they would support a reduction (17%) or complete withdrawal (40%) of French troops from the country. That said, opposition to the mission is less vocal in France than in some other European countries and the French parliament does not play as strong a role in approving troop deployments than some other European parliaments. Although most agree that the French military engagement in Afghanistan has been effective and beneficial, critics contend that France has done too little in the area of civilian development and capacity building. France has long advocated a strict division between civilian and military personnel in overseas deployments. French military forces are generally trained for combat and stabilization operations. France does not have a PRT and has not been supportive of the PRT model in Afghanistan. On the other hand, French officials have increasingly acknowledged that success in Afghanistan will require enhanced civilian development and capacity building efforts. Military Operations in Libya President Sarkozy has made a concerted effort to play a leading role both in ongoing military operations in Libya and in the continuing political deliberations about the future of the mission. Prior to the first air strikes on Libyan targets on March 19, 2011, France, along with the UK, had been the most vocal proponent of taking action against the Qadhafi regime. The two countries sponsored the U.N. Security Council Resolutions creating an arms embargo on Libya and authorizing the use of force to protect Libyan civilians (Security Council Resolutions 1970 and 1973, respectively), and pushed the European Union to quickly adopt sanctions against Qadhafi. France was the first country to afford diplomatic recognition to the Libyan Transitional National Council, Paris hosted the first international conference on Libya's future, and French fighter jets were the first to launch attacks on Libyan ground forces. In conjunction with U.S. Operation Odyssey Dawn and British Operation Ellamy, French military operations against Qadhafi's forces were launched on March 19, 2011 under the codename Operation Harmattan . Since then, French fighter jets have been heavily involved both in establishing and maintaining a no-fly zone over Libyan territory and in attacking Qadhafi ground forces. On March 27, 2011, after just over a week of coalition air operations under U.S. command, NATO announced that it would take over command and control of all ongoing military operations in Libya. The stated goal of NATO's Operation Unified Protector is "to protect civilians and civilian-populated areas under threat of attack from the Gaddafi regime." This entails (1) enforcing a U.N.-mandated arms embargo; (2) enforcing a no-fly zone over Libyan territory; and (3) protecting civilians and civilian population areas from being attacked by military forces from the Qadhafi regime. During the initial stages of coalition operations over Libya, France resisted U.S. calls to transfer the mission to NATO command. Among other things, French officials expressed concern that a NATO-led mission in Libya could lead to heightened criticism of western motives in the region. They argued, for example, that skepticism of U.S. motives and public perception of NATO as a U.S.-dominated alliance could erode support for the mission within Arab countries. Accordingly, French officials have consistently emphasized the importance of maintaining Arab endorsement of, and involvement in, the ongoing military operations as well as diplomatic efforts to broker a cease fire and possible transfer of power in Libya. As of April 5, 2011, 14 NATO allies and three partner countries were contributing a total of 195 fighter jets and 18 naval vessels to Operation Unified Protector. French military assets deployed in the theater of operations consist primarily of approximately 20 combat aircraft—Rafale and Mirage fighter planes—operating out of Solenzara, Corsica, and the aircraft carrier Charles de Gaulle, which carries an additional 26 aircraft, including 16 fighter jets. Along with the Charles de Gaulle, at least four French frigates are reportedly present off the Libyan coast. In spite of statements underscoring alliance unity on the mission in Libya, the initial planning and operational phases were marked by significant levels of discord within Europe and NATO. France was at the center of these disputes. A key point of contention was the amount of flexibility that NATO forces would be granted to protect civilians and civilian areas. Reports indicate that French officials insisted on maintaining the ability to strike ground forces that threatened civilian areas, while their Turkish counterparts vocally opposed any targeting of ground forces. Although the allies ultimately agreed on the terms of their military engagement, some of the aforementioned tensions have reemerged over the course of the mission. In particular, French and British officials have urged more allies to join the mission and have called on those participating to increase their contributions. They have also criticized many of those countries taking part in Operation Unified Protector for placing operational restrictions on their forces that forbid them to attack Qadhafi's ground forces. Many observers speculate that domestic political considerations were a key factor behind President Sarkozy's decision to lead international diplomatic and military efforts in Libya. Sarkozy, who is struggling to boost his public approval ratings ahead of the 2012 presidential election, appears to enjoy the support of a wide majority of the French public for his handling of the situation in Libya. That said, a drawn-out military mission with no foreseeable resolution could also damage the president's political prospects. A widespread perception that the Sarkozy government failed to decisively side with pro-democratic forces in Tunisia and Egypt during popular protests in those countries in late 2010 and early 2011 could also have played a role in President Sarkozy's eagerness to take a proactive stance against the Qadhafi regime. In the case of former French colony Tunisia France's then-foreign Minister, Michèle Alliot-Marie, publicly suggested that France could help Tunisian President Zine El Abidine Ben Ali control protests just one week before he fled the country. Alliot-Marie subsequently resigned under pressure over her links to the Ben Ali regime and Sarkozy acknowledged that he had underestimated the Tunisian crisis. The Iranian Nuclear Program France, with Britain and Germany, comprise the "EU-3" that has been at the forefront of international efforts to curtail Iran's nuclear program. In 2006, China, Russia, and the United States joined the EU to form the "Permanent Five Plus One" (P5+1 or EU-3+3) negotiating group. Since then, France and the P5+1 have played a central role in pushing for three rounds of U.N. sanctions related to Iran's nuclear program (Security Council Resolutions 1737, 1747, 1803, and 1929). France and the EU-3 played a key role in passing the latest and most stringent U.N. sanctions against Iran to date, in June 2010. U.N. Security Council Resolution 1929 and the accompanying EU-wide sanctions, passed in July 2010, include: a ban on new investment in Iranian oil and gas industries—including equipment, technical support, and technology transfers; a ban on new relationships with Iranian financial institutions and on Iranian banks and their subsidiaries operating in the EU; a ban on insurance and re-insurance of Iranian government institutions or their affiliates; and extensive asset freezes of Iranian companies and individuals. President Sarkozy is viewed as taking a harder line on Iran than many of his European counterparts. France has consistently supported stronger sanctions against Iran, including a ban on the import of Iranian crude oil and export to Iran of refined petroleum products (not included in the June 2010 U.N. sanctions), and has advocated autonomous EU sanctions in the event that the U.N. does not agree to new measures. In parallel to U.N. and EU efforts, French officials appear intent to continue to privately urge French and European companies to cease doing business with Iran. The Sarkozy government has taken measures to end export credit guarantees to companies doing business in Iran and government pressure was reportedly a factor behind French energy giant Total's 2008 withdrawal from a major natural gas project in Iran. French and European leaders have welcomed enhanced U.S. diplomatic engagement of the Iranian regime. While they emphasize their support of Administration policy, however, French officials have also encouraged the United States to react more firmly to Iran's apparent rejection of U.S. and international overtures. Sarkozy, for example, was more outspoken than the Obama Administration in condemning the Iranian regime's behavior after the June 2009 presidential election and was in favor of moving more aggressively to sanction Tehran immediately thereafter. Countering Terrorism Many U.S. and French officials believe that bilateral cooperation between the United States and France in law-enforcement efforts to combat terrorism since September 11 has been strong. France has long experience in combating terrorism, a tightly centralized system of law enforcement, and a far-reaching intelligence network that gathers information on extremist groups. Violent radical groups have been active in France for many decades, and strong state action has been used in response. Since the 1960s, Algerian, Basque, and Corsican terrorists have struck French targets. By most accounts, a more forceful law enforcement policy against Muslim extremists took hold in the French government after the September 1995 bombing of the Paris subway by Algerian militants belonging to the Armed Islamic Group (GIA). The reaction of the French government, according to U.S. and French officials, was swift, ruthless, and effective, and the bombings ceased. Al Qaeda has carried out a number of successful attacks against French interests. In August 2009, Al Qaeda in the Lands of the Islamic Maghreb (AQIM) claimed responsibility for the suicide bombing at the French Embassy in Mauritania that injured three people. Today, France regards Al Qaeda and related extremist groups as the country's greatest terrorist threat. On July 25, 2010, representatives of AQIM claimed responsibility for the death of a French hostage. French officials subsequently reiterated that France was "at war with Al Qaeda," and that the fight against AQIM would "intensify." Observers tend to agree that France has been "adept at dismantling and prosecuting terrorist networks." In 1986, a French law created special judicial and police authorities to respond to terrorism. Efforts to find and arrest terrorists are overseen by a senior anti-terror magistrate. The anti-terror magistrate's prosecutors have greater authority than other French prosecutors to order wiretaps and surveillance, and they may order preventive detention of suspects for up to six days without filing a charge. Under the 1986 anti-terror law, there are special judicial panels that try cases without juries. Unlike the United States, France uses its military as well as the police to ensure domestic order (however, France has no equivalent of the U.S. National Guard, which can be deployed in national crises). The French military is in the midst of an effort to modify its forces to be more effective in counter-terror efforts at home and abroad. While France has long championed free speech and freedom of religion, there is also a prevailing requirement for public order. Strong central authority in France has traditionally meant that the government constrains civil liberties when there is a real or perceived threat. Police frequently check individuals' identities and inspect carried items, particularly in large public places such as airports. Since the subway bombing of 1995, France has pursued vigorous surveillance of suspected terrorist groups with, for example, increased authority to eavesdrop on conversations and to view electronic mail. On September 12, 2001, France revived an existing law enforcement measure, Vigipirate , that enhances the ability of the government to ensure order. The system provides for greater surveillance of public places, government authority to cancel holidays or public gatherings that could be the target of terrorist attacks, the activation of elements of the military to secure infrastructure, and tighter security at airports, train stations, embassies, religious institutions, nuclear sites, and other locations that may come under threat. Upon activation of Vigipirate , the government called 35,000 personnel from the police and military to enforce such measures, including 4,000 personnel assigned to guard the Paris subway system. Vigipirate is still in force, although not at the highest level of alert. Coordination has improved between the United States and France in counter-terror policy since September 11. As Interior Minister, Sarkozy was intimately involved in ensuring coordination. The two governments exchange selective intelligence information on terrorist movements and financing. In January 2002, the French and U.S. governments signed an agreement allowing the U.S. Customs Service to send inspectors to the major port of Le Havre. There, U.S. inspectors have joined their French counterparts in inspecting sea cargo containers for the possible presence of weapons of mass destruction intended for shipment to U.S. ports. Economic and Trade Relations U.S. commercial ties with France are extensive, mutually profitable, and growing. With over $1 billion in commercial transactions taking place between the two countries every day of the year, each country has an increasingly large stake in the health and openness of the other's economy. Based on a GDP of $2.6 trillion, France is the world's sixth-largest economy. It has a large industrial base, a highly skilled workforce, and substantial agricultural resources. Most job creation in recent years, however, has come from an increasingly dynamic services sector. France is also the second largest trading member of the EU (after Germany). It ran a $69 billion trade deficit in 2010. Total trade amounted to $1.1 trillion, 65% of which was with the other 26 members of the EU. France is the eighth largest merchandise trading partner for the United States and the United States is France's largest trading partner outside the European Union. More than half of bilateral trade occurs in major industries such as aerospace, industrial chemicals, pharmaceuticals, medical and scientific equipment, electrical machinery, and plastics where both countries export and import similar products. U.S.-French trade in goods, services, and income receipts totaled nearly $119 billion in 2009. Fifty-two percent of this trade was in goods, 25% in services, and 23% in income receipts. In recent years, France has been the sixth largest market for U.S. exports of services such as tourism and transportation. Although much emphasis is placed on bilateral trade in goods and services receives, foreign direct investment and the activities of foreign affiliates can be viewed as the backbone of the commercial relationship. Sales of French-owned companies operating in the United States and U.S.-owned companies operating in France outweigh trade transactions by a factor of almost five. In 2009, France was the twelfth largest host country for U.S. foreign direct investment abroad and the United States, with investments valued at $85.8 billion, was a major foreign investor in France. During that same year, French companies had direct investments in the United States totaling $189.3 billion (historical cost basis), making France the sixth largest investor in the United States. French-owned companies employed about 760,000 workers in the United States, and U.S.-owned companies employed approximately 650,000 workers in France. France has pursued economic reforms that increase the attractiveness of the French economy to foreign investors. The French government also offers an array of investment incentives. However, while today's foreign investors face less regulations than previously, the French government still from time to time intervenes in foreign investment decisions. In some cases, this is a result of union opposition to takeovers of French firms. In other cases, it may be a result of the preference of French firms for working with other European firms rather than U.S. firms. Traditionally, French stakeholders have shown hostility towards a range of foreign takeovers. Labor market regulation in France also remains in flux, with the impact of the 35-hour work week mixed. Many companies have used the 35-hour workweek as an opportunity to negotiate annualized work-hour programs with their employees in an effort to provide greater labor flexibility.

The factors that shape French foreign policy have changed since the end of the Cold War. The perspectives of France and the United States have diverged in some cases. More core interests remain similar. Both countries' governments have embraced the opportunity to build stability in Europe through an expanded European Union (EU) and NATO. Each has recognized that terrorism and the proliferation of weapons of mass destruction are the most important threats to their security today. Several factors shape French foreign policy. France has a self-identity that calls for efforts to spread French values and views, many rooted in democracy and human rights. France prefers to engage international issues in a multilateral framework, above all through the European Union. European efforts to form an EU security policy potentially independent of NATO emerged in this context. However, more recently, policymakers in France, Europe and the United States have come to view a stronger European defense arm as a complement to rather than a substitute for NATO. From the September 11, 2001, attacks on the United States through the Iraq war of 2003 until today, France has pressed the United States to confront emerging crises within a multilateral framework. France normally wishes to "legitimize" actions ranging from economic sanctions to military action in the United Nations. The election of Nicolas Sarkozy to the French presidency in May 2007 appears to have contributed to improved U.S.-French relations. Sarkozy has taken a more practical approach to issues in U.S.-French relations than his predecessor, Jacques Chirac. Perhaps most notably, in April 2009, Sarkozy announced France's full reintegration into NATO's military command structure, more than 40 years after former President Charles de Gaulle withdrew his country from the integrated command structure and ordered U.S. military personnel to leave the country. Sarkozy is a traditional Gaullist in his desire to see France play a major role in the world. At the same time, he asserts that France should exert its power through the European Union, and that Paris must play a leading role in shaping the EU's foreign and security policy. He deemphasizes France's traditionally strong role in sub-Saharan Africa, and has sought to shift France's foreign policy focus toward the Middle East. Trade and investment ties between the United States and France are extensive, and provide each government a large stake in the vitality and openness of their respective economies. Through trade in goods and services, and, most importantly, through foreign direct investment, the economies of France and the United States have become increasingly integrated. Other areas of complementarity include the ongoing NATO missions in Afghanistan and Libya, peace operations in the Balkans, the Middle East Peace Process and efforts to counter the Iranian nuclear program, and the fight against terrorism—all challenges where France has played a central role. A major split occurred over Iraq, however, with many countries either supporting or independently sharing French ideas of greater international involvement.

Introduction to HUD Most of the funding for the activities of the Department of Housing and Urban Development (HUD) comes from discretionary appropriations provided each year in the annual appropriations acts, typically as a part of the Transportation, HUD, and Related Agencies appropriations bill (THUD). HUD's programs are primarily designed to address housing problems faced by households with very low incomes or other special housing needs. Three rental assistance programs—Public Housing, Section 8 tenant-based rental assistance (which funds Section 8 Housing Choice Vouchers), and Section 8 project-based rental assistance—account for the majority of the department's funding (more than three-quarters of total HUD appropriations in FY2016). Two flexible block grant programs—HOME and the Community Development Block Grant (CDBG) program—help communities finance a variety of housing and community development activities designed to serve low- and moderate-income families. In addition, in some years Congress appropriates funds to CDBG to assist in disaster recovery. Other more specialized grant programs help communities meet the needs of homeless persons, including those living with HIV/AIDS. HUD's Federal Housing Administration (FHA) insures mortgages made by lenders to home buyers with low down payments and to developers of multifamily rental buildings containing relatively affordable units. FHA collects fees from insured borrowers, which are used to sustain the insurance fund. Surplus FHA funds have been used to offset the cost of the HUD budget. A Note About the Housing Trust Fund. The Housing Trust Fund (HTF)—a formula grant program administered by HUD—is not funded through the appropriations process; rather, it is funded through contributions from two government-sponsored enterprises, Fannie Mae and Freddie Mac. The HTF received its first annual funding in 2016 and is expected to receive funding again in 2017. Since the program is funded outside of the annual appropriations process, it is not reflected in this report. Table 1 presents total net enacted appropriations for HUD over the past five years, including emergency appropriations, rescissions, offsetting collections, and receipts. (For more information, see CRS Report R42542, Department of Housing and Urban Development (HUD): Funding Trends Since FY2002 , by [author name scrubbed].) FY2017 Status Enactment of Full-Year Appropriations On May 5, 2017, the Consolidated Appropriations Act of 2017 was signed into law ( P.L. 115-31 ). Title II of Division K provides full-year FY2017 appropriations for HUD. The law appropriates $48.1 billion for HUD's programs and activities; after accounting for offsets, the net discretionary budget authority provided for the department by the bill totals $38.8 billion. This represents a $1 billion increase in funding over FY2016, which is primarily attributable to funding increases for the tenant-based rental assistance (TBRA) account (+$663 million) and project-based rental assistance (PBRA) account (+$196 million). The increased funding largely maintains current services for the roughly 3 million low-income families who receive housing assistance through the Housing Choice Voucher program and the project-based Section 8 program. The largest relative increase in funding is provided for HUD's lead hazard reduction programs (+32%). The law also included $400 million in disaster assistance provided through the CDBG program. Continuing Resolutions None of the FY2017 regular appropriations bills were enacted before the end of FY2016. Instead, Congress approved three continuing resolutions to provide temporary funding. The first CR provided funding for most federal agencies through December 9, 2016 ( P.L. 114-223 ); it also contained the Military Construction and Veterans Affairs Appropriations Act for all of FY2017. The second CR, which was enacted before the expiration of the first, provided funding through April 28, 2017 ( P.L. 114-254 ). The third continuing resolution continued the terms of the second CR for one week ( P.L. 115-30 ). Under the terms of the CRs, funding for most programs, projects, and activities—including those administered by HUD—was continued at FY2016 levels, less an across-the-board reduction of 0.496% in the first CR and 0.1901% in the second CR. Additionally, the first two CRs provided appropriations for disaster relief grants through HUD's Community Development Block Grant program: P.L. 114-223 appropriated $500 million in FY2016 funding for grants for areas that experienced presidentially declared disasters that occurred prior to the law's enactment (including flooding in Louisiana); P.L. 114-254 appropriated $1.8 billion in FY2017 funding for areas that experienced presidentially declared disasters that occurred prior to the law's enactment (including flooding in South Carolina). For more information about the two CRs, see CRS Report R44653, Overview of Continuing Appropriations for FY2017 (H.R. 5325) , coordinated by [author name scrubbed]; and CRS Report R44723, Overview of Further Continuing Appropriations for FY2017 (H.R. 2028) , coordinated by [author name scrubbed]. House Action On May 24, 2016, the House Appropriations Committee approved its version of a FY2017 THUD appropriations bill ( H.R. 5394 ). The bill included $38.7 billion in net discretionary budget authority for HUD. That total reflects approximately $48 billion in new gross budget authority for HUD's programs and activities and more than $9 billion in savings from offsets and receipts. This is about $1 billion more in new gross budget authority, but about $400 million less in net budget authority, than was provided in FY2016 (the difference attributable to an additional $580 million in offsetting receipts in FY2017 relative to FY2016). It included about $500 million less than was included in the Senate-passed bill, and nearly $1 billion less than was requested by the President. Senate Action On May 12, 2016, the full Senate began consideration of FY2017 appropriations for Transportation, HUD, and Related Agencies. By custom, appropriations legislation originates in the House of Representatives. Because House action on the FY2017 THUD bill had not yet occurred, the Senate took up H.R. 2577 , which is the House-passed version of the FY2016 THUD bill. The Senate Appropriations Committee substitute amendment ( S.Amdt. 3896 ) to the bill included as Division A the text of the FY2017 THUD appropriations bill as reported by the committee ( S. 2844 ). The substitute amendment also included as Division B the text of the Senate Appropriations Committee-reported Military Construction, Veterans Affairs, and Related Agencies bill. It was approved by the full Senate on May 19, 2016. Earlier, on April 21, 2016, the Senate Appropriations Committee reported its FY2017 Transportation, HUD, and Related Agencies appropriations bill ( S. 2844 ; S.Rept. 114-243 ). It proposed $48.4 billion in gross discretionary appropriations for HUD's programs and activities, which is a 3% increase from the FY2016 level. After accounting for savings from offsets and rescissions, the bill included $39.2 billion in net discretionary budget authority, which is a 2% increase from the FY2016 level. President's Request On February 9, 2016, the Obama Administration submitted its FY2017 budget request to Congress. It included $48.9 billion in gross discretionary appropriations for HUD (4% more than FY2016) and $39.6 billion in net discretionary budget authority (3.5% more than FY2016). (For more information, see CRS Report R44380, Department of Housing and Urban Development (HUD): FY2017 Budget Request Overview and Resources , by [author name scrubbed].) FY2016 On December 18, 2015, Congress approved and President Obama signed into law a FY2016 omnibus appropriations law ( P.L. 114-113 ). It included $47 billion in appropriations for HUD; $38.3 billion in net budget authority (excluding $300 million in disaster funding). (For more information, see CRS Report R44059, Department of Housing and Urban Development: FY2016 Appropriations , coordinated by [author name scrubbed].) Table 2 presents account-level funding information for HUD, comparing FY2016 with the FY2017 President's budget request, congressional action, and final FY2017 amounts. It is followed by a discussion of selected issues and accounts. Discussion of Selected Accounts and Issues Assisted Housing Programs More than three-quarters of appropriations for HUD supports three programs: Section 8 tenant-based rental assistance (which funds Section 8 Housing Choice Vouchers), Section 8 project-based rental assistance, and the Public Housing program. Together, these three programs serve more than 4 million low-income households. The following subsections discuss appropriations for these three programs. Section 8 Tenant-Based Rental Assistance The tenant-based rental assistance (TBRA) account funds the Section 8 Housing Choice Voucher program; it is the largest account in HUD's budget. Most of the funding provided to the account each year is for the annual renewal of more than 2 million vouchers that are currently authorized and being used by families to subsidize their housing costs. The account also provides funding for the administrative costs incurred by the local Public Housing Authorities (PHAs) that administer the program. The account is funded using both current-year appropriations and advance appropriations provided for use in the following fiscal year. Renewal Funding Arguably, the most contentious issue in the tenant-based rental assistance account every year is the cost of renewing existing vouchers. All of the roughly 2 million vouchers that are currently authorized and in use are funded annually, so in order for families to continue to receive assistance (i.e., renew their leases at the end of the year), new funding is needed each year. How much it will cost to renew those vouchers is difficult to estimate—since the cost of a voucher is driven by changes in market rents and tenant incomes—and estimates can change from the time the President's budget is released until final appropriations are enacted, as newer data are collected by HUD. The President's budget estimated that the $766 million increase requested would be sufficient to renew all existing vouchers projected to be in use in 2016. The President's estimate assumes $30 million in savings in renewal costs from a policy change related to medical expense deductions that has been proposed in the past several President's budget requests. Both the House committee-passed bill and the Senate bill would have provided less funding for voucher renewals than requested by the President. The House committee-passed bill included $135 million less than the request and the Senate-passed bill proposed $92 million less than the request. As requested, and permitted in FY2016, both bills would have provided the Secretary with the authority to reallocate unused prior-year funding (PHA reserves) to supplement FY2017 allocations. S.Rept. 114-243 stated that the amount of funding provided, paired with the reallocation authority, would be sufficient to support all vouchers in use. The press release accompanying House Appropriations Committee-passage of H.R. 5394 also contended that the bill provided sufficient funding to maintain all vouchers in use. The final FY2017 full-year appropriations level for renewals is lower than proposed by the Senate, but higher than proposed by the House committee bill. It includes the requested reallocation authority. Administrative Fees PHAs are paid a per-unit fee to administer the Housing Choice Voucher program. Thus, the total amount of fees a PHA earns in a year is based on how many vouchers it leases. In recent years, the amount of appropriations provided by Congress has not been sufficient to fully fund all of the fees earned by PHAs under the formula, thus they have received reduced, or prorated, fees. The President's budget requested an increase of $427 million in administrative fee funding relative to FY2016. HUD's Congressional Budget Justifications contended the requested funding level would be sufficient to fund all fees under a new formula HUD is developing based on the findings of a recent administrative fee study, which the department states it hopes to have in place for 2017. The House committee-passed bill included no increase in administrative fee funding; rather, it proposed to fund fees at the FY2016 level. The Senate-passed bill proposed a smaller increase than requested by the President (+$119 million more than FY2016). The final FY2017 appropriations law funds administrative fees at FY2016 levels. New Vouchers New vouchers—or "incremental vouchers"—are vouchers that are funded by Congress and distributed by HUD to PHAs to serve additional families. In recent years, the primary source of new vouchers has been the Veterans Affairs Supported Housing (VASH) program, which is administered jointly with the Department of Veterans Affairs and provides vouchers paired with supportive services for homeless veterans. In some years, the Family Unification Program (FUP), which provides vouchers for families involved in the child welfare system and youth aging out of foster care, has also received funding for additional vouchers. The President's budget requested $88 million to fund approximately 10,000 new vouchers for families with children who are experiencing homelessness. Additionally, the President's budget requested $7 million to renew tribal VASH vouchers that were funded for the first time in FY2015. The House committee-passed bill included no funding for new incremental vouchers. The Senate-passed bill proposed funding two categories of incremental vouchers: $20 million for FUP vouchers and $57 million for VASH vouchers. The committee report directed that HUD prioritize the awards of the new FUP vouchers to PHAs that will target them to youth. The bill also included provisions designed to improve the program for youth, including a lengthening of the existing 18-month time limit to 36 months (or longer, if the youth is participating in economic self-sufficiency activities) and broadening the age of eligibility up to age 24 (from age 21). (Similar FUP policy changes were proposed in the President's budget request.) Of the funding for VASH vouchers, $7 million was targeted for the renewal of tribal vouchers, as requested by the President. The final FY2017 appropriations law includes funding for the same categories of incremental vouchers proposed by the Senate bill, but at lower levels: $10 million for FUP vouchers and $47 million for VASH vouchers (including renewal of tribal VASH vouchers). Mobility Demonstration One of the key features of the Housing Choice Voucher program is portability; families can move wherever they choose and take their voucher with them. Mobility is a term often used to describe portability moves made by families to communities with lower poverty rates and greater access to educational or economic opportunities. While some older research findings about the impact of mobility moves on family outcomes have been mixed, recent findings have shown that certain mobility moves may have meaningful impacts for children's outcomes. The President's budget requested $15 million for a new mobility demonstration to encourage and support mobility moves by families with vouchers. The funds would be awarded to PHAs to provide mobility services to families, including pre- and post-move counseling, and would also fund an impact evaluation. The House committee-passed bill did not include funding for the mobility demonstration; the Senate-passed bill would have provided $11 million to fund it. The final FY2017 appropriations law does not fund the proposal. Section 8 Project-Based Rental Assistance The Section 8 project-based rental assistance (PBRA) account provides funding to administer and renew existing project-based Section 8 rental assistance contracts between HUD and private multifamily property owners. Under those contracts, HUD provides subsidies to the owners to make up the difference between what eligible low-income families pay to live in subsidized units (30% of their incomes) and a previously agreed-upon rent for the unit. No contracts for newly subsidized units have been entered into under this program since the early 1980s. When the program was active, Congress funded the contracts for 20- to 40-year periods, so the monthly payments for owners came from old appropriations. However, once those contracts expire, they require new annual appropriations if they are renewed. Further, some old contracts do not have sufficient funding to finish their existing terms, so new funding is needed to complete the contract (referred to as amendment funding). As more contracts have shifted from long-term appropriations to new appropriations, this account has grown and become the second-largest account in HUD's budget. This account also funds the cost of performance-based contract administrators or PBCAs, entities contracted by HUD to manage the program (generally, state housing finance agencies or public housing authorities). Renewals and Contract Administrators The President's budget request included $10.581 billion for the cost of renewing PBRA contracts (including $4 million for technical assistance for tenant organizations) and $235 million for the cost of contract administrators. The President's budget documents acknowledged that the amount requested is less than would be needed to fully fund either activity. In the case of PBRA contract renewals, the budget assumed approximately $240 million in one-time savings from providing funding for less than 12 months for some contract renewals as a part of a transition to calendar year funding. Further, the renewal estimate assumes cost savings from a requested policy change in calculation of medical deductions for elderly and disabled residents. In the case of PBCA funding, the budget assumed the use of $60 million in recaptured funding as well as cost savings from issuing new, cost-saving contracts. Both the Senate-passed bill and the House committee-passed bill proposed $10.901 billion for PBRA contract renewals, which is $85 million more than was requested by the President. Neither bill included the President's proposed change to medical expense deductions; S.Rept. 114-243 stated that the Senate committee increased the funding level above the request because it rejected the policy change. Both bills proposed to fund contract administrators at the requested level. The final FY2017 appropriations law funds PBRA at $10.816 billion, less than requested by the President and included in the Senate and House committee-passed bills. It funds PBCAs at the requested level and permits the use of recaptures and carryover to supplement the appropriated funding level. Public Housing The Public Housing program provides publicly owned and subsidized rental units for very low-income families. Created in 1937, it is the federal government's oldest housing assistance program for poor families, and it is arguably HUD's most well-known assistance program. (For more information, see CRS Report R41654, Introduction to Public Housing , by [author name scrubbed].) Although there has not been permanent authority to build new Public Housing developments for many years, Congress continues to provide funds to the approximately 3,000 PHAs that own and maintain the existing stock of more than 1 million units. Public Housing receives federal funding under two primary accounts, which, when combined, result in Public Housing being the third-highest funded program in HUD's budget (following the two Section 8 programs). Through the operating fund, HUD provides funding to PHAs to help fill the gap between tenants' rent contributions and the cost of ongoing maintenance, utilities, and administration of public housing properties. Through the capital fund, HUD provides funding to PHAs for capital projects and modernization of their public housing properties. Choice Neighborhoods is an Obama Administration initiative to provide competitive grants to revitalize distressed public and assisted housing properties and their surrounding communities. It is similar to its predecessor program, the HOPE VI program; however, Choice Neighborhoods expands the pool of eligible applicants beyond public housing properties to include other HUD-assisted properties and their communities. Operating Fund Operating fund dollars are allocated to PHAs according to a formula that estimates what it should cost PHAs to maintain their public housing properties based on the characteristics of those properties. When the amount of appropriations provided is insufficient to fully fund the amount PHAs qualify for under the formula, their allocation is pro-rated, or reduced proportionally. According to HUD's Congressional Budget Justifications, the amount requested in the President's Budget for the Operating Fund for FY2017 (a 1.5% increase from FY2016) would be sufficient to fund an estimated 87% of PHAs' formula eligibility. The House committee-passed bill proposed to fund the account level with FY2016, which would likely mean a proration level lower than 87%. The Senate-passed bill proposed to increase funding for the Operating Fund above the President's requested funding level (+2.3%) and the FY2016 funding level (+4%). As a result, under the Senate-approved funding level, the estimated proration level should have been higher than 87%. The final FY2017 appropriation law funds the Operating Fund below the President's request, which will likely mean a lower proration level. Capital Fund The President's budget requested $35 million less for the Capital Fund in FY2017 than was provided in FY2016. In terms of formula grants, the reduction is $31 million. The President's budget requested a new set-aside of $5 million for its "ConnectHome" initiative, designed to expand broadband access in public housing. As in past years, the President's budget proposed to eliminate funding for the Resident Opportunities and Supportive Services (ROSS) set-aside, which funds service coordinators in public housing. The House committee-passed bill proposed to fund the Capital Fund at the FY2016 level. It included more for set-asides than FY2016, which means slightly less (<1%) would have been available for formula grants. However, the bill would have provided slightly more (also <1%) for formula grants than was requested by the President. The Senate-passed bill proposed a $25 million increase for the Capital Fund relative to FY2016. That amount reflects a decrease of $7 million for formula grants, but it proposed to fund the ROSS set-aside at the FY2016 level. It did not include funding for "ConnectHome," but did include a new set-aside of $25 million for competitive grants for PHAs to evaluate and abate lead-based paint hazards in public housing. The final FY2017 appropriation law includes more for the Capital Fund than was requested by the President or proposed by the House Committee or Senate bills. The increase in funding (+4% over the request) is attributable both to an increase in the amount provided for formula grants, as well as new funding for competitive lead-based paint hazard mitigation grants, as proposed by the Senate. Rental Assistance Demonstration (RAD) The Rental Assistance Demonstration (RAD) is an Obama Administration initiative, first authorized by Congress in FY2012. Under RAD, a limited number of units funded through other HUD-assisted housing programs may convert to either project-based Section 8 rental assistance or Housing Choice Vouchers. These include the Rent Supplement program, Rental Assistance Payments, Public Housing, and Section 8 Moderate Rehabilitation program. RAD has never received funding, which means that in order to be eligible, projects must be able to undergo a cost-neutral conversion (i.e., receive no increase in federal subsidy as a result of the conversion). The President's FY2017 budget request included $50 million to fund RAD in order to allow units that cannot undergo a cost-neutral conversion to participate. It also includes proposed program changes to eliminate the cap on the number of units that can convert under RAD and prohibit the rescreening of tenants in public housing units undergoing a RAD conversion. Similar proposals have been included in the past several President's budget requests. Additionally, for the first time in FY2017, the President's budget requests that RAD be expanded to allow for the conversion of units with Project Rental Assistance Contract (PRAC) assistance under the Section 202 Housing for the Elderly program. HUD contends this expanded authority will allow these units to leverage private financing and thus be preserved. The House committee-passed bill included no funding and no expansion for RAD. The Senate-passed bill proposed to expand the RAD demonstration to the Section 202 Housing for the Elderly program, as requested by the President, and includes $4 million to help fund PRAC conversions. The bill did not include additional funding to support other RAD conversions. The Senate-passed bill proposed several additional changes to RAD, including, among others, raising the cap on the number of Public Housing units that can participate from 180,000 to 250,000 and prohibiting rescreening of public housing residents, as proposed in the President's budget. The final FY2017 appropriations law does not include the President's requested expansion of RAD for PRAC units, but does raise the cap on public housing units from 180,000 to 225,000. Community Development Block Grants The Community Development Block Grant (CDBG) program, funded in the Community Development Fund account, is the federal government's largest and most widely available source of financial assistance supporting state and local government-directed neighborhood revitalization, housing rehabilitation, and economic development activities. These formula-based grants are allocated to approximately 1,194 entitlement communities (metropolitan cities with populations of 50,000, principal cities of metropolitan areas, and urban counties), the 50 states plus Puerto Rico, and the insular areas of American Samoa, Guam, the Virgin Islands, and the Northern Mariana Islands. Grants are used to implement plans intended to address housing, community development, and economic development needs, as determined by local officials. For FY2017, the President's budget requested $2.88 billion for the Community Development Fund, including $2.8 billion for grants under the CDBG program and $80 million for grants for Indian tribes. The requested funding level was $200 million less for CDBG and $20 million more for Indian tribes than was provided in FY2016. As in the past several budget requests, HUD's FY2017 budget documents stated that the agency planned to advance a legislative package of CDBG reforms. Specifically, the Administration's grant reforms, as outlined in HUD's Congressional Budget Justifications, included proposals that would have, if approved, reduced the number of small grantees, including removing grandfathering protections for communities that no longer meet the population threshold for entitlement status and establishing a minimum grant amount; reduced the administrative burden on grantees by synchronizing critical program cycles for the submission of plans and reports; helped grantees target funding resources to areas of greatest need; and provided more options for regional coordination, administration, and planning. The Administration also proposed an administrative provision that would have increased (from 10% to 15%) the percentage of CDBG funds allocated to the states of Texas, California, New Mexico, and Arizona that must be used in colonias ; these are blighted and economically distressed unincorporated areas within 150 miles of the border with Mexico. The House committee-passed bill would have funded CDBG and its related set-asides at FY2016 levels ($3 billion for CDBG grants and $60 million for Indian CDBG grants). The Senate-passed bill would have funded CDBG at $3 billion, which was the same as the program's FY2016 funding level. Also, it would have provided the level of funding ($60 million) for the Indian Community Development Block Grant (ICDBG) program as appropriated for FY2016. However, the bill would have funded ICDBG, along with Native American Housing Block Grants, in a new Indian Block Grant account instead of the CDF account. The bill did not include the colonias set-aside increase that was requested by the President. The bill did include a provision that would have prohibited CDBG grantees from exchanging CDBG funds for other sources of funds. This practice is seen as a means of avoiding CDBG program requirements such as those relating to targeting assistance to low- and moderate-income households, fair housing, environmental review, and fair labor standards. The final appropriations law appropriates $3 billion for distribution to CDBG entitlement communities, states, and insular areas. The law provides an additional $60 million for ICDBG activities. The law does not include a provision requested by the Administration that would have directed the states of Texas, New Mexico, Arizona, and California to increase the percentage of CDBG targeted to colonias from 10% to 15%. Nor does the law transfer ICDBG funds to a new Indian Block Grant as proposed by the Senate bill. The law includes a Senate provision that prohibits CDBG grantees from transferring or exchanging CDBG funds for other funding sources. The Federal Housing Administration (FHA) The Federal Housing Administration (FHA) insures private mortgage lenders against losses on certain mortgages made to eligible borrowers. If a borrower defaults on the mortgage, FHA repays the lender the remaining amount that the borrower owes. The provision of FHA insurance helps to make mortgage credit more widely available, and at a lower cost, than it might be in the absence of the insurance. The FHA insurance programs are administered primarily through two program accounts in the HUD budget. The Mutual Mortgage Insurance Fund (MMI Fund) account includes mortgages for single-family home loans made to eligible borrowers. It also includes FHA-insured reverse mortgages, known as Home Equity Conversion Mortgages (HECMs). The MMI Fund is the largest of the FHA insurance funds, and when there is public discussion of "FHA insurance" or "FHA loans," it is usually related to the MMI Fund and the single-family home loans insured under that fund. (For more information on the features of FHA-insured home mortgages, see CRS Report RS20530, FHA-Insured Home Loans: An Overview , by [author name scrubbed].) The second account, the General Insurance/Special Risk Insurance Fund (GI/SRI Fund), includes mortgages on multifamily buildings and healthcare facilities such as hospitals and nursing homes. Offsetting Receipts The costs of federal loan guarantees are reflected in the budget as the net present value of all of the expected future cash flows from the loans that are expected to be insured in a given year. (Cash inflows include fees paid by borrowers to the federal government; cash outflows include claims paid by the federal government when a loan is not repaid by the borrower.) If the estimated cash inflows exceed the estimated cash outflows—that is, if the insured loans are expected to earn more money for the government than they cost—then the program is said to have a negative credit subsidy. A negative credit subsidy results in offsetting receipts, which, in the case of FHA, can offset other costs of the HUD budget. Historically, the MMI Fund has been estimated to have negative credit subsidy. The resulting offsetting receipts are usually the single largest source of offsets in the HUD budget. While the President's budget request estimates the amount of FHA offsetting receipts, the Congressional Budget Office (CBO) does its own estimates, and the CBO estimates are the ones that are used by congressional appropriators to determine budget authority. For FY2017, CBO estimates that the MMI Fund's single-family mortgage insurance programs, excluding FHA-insured reverse mortgages, will earn $7.4 billion. This is a slight increase from FY2016, when the MMI Fund's single-family programs were estimated to earn just over $7 billion. In total, FHA programs are estimated to generate nearly $8 billion in offsetting receipts in FY2017, compared to nearly $7.8 billion in FY2016. Appropriations and Commitment Authority Because the loans insured under the MMI Fund have historically been estimated to have negative credit subsidy, the MMI Fund has never needed an appropriation to cover the costs of loans guaranteed in a given fiscal year. However, FHA does receive appropriations every year for salaries (included in the salaries and expenses account for the overall HUD budget) and administrative contract expenses. The President's budget requested $160 million for FHA's administrative contract expenses, $30 million more than was provided in FY2016. The President's budget proposed paying for this $30 million increase through a fee that would be charged to lenders on FHA-insured mortgages they originate. The House committee-passed bill and the Senate-passed bill both proposed $130 million for administrative contract expenses, the same amount that was provided in FY2016. Neither bill would have provided FHA with the authority to charge lenders a fee to pay for some administrative support expenses, although both the House and Senate committee reports included language indicating support for the goal of improving FHA systems and technology. The Senate committee report language stated that it included resources in the Information Technology account to be used for such purposes. The final FY2017 law does not include the requested fee authority. Annual appropriations acts also authorize FHA to insure up to a certain aggregate dollar volume of loans during the fiscal year. This is referred to as "commitment authority." The President's budget requested the authority to insure up to $400 billion in new mortgages under the MMI Fund and up to $30 billion in new mortgages under the GI/SRI Fund in FY2017, the same amount of commitment authority that was provided in FY2016. The House committee-passed bill and the Senate-passed bill both included the requested commitment authority, and that level was approved in the final FY2017 appropriations law. Lead Hazard Control HUD's Office of Lead Hazard Control administers both the Lead-Based Paint Hazard Control Grant program and the Lead Hazard Reduction Demonstration program, designed to reduce the hazards of lead-based paint in homes. It also administers the Healthy Homes Initiative (HHI), which funds grants that can be used to address a broader set of environmental hazards in homes. For FY2017, the President's budget requested $110 million for these programs, the same amount funded in FY2016. Both the House Committee-passed bill and the Senate-passed bill proposed funding increases (to $130 million and $135 million, respectively). The final FY2017 appropriations law funds the account at an even higher level: $145 million. Policy Directives and Provisions The Senate bill and accompanying committee report ( S.Rept. 114-243 ) contained a number of policy changes and directives related to HUD's oversight and enforcement of lead-paint regulations, particularly as they apply to HUD-assisted housing. These included requirements th at HUD align its elevated blood- level standards with the Centers for Disease Control and Prevention (CDC) within a given timeframe , requirements for HUD to establish and implement various enhanced inspection, monitoring , and reporting requirements related to lead -based paint hazards in HUD-assisted housing, increased funding for PHAs to address lead-based paint hazards in public housing, and a requirement that GAO study HUD's oversight of lead-based paint hazards . The final appropriations law and accompanying explanatory statement maintain some, but not all, of the directives from the Senate bill . It requires a GAO report, but with an expanded focus , and it also requires HUD to report on its activities, but does not include the same directives for HUD to enhance its inspection procedures . Selected General Provisions Funding to Implement HUD's Affirmatively Furthering Fair Housing Rule The Fair Housing Act requires certain grantees, including communities receiving Community Planning and Development (CPD) formula grants—CDBG, HOME, HOPWA, and ESG funding—as well as the PHAs who administer public housing and the Section 8 Housing Choice Voucher program, to affirmatively further fair housing. While not defined in statute, affirmatively furthering fair housing has been found by courts to mean doing more than simply refraining from discrimination, and working to end discrimination and segregation. (For more information about the obligation to affirmatively further fair housing, see CRS Report R44557, The Fair Housing Act: HUD Oversight, Programs, and Activities , by [author name scrubbed].) In July 2015, HUD issued a final rule that changes the way in which CPD grantees and PHAs (collectively referred to as "program participants") comply with the requirement to affirmatively further fair housing. The rule has been controversial. When the proposed rule was published, in June 2013, HUD received more than 1,000 comments. Commenters raised concerns that the requirements intrude on the authority of local jurisdictions and constitute social engineering; raised concerns that compliance will be costly, especially for small jurisdictions and PHAs; asked questions as to whether HUD will continue to allow investment in low-income, segregated areas; and expressed uncertainty about how HUD will enforce the rule. During the FY2016 appropriations process, the House adopted an amendment to the THUD appropriations bill ( H.Amdt. 399 to H.R. 2577 ) that would have prohibited funds in the bill from being used to enforce the affirmatively furthering fair housing rule. The amendment was not included in the final appropriations act. A similar amendment was proposed to the FY2017 appropriations bill in the Senate. S.Amdt. 3897 would prevent funds from being used to carry out the final rule. The amendment was tabled. Instead, the Senate adopted an amendment, S.Amdt. 3970 , that would prohibit funds in the appropriations bill from being used to "direct a grantee to undertake specific changes to existing zoning laws" in carrying out the affirmatively furthering fair housing rule (§240 of the Senate-passed appropriations bill). The provision is included in the final appropriations law. See §243 of P.L. 115-31 . Housing Assistance for Persons Convicted of Committing Certain Crimes Under existing federal law, persons convicted of committing certain crimes are either barred from receiving federal rental housing assistance or local program administrators are given authority to bar such persons from receiving assistance. An amendment accepted during floor consideration of the Senate-passed THUD appropriations bill ( S.Amdt. 3905 ) would have prohibited any funding in the bill from being used to provide housing assistance to persons convicted of a broader set of crimes than are currently subject to restrictions under federal law. Specifically, the amendment would have barred assistance funded under the bill for persons convicted of aggravated sexual abuse, murder, human trafficking, and child pornography (§249 of the Senate-passed bill). This provision is not included in the final FY2017 appropriations law. Restrictions Related to the Federal Flood Risk Management Standard The Federal Flood Risk Management Standard (FFRMS) is the principal mechanism for accomplishing the flood risk management policies established by President Obama in Executive Order (E.O.) 13690. First published in January 2015, the FFRMS aims to improve the resilience of communities and federal assets against the impacts of flooding and the standard is applicable to certain federally funded projects. Section 236 of the House Appropriations Committee-reported FY2017 THUD appropriations bill would have prohibited any funding appropriated under the bill from being used to implement, administer, carry out, or enforce E.O. 13690 until at least 90 days after the Secretary of HUD makes specified reports to the House and Senate appropriations committees regarding the effects of the new FFRMS. This provision is not included in the final FY2017 appropriations law. Appendix. The Budget Resolution and Discretionary Spending Caps HUD appropriations are included as a part of the Transportation, HUD, and Related Agencies appropriations bill (THUD) each year. That bill, like the other 11 annual appropriations bills, is crafted to comply with limits provided in the annual budget resolution, which is, in turn, influenced by the Budget Control Act and its discretionary spending limits. Thus, it is useful to have a basic understanding of these policies and procedures as context when considering the formulation of HUD appropriations levels. The Budget Resolution The annual budget resolution provides a budgetary framework within which Congress considers legislation affecting spending and revenue. It sets forth spending and revenue levels, including spending allocations to House and Senate committees. These levels are enforceable by a point of order. After the House and the Senate Appropriations Committees receive their discretionary spending allocations from the budget resolution (referred to as 302(a) allocations), they divide their allocations among their 12 subcommittees (referred to as the 302(b) allocations). Each subcommittee is responsible for one of the 12 regular appropriations bills. While a budget resolution and subcommittee allocations alone cannot be used to determine how much funding any individual account or program will receive, they do set the parameters within which decisions about funding for individual accounts and programs can be made. The House and the Senate did not adopt a budget resolution for FY2017. In its absence, the Senate Budget Committee chair filed budgetary levels in the Congressional Record that are enforceable in the Senate as if they had been included in a budget resolution for FY2017. Based on these levels, the Senate Appropriations Committee reported their initial 302(b) suballocations on April 18, 2016. They include $56.474 billion for the THUD subcommittee, which is approximately $1 billion less than the comparable FY2016 level ($57.301 billion). In the absence of a budget resolution in the House, the House Appropriations Committee chose to adopt "interim 302(b) suballocations" for the appropriations bills as they were marked up in full committee. These interim suballocations are not procedurally enforceable. A suballocation for the THUD subcommittee of $58.190 billion was included in H.Rept. 114-606 . The Budget Control Act and Sequestration In 2011, the Budget Control Act (BCA, P.L. 112-25 ) was enacted, which both increased the debt limit and contained provisions intended to reduce the budget deficit through spending limits and reductions. In part, the BCA was intended to accomplish deficit reduction by imposing statutory limits on discretionary spending each fiscal year from FY2012 through FY2021. The BCA specifies separate limits for defense and nondefense spending; HUD discretionary programs are subject to the nondefense discretionary limits. In addition to the initial spending limits set in the BCA, the law 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. When a plan was not enacted, the BCA required that a one-time sequestration of nonexempt discretionary spending occur in FY2013. (Sequestration is a process of automatic, largely across-the-board spending reductions.) In addition, the BCA required that the discretionary spending limits be lowered further for FY2014 through FY2021. Various amendments to the BCA have been enacted that have altered the discretionary spending reductions that were otherwise scheduled to occur under that law. Most recently, the enactment of the Bipartisan Budget Act of 2015 had the effect of lessening the BCA reductions for FY2016 and FY2017, by establishing higher levels for those fiscal years' limits than otherwise would have been the case. Under current law, those BCA reductions are to resume for the FY2018 limits. In each fiscal year, if discretionary funding is enacted that exceeds either of the limits (defense or non-defense), then sequestration will be imposed to reduce spending in the applicable category. In terms of mandatory funding, the BCA provided for reductions of nonexempt programs through sequestration each year through FY2021. This has subsequently been amended to occur through FY2024.

Most of the funding for the activities of the Department of Housing and Urban Development (HUD) comes from discretionary appropriations provided each year in the annual appropriations acts, typically as a part of the Transportation, HUD, and Related Agencies appropriations bill (THUD). HUD's programs are primarily designed to address housing problems faced by households with very low incomes or other special housing needs. This report tracks FY2017 appropriations for the department. Full-Year Appropriations: On May 5, 2017, the Consolidated Appropriations Act of 2017 was signed into law (P.L. 115-31). Title II of Division K provides $48.1 billion in gross appropriations for HUD's programs and activities; after accounting for savings from offsets, the net new budget authority for the department totals $38.8 billion. The law provides a $1 billion increase in funding for HUD's policies and programs over FY2016, which is primarily attributable to funding increases for the largest accounts in HUD's budget: the tenant-based rental assistance (TBRA) account (+$663 million) and project-based rental assistance (PBRA) account (+$196 million). Those increases largely maintain current services for the roughly 3 million low-income families who receive housing assistance through the Housing Choice Voucher program and the project-based Section 8 program. The largest relative increase in funding was provided for HUD's lead hazard reduction programs (+32%). Continuing Resolutions: Congress did not enact regular full-year FY2017 appropriations for HUD prior to the end of FY2016. Instead, HUD and most other federal agencies were funded through a series of continuing resolutions. Senate Action: On May 19, 2016, the full Senate approved FY2017 appropriations for HUD as a part of a substitute amendment to H.R. 2577 (which incorporated both the committee-reported version of the THUD bill (S. 2844) and the committee-reported version of the Military Construction, Veterans Affairs, and Related Agencies bill). It included $48.4 billion in gross discretionary appropriations for HUD's programs and activities, a 3% increase from the FY2016 level. After accounting for savings from offsets and rescissions, the bill included $39.2 billion in net discretionary budget authority, a 2% increase from the FY2016 level. House Action: On May 24, 2016, the House Appropriations Committee approved its version of a FY2017 THUD appropriations bill (H.R. 5394). It included $48 billion in gross discretionary appropriations and $38.7 billion in net discretionary budget authority for HUD, nearly $1 billion less than was requested and about $500 million less than was included in the Senate version. Like the Senate bill, H.R. 5394 proposed increases to the TBRA and PBRA accounts, but the increases were smaller than those in the Senate bill or requested by the President. President's Budget Request: Congressional action followed the release of the Obama Administration's FY2017 budget request to Congress on February 9, 2016. The request included $48.9 billion in gross discretionary appropriations for HUD (+4% from FY2016) and $39.6 billion in net discretionary budget authority (+3.5% from FY2016). The largest funding increases proposed were for the PBRA and TBRA accounts.

Introduction Recognizing the potential harm that a large, sudden release of hazardous chemicals poses to nearby people, state and federal governments have long regulated safety practices at chemical facilities. Historically, chemical facilities have engaged in security activities on a voluntary basis. Even before the terrorist attacks of 2001, congressional policy makers expressed concern over the security vulnerabilities of these facilities. After the 2001 attacks and the decision by several states to begin regulating security at chemical facilities, Congress again considered requiring federal security regulations to mitigate these risks. In 2006, the 109 th Congress passed legislation providing the Department of Homeland Security (DHS) with statutory authority to regulate chemical facilities for security purposes. Subsequent Congresses have extended this authority, which currently expires on December 13, 2014. Advocacy groups, stakeholders, and policy makers have called for Congress to reauthorize this authority, though they disagree about the preferred approach. The 113 th Congress has passed H.R. 4007 , which provides new statutory authority through the Homeland Security Act and extends the termination date of this authority for four years. The explosion on April 17, 2013, at the West Fertilizer Company fertilizer distribution facility in West, TX, has led to additional focus on DHS's ability to identify noncompliant facilities. The West Fertilizer Company had not reported to DHS under the CFATS program, though it appeared to have possessed more than screening threshold quantities of chemicals of interest. While DHS had engaged in previous activity to identify facilities that had not complied with CFATS reporting requirements, DHS did not identify the West Fertilizer Company. Congressional policy makers have questioned the sufficiency of DHS efforts to identify these noncompliant "outlier" facilities. This report provides a brief overview of the existing statutory authority and implementing regulation. It describes several policy issues raised in previous debates regarding chemical facility security and identifies policy options for congressional consideration. For additional analysis of CFATS implementation, see CRS Report R43346, Implementation of Chemical Facility Anti-Terrorism Standards (CFATS): Issues for Congress . Overview of Statute and Regulation The 109 th Congress provided DHS with statutory authority to regulate chemical facilities for security purposes. The statute explicitly identified some DHS authorities and left other aspects to the discretion of the Secretary of Homeland Security. The statute contains a "sunset provision" that causes the statutory authority to expire on December 13, 2014. This section reviews the chemical facility security statute and regulation, focusing on the regulatory compliance process. The 113 th Congress has passed H.R. 4007 , which will provide new statutory authority through the Homeland Security Act to regulate chemical facilities for security purposes. The regulations issued by DHS under the authority of previous statutory authority may be used to implement the new authority, and DHS may issue additional regulation to implement the new authorities. On April 9, 2007, DHS issued an interim final rule regarding the chemical facility anti-terrorism standards (CFATS). This interim final rule entered into force on June 8, 2007. The interim final rule implements statutory authority explicit in P.L. 109-295 , Section 550, and authorities DHS found that Congress implicitly granted. In promulgating the interim final rule, DHS interpreted the language of the statute to determine what DHS asserts was the intent of Congress. Consequently, much of the rule arises from the Secretary's discretion and interpretation of legislative intent rather than explicit statutory language. Under the interim final rule, the Secretary of Homeland Security determines which chemical facilities must meet regulatory security requirements, based on the degree of risk posed by each facility. The DHS lists 322 "chemicals of interest" for the purposes of compliance with CFATS. The DHS considers each chemical in the context of three threats: release; theft or diversion; and sabotage and contamination. Chemical facilities with greater than specified quantities, called screening threshold quantities, of chemicals of interest must submit information to DHS to determine the facility's risk status. See Figure 1 . The statute exempts several types of facilities from this requirement: facilities defined as a water system or wastewater treatment works; facilities owned or operated by the Department of Defense or Department of Energy; facilities regulated by the Nuclear Regulatory Commission (NRC); and those facilities regulated under the Maritime Transportation Security Act of 2002 ( P.L. 107-295 ). Based on the information received from the facility, DHS determines whether a facility is or is not high-risk. Facilities that DHS deems high risk must meet CFATS requirements. The DHS assigns high-risk facilities into one of four tiers based on the magnitude of the facility's risk. Facilities in higher risk tiers must meet more stringent requirements. The statute mandated the use of performance-based security requirements. The DHS created graduated performance-based requirements for facilities assigned to each risk-based tier. All high-risk facilities must perform a security vulnerability assessment, develop an effective site security plan, submit these documents to DHS, and implement their security plan. The security vulnerability assessment serves two purposes under the interim final rule. One is to determine or confirm the placement of the facility in a risk-based tier. The other is to provide a baseline against which to evaluate the site security plan activities. The site security plans must address the security vulnerability assessment by describing how activities in the plan correspond to securing facility vulnerabilities. Additionally, the site security plan must address preparations for and deterrents against specific modes of potential terrorist attack, as applicable and identified by DHS. The site security plans must also describe how the activities taken by the facility meet the risk-based performance standards provided by DHS. The DHS must review and approve the submitted documents, audit and inspect chemical facilities, and determine regulatory compliance. The DHS may disapprove submitted security vulnerability assessments or site security plans that fail to meet DHS performance-based standards, but not because of the presence or absence of a specific security measure. In the case of disapproval, DHS must identify in writing those areas of the assessment and/or plan that need improvement. Owners or operators of chemical facilities may appeal disapproval of site security plans to DHS. Similarly, if, after inspecting a chemical facility, DHS finds the facility not in compliance, the Secretary must write to the facility explaining the deficiencies found, provide an opportunity for the facility to consult with DHS, and issue an order to the facility to comply by a specified date. If the facility continues to be out of compliance, DHS may fine and, eventually, order the facility to cease operation. The interim final rule establishes the process by which chemical facilities can appeal such DHS decisions and rulings, but the statute prohibits third-party suits for enforcement purposes. The statute requires certain protections for information developed in compliance with this act. The interim final rule creates a category of information exempted from disclosure under the Freedom of Information Act (FOIA) and comparable state and local laws. The DHS named this category of information "Chemical-terrorism Vulnerability Information" (CVI). Information generated under the interim final rule, as well as any information developed for chemical facility security purposes identified by the Secretary, comprise this category. Judicial and administrative proceedings shall treat CVI as classified information. The DHS asserts sole discretion regarding who will be eligible to receive CVI. Disclosure of CVI may be punishable by fine. The interim final rule states it preempts state and local regulation that "conflicts with, hinders, poses an obstacle to, or frustrates the purposes of" the federal regulation. States, localities, or affected companies may request a decision from DHS regarding potential conflict between the regulations. Since DHS promulgated the interim final rule, Congress amended P.L. 109-295 , Section 550, to state that such preemption will occur only in the case of an "actual conflict." The DHS has not issued revised regulations addressing this change in statute. Implementation The National Protection and Programs Directorate (NPPD) within DHS is responsible for chemical facility security regulations. In turn, the Office of Infrastructure Protection, through its Infrastructure Security Compliance Division (ISCD), oversees the CFATS program within NPPD. This section reviews implementation of the chemical facility security regulations, focusing on funding, the number of regulated facilities, rate of facility inspection, and reviews of DHS implementation efforts. Staffing and Funding The availability of staff, infrastructure, and funds is a key factor in implementing the CFATS program. Congress has not authorized specific appropriations for the CFATS program. As seen in Table 1 , the staffing and funding for this program generally increased since its creation, but decreased since FY2011. The full-time-equivalent (FTE) staffing peaked in FY2011 at 257 FTE. Appropriations for this program peaked in FY2010 at $103 million. When DHS received statutory authority to regulate chemical facilities in 2006, it did not possess a chemical facility security office or inspector cadre. The general increase in FTE over time reflects the creation and staffing of the office and the development of an inspector cadre. In February 2012, DHS testified that it had hired most of the inspector cadre. In March 2013, the DHS Inspector General reported that a working group within ISCD requested an additional 64 inspectors for FY2014 and FY2015 to increase the rate of facility inspection. According to the DHS Inspector General, this request was not approved. For FY2014, Congress appropriated $81 million for ISCD, an increase in funding from FY2013. The joint explanatory statement accompanying FY2014 appropriations also directed DHS to provide reports to Congress on CFATS implementation, coordination of chemical security responsibilities, how ISCD will improve its review process, and how NPPD is avoiding program duplication and is ensuring facility security in its personnel surety efforts. It also requires DHS provide a comprehensive update on efforts to address facilities not reporting under CFATS. Number of Regulated Facilities The DHS has received more than 48,000 Top-Screen submissions from over 36,000 chemical facilities (step 4 in Figure 1 ). Of these facilities, DHS required more than 7,800 to submit a security vulnerability assessment to determine whether they were high-risk. From the submitted security vulnerability assessments, DHS currently identifies approximately 3,700 facilities as high-risk. The DHS considers the other facilities as low-risk, and they need meet no further CFATS requirements at this time. The DHS assigned each high-risk facility, in some cases preliminarily, to one of four risk tiers (step 7 in Figure 1 ). Table 2 shows the number of high-risk facilities in each tier, with Tier 1 those facilities of highest risk. In May 2010, DHS identified an anomaly in one of the risk-assessment tools it used to determine a facility's risk tier. At that time, DHS believed that it had resolved the anomaly. In June 2011, a new acting ISCD Director "rediscovered" this issue, identified its potential effect on facility tiering, brought the issue to the attention of NPPD leadership, and notified facilities of their change in risk tier. Subsequent review of this risk-assessment tool resulted in DHS reviewing the tier determination of approximately 500 facilities. The DHS lowered the number of facilities allocated at that time to the highest-risk tier from 219 to 102, a greater than 50% reduction. In some cases, DHS determined that facilities no longer qualified as a high-risk facility and thus were not subject to the CFATS regulations. Overall, the total number of chemical facilities assigned a risk tier by DHS has declined since the CFATS program began. The DHS asserts that the observed reduction in regulated chemical facilities indicates that the CFATS program and its statutory authority are increasing security by inducing regulated entities to voluntarily reduce the chemical holdings to levels below the regulatory threshold. Several other factors may have contributed to this decline, including erroneous filing by regulated entities, process changes on the part of regulated entities, and business operations and decisions. The reported total number of facilities may not fully reflect the actual number of facilities possessing chemicals of interest above screening threshold quantities. Since the CFATS program relies on facilities possessing such chemicals to report their holdings, it is possible that additional facilities exist that have not reported possessing chemicals of interest. For example, DHS did not receive any submissions from the West Fertilizer Company. Reportedly DHS was not aware of the chemical holdings at the facility prior to its explosion. If such facilities did not report their holdings, DHS would not assess whether they were high-risk and thus regulated. A potential mitigating factor might be if other federal agencies that receive information about facility chemical holdings through different regulatory programs shared such information with DHS. Such information sharing might allow DHS to identify facilities that had not reported to it but had reported to other federal agencies. Facility Inspections and Plan Approval The DHS originally planned to begin inspections of Tier 1 facilities as soon as 14 months after it issued regulations implementing CFATS (step 11 of Figure 1 ). Several factors have delayed inspections, including the release of additional regulatory requirements in the form of an appendix and the need to build an inspector cadre, establish a regional infrastructure, and assist facilities in complying with the regulation. Chemical inspectors must be able to assess the security measures at a chemical facility using the performance-based criteria developed by DHS. Performance-based security measures are likely more difficult to assess than prescriptive measures and thus inspectors may require greater training and experience. To overcome this challenge, DHS established a Chemical Security Academy, a 10-week training course for inspectors. Such training, while likely improving the quality of inspection, also introduces additional time between the hiring of new inspectors and their deployment in the field. Since 2007, DHS officials have provided numerous dates for beginning inspections. The DHS began inspections of Tier 1 facilities in February 2010. At that time, DHS testified that it planned to inspect all Tier 1 facilities by the end of calendar year 2010, but by the end of calendar year 2011, DHS had only authorized 10 site security plans (step 10 of Figure 1 ) and had approved no implementation of any site security plan. Since then, DHS has implemented an interim site security plan review process that it asserts is more effective and timely. The DHS has used this interim review process to authorize additional site security plans. As of December 2014, DHS had authorized or conditionally authorized 2,456 site security plans. The DHS also reported that it had successfully inspected and approved the site security plan at 1,366 facilities. The DHS has not identified the tier assignment of these facilities. In April 2014, DHS identified the tier assignments of facilities with authorized and approved site security plans. This data showed that DHS has focused on authorizing and approving site security plans for facilities assigned to the higher risk tiers. See Table 3 . According to DHS, ISCD inspected and approved more facilities than it had expected to in FY2013, but some of these approvals were for facilities in tiers lower than planned. In March 2013, DHS testified that it planned to have all Tier 1 facilities approved by October 2013 and all Tier 1 and Tier 2 facilities approved by May 2014. The DHS did not meet this milestone and now estimates that, by the end of FY2014, it will have approved over 90% of all Tier 1 and Tier 2 facilities that have authorized site security plans. The DHS notes that regulated facilities may move between tiers, and new regulated facilities may be assigned any tier. As a consequence, DHS asserts it is likely that a small percentage of facilities in each tier will not have approved site security plans at any given time. The DHS has identified an additional factor in the delay of the inspection schedule: iteration between DHS and regulated entities regarding their site security plans. The DHS has issued at least 66 administrative orders to compel facilities to complete their site security plans. In addition, DHS established a pre-authorization inspection process to gain additional information from facilities to fully assess the submitted site security plan and potentially reduce the number of requests for additional information from DHS to regulated facilities. Once DHS completes a pre-authorization inspection at a facility, the facility may amend its site security plan to reflect the results of the pre-authorization inspection. The DHS had performed approximately 180 pre-authorization inspections as of February 2012. The DHS has since included this type of inspection in its more general compliance assistance visit program. As of December 2014, DHS had conducted 1,691 compliance assistance visits. Program Reviews The CFATS program has undergone three reviews of its processes and progress. The first was an internal review conducted by program management to identify programmatic challenges. Since that review, both the DHS Office of the Inspector General (OIG) and the Government Accountability Office (GAO) have released reports addressing the CFATS program. Internal Review of CFATS Program In December 2010, NPPD initiated a management review of ISCD through the NPPD Office of Compliance and Security. In July 2011, new leadership took charge of ISCD and, at the direction of Under Secretary Beers, began a review of the goals, challenges, and potential corrective actions to improve program performance. In November 2011, ISCD leadership presented Under Secretary Beers with a report containing the results of both reviews. According to DHS, the report was intended as a candid, internal assessment that focused predominantly on the challenges faced by ISCD rather than on the program's successes and opportunities. At the time of the report, DHS had received approximately 4,200 site security plans but had not approved any. The review report identified several factors that contributed to the absence of approvals. These factors included the inability to perform compliance inspections and the lack of an established records management system to document key decisions. Other difficulties facing ISCD reportedly included human resource issues, such as having employees with insufficient qualifications and work training, erroneous impressions of inspector roles and responsibilities, and the use of contractors to perform inherently governmental work. Additional reported challenges included difficulty in quickly altering workplace requirements, resolving personnel security requirements, detailing site security compliance inspections, managing workplace behavior and perceptions, and dealing with a unionized workforce. Additionally, ISCD lacked a system for tracking the usage of consumable supplies, potentially allowing for waste, fraud, and abuse; faced challenges in hiring new qualified individuals; and suffered from a lack of morale. The report identified three top priorities to address the challenges addressing ISCD: clearing the backlog of site security plans; developing a chemical inspection process; and addressing ISCD statutory responsibilities for regulating ammonium nitrate and managing personnel surety as part of the CFATS program. The ISCD developed an action plan with discrete action items to address identified challenges. In addition to the action plan, NPPD requested ISCD leadership to provide milestones and a schedule for completion of the action plan tasks. The ISCD implemented this plan with the oversight of NPPD leadership. According to GAO, ISCD developed at least eight sequential versions of the action plan, updating each additional version, and in some cases adding additional detail, milestones, or timelines. As of July 2013, DHS had completed 90 of the 95 action items included in the action plan. Completed action items include updated internal policy and guidance materials for inspections, a monthly ISCD newsletter, increased staff engagement and dialogue, and additional supervisory training and guidance. The GAO reviewed the DHS action plan and stated that "ISCD appears to be heading in the right direction, but it is too early to tell if individual items are having their desired effect because ISCD is in the early stages of implementing corrective actions and has not established performance measures to assess results." The GAO provided several caveats to its assessment, including that it did not have available documentary evidence about the causes of the issues identified in the ISCD memorandum. For example, GAO stated, "Program officials did not maintain records of key decisions and the basis for those decisions during the early years of the program." Office of the Inspector General Review In March 2013, the DHS OIG released a report on its review of the CFATS program through the end of FY2012. The DHS OIG review addressed whether: management controls were in place and operational to ensure that CFATS is not mismanaged; NPPD and ISCD leadership misrepresented program progress; and nonconforming opinions of program personnel were suppressed or met with retaliation. The DHS OIG report was critical of the prior performance of the CFATS program, stating: Program progress has been slowed by inadequate tools, poorly executed processes, and insufficient feedback on facility submissions. In addition, program oversight had been limited, and confusing terminology and absence of appropriate metrics led to misunderstandings of program progress. The Infrastructure Security Compliance Division still struggles with a reliance on contractors and the inability to provide employees with appropriate training. Overall efforts to implement the program have resulted in systematic noncompliance with sound Federal Government internal controls and fiscal stewardship, and employees perceive that their opinions have been suppressed or met with retaliation. Although we were unable to substantiate any claims of retaliation or suppression of nonconforming opinions, the Infrastructure Security Compliance Division work environment and culture cultivates this perception. Despite the Infrastructure Security Compliance Division's challenges, the regulated community views the Chemical Facility Anti-Terrorism Standards Program as necessary in establishing a level playing field across a diverse industry. The DHS OIG issued 24 recommendations to assist ISCD to correct identified program deficiencies and attain intended program results and outcomes. The ISCD concurred fully or partially with 20 recommendations and did not concur with 4 recommendations. The DHS OIG recommendations included improving internal processes to achieve a more timely response to information submissions and requests from regulated entities; defining, developing, and implementing improved processes and procedures for inspections; refining and improving the existing CFATS tiering methodology and tiering process; and reducing reliance on contractors and improving managerial oversight within ISCD. In response to these recommendations, ISCD provided the DHS OIG with a corrective action plan. As of February 2014, ISCD has addressed 12 of the DHS OIG recommendations. Nine recommendations were administrative and include selecting permanent ISCD leadership; reducing reliance on contract personnel; developing policy for appointing acting management; ensuring that all employees serving in an acting supervisory capacity have a supervisory position description; ensuring that all employees receive performance reviews; disseminating ISCD organizational and reporting structure to staff; reiterating to all employees the process for reporting misconduct allegations; implementing a plan to ensure the long‐term authorization of the CFATS Program; and establishing internal controls for the accountability of appropriated funds. Three recommendations were programmatic and pertained to: revising the long‐term review process to reduce the Site Security Plan backlog; implementing a process to improve the timeliness of facility submission determinations; and program metrics that measure CFATS program value accurately and demonstrate the extent to which risk has been reduced at regulated facilities. The ISCD is still addressing 12 DHS OIG recommendations. Ten recommendations are programmatic and include improving CFATS Program tools and processes; engaging regulated industry and government partners; and finalizing program requirements. The two administrative recommendations include providing training and guidance; and eliminating inappropriate Administratively Uncontrollable Overtime pay. Government Accountability Office Review In April 2013, GAO issued a report on the CFATS program. The GAO assessed how DHS assigned chemical facilities to tiers and the extent to which it did so, how DHS revised its process to review facility security plans, and whether DHS communicated and worked with owners and operators to improve security. The GAO found that the approach DHS used to assess risk and make decisions to place facilities in final tiers does not consider all of the elements of consequence, threat, and vulnerability. For example, the risk assessment approach is based primarily on consequences arising from human casualties, but does not consider economic consequences. The GAO review of the risk assessment approach revealed that ISCD was inconsistent in how it assessed threat. According to GAO, ISCD considered threat for the 10% of facilities tiered because of the risk of release or sabotage, but not for the approximately 90% of facilities that are tiered because of the risk of theft or diversion. Also, GAO identified that when it did use threat data, the data was not current. In addition, GAO found that DHS had not been tracking data on reviews of site security plans and thus could not quantify improvements to that process. The GAO estimated that it could take another seven to nine years before DHS completed reviews on submitted site security plans. Input GAO solicited from 11 trade associations also indicated that DHS does not obtain systematic feedback on outreach activities. The GAO recommended that DHS: develop a plan, with timeframes and milestones, that incorporates the results of the various efforts to fully address each of the components of risk and take associated actions where appropriate to enhance ISCD's risk assessment approach and conduct an independent peer review, after ISCD completes enhancements to its risk assessment approach that fully validates and verifies ISCD's risk assessment approach consistent with the recommendations of the National Research Council of the National Academies. The ISCD has taken steps to address the GAO recommendations. For example, ISCD engaged the Homeland Security Studies and Analysis Institute to coordinate an examination of the CFATS risk assessment model. According to GAO, HSSAI recommended that ISCD revise the current risk-tiering model and create a standing advisory committee—with membership drawn from government, expert communities, and stakeholder groups—to advise DHS on significant changes to the methodology. In addition, ISCD plans to modify the risk assessment approach to better include all elements of risk. Executive Order 13650 On August 1, 2013, President Obama signed an executive order on improving chemical facility safety and security. The executive order directs multiple federal agencies, including DHS, to take certain actions in the areas of chemical facility safety and security. It also establishes a Chemical Facility Safety and Security Working Group co-led by DHS, EPA, and the Department of Labor. Among other topics, it contains several provisions related to information sharing and coordination in the CFATS program. The executive order directs the working group to develop a plan that will, among other goals, identify ways to improve coordination among the federal government, first responders, and state, local, and tribal entities. It specifically directs the Secretary of Homeland Security to assess the feasibility of sharing CFATS data with State Emergency Response Commissions (SERCs), Tribal Emergency Planning Committees (TEPCs), and Local Emergency Planning Committees (LEPCs). The executive order directs the working group to analyze the potential to improve information collection by and sharing between agencies to help identify chemical facilities which may not have provided all required information or may be noncompliant with federal requirements to ensure chemical facility safety. It also directs the working group to produce a proposal for a coordinated, flexible data-sharing process that can be used to track submitted data. The proposal is to allow for the sharing of information with and by state, local, and tribal entities. The executive order also directs the working group to convene an array of stakeholders to identify and share successes to date and best practices to reduce safety and security risks. The executive order specifically includes consideration of "the use of safer alternatives." The executive order directs the working group to deploy a pilot program to validate best practices and test innovative methods for federal interagency collaboration regarding chemical facility safety and security. The pilot program, which DHS has implemented, is to include innovative and effective methods of collecting, storing, and using facility information, stakeholder outreach, inspection planning, and, as appropriate, joint inspection efforts. The results of this pilot program are to inform comprehensive and integrated standard operating procedures for a unified federal approach for identifying and responding to risks in chemical facilities, incident reporting and response procedures, enforcement, and collection, storage, and use of facility information. These best practices are to reflect best practices and are to include agency-to-agency referrals and joint inspection procedures where possible and appropriate. Additionally, the executive order directs the Secretary of Homeland Security to identify a list of chemicals that should be considered for addition to the CFATS chemical of interest list. Expanding the list of chemicals of interest, while not changing the mechanism by which DHS defines a chemical facility, would likely lead to additional facilities regulated under CFATS. In May 2014, the working group issued a report to the President on progress to date. The report includes descriptions of various efforts to modify the CFATS program in order to improve its performance individually and in conjunction with other programs. These efforts include improved information sharing among federal agencies regarding regulated facilities with chemical holdings; outreach to state homeland security advisors, first responders, and other state and local agencies; comparison of federal chemical facility information with that held by states; and continued coordination and harmonization activities among chemical facility security regulatory programs. The report also described a planned CFATS Advance Notice of Proposed Rulemaking (ANPRM) on potential modification of the CFATS regulations to address ammonium nitrate as a chemical of interest, updates to the list of chemicals of interest, and other aspects of the program. On May 30, 2014, the Office of Management and Budget indicated its Office of Information and Regulatory Affairs had received the proposed ANPRM language from DHS. Finally, the report identifies three specific areas where the working group calls for congressional action with regard to CFATS. These are: providing permanent authorization for the CFATS program; streamlining the CFATS enforcement process; and removing the water and wastewater treatment facilities exemption from CFATS. Policy Issues Previous congressional discussion on chemical facility security raised several contentious policy issues. Some issues will exist even if Congress extends the existing statutory authority without changes. These include whether DHS has sufficient funding and capabilities to adequately oversee chemical facility security; whether federal chemical facility security regulations should preempt state regulations; and how much chemical security information individuals may share outside of the facility and the federal government. Other issues, such as what facilities DHS should regulate as a chemical facility and whether DHS should require chemical facilities to adopt or consider adopting inherently safer technologies, may be more likely addressed if Congress chooses to revise or expand existing authority. Funding and Infrastructure and Workforce Capabilities The 2007 CFATS regulations establish an oversight structure that relies on DHS personnel inspecting chemical facilities and ascertaining whether regulated entities have implemented their authorized site security plans. Although the use of performance-based measures, where chemical facilities have flexibility in how to achieve the required security performance, may reduce some demands on the regulated entities, it may also require greater training and judgment on the part of DHS inspectors. Congressional oversight has raised the question of whether DHS has requested and received appropriated funds sufficient to hire and retain the staff necessary to perform the required compliance inspections and whether DHS has properly managed the appropriated funds received. The DHS has faced challenges when creating the necessary infrastructure to perform nationwide inspections. As stated by DHS, initial expectations for inspector responsibilities and infrastructure needs did not match the final needs. For example, at the program's outset, certain roles and responsibilities were envisioned for the program staff that, in the end, did not apply. This resulted in the hiring of some employees whose skills did not match their ultimate job responsibilities and the purchase of some equipment that in hindsight appear to be unnecessary for chemical inspectors. Additionally, we envisioned a greater number of field offices than we eventually decided to employ. The degree to which funding meets agency infrastructural needs likely depends on factors both external and internal to DHS. External factors include the number of regulated facilities and the sufficiency of security plan implementation. Challenges experienced by DHS in overseeing facility site security plan implementation will likely increase the workforce necessary to meet the planned inspection cycle. In contrast, reduction in the number of regulated facilities will likely decrease the number of needed inspectors. Internal factors include the ratio between headquarters staff and field inspectors; the assigned risk tiers of the regulated facilities; and the timetable for implementation of inspections. Once DHS has more fully engaged in inspection of regulated facilities, it may be able to more comprehensively determine its long-term resource needs and estimate both funding and staff requirements. A key factor for achieving program efficacy and efficiency may be the success in training inspectors to perform CFATS inspections, given the reported difficulties in developing inspector training combined with the requirements of a new regulatory program. Inspection Rate As of December 2014, 1,366 chemical facilities had been approved in the CFATS process, which starts with information submission by chemical facilities and finishes with approval of inspected security measures by DHS. The DHS states that the first authorization inspection was conducted in 2010; as of December 2014, DHS had conducted 1,851 authorization inspections. In 2013, GAO projected that DHS may require between seven and nine years to complete review of site security plans and that to inspect and approve all regulated facilities will require additional time. This estimate is premised on an approval rate of 30 to 40 facilities per month. As DHS has increased its rate of inspection and approval, it is likely that it will take DHS less time to approve all regulated facilities. Some policy makers have expressed surprise at the pace of inspection and questioned whether DHS should continue at the current pace or accelerate the compliance process. Several factors likely complicate and slow the inspection process. One factor appears to be the internal operations of the DHS implementing office and the skills and capabilities of the ISCD inspector cadre. Another factor appears to be that the information facilities submit in site security plans may not provide what DHS views as sufficient detail to evaluate compliance. Rather than reject such site security plans, DHS attempts to gather iteratively the necessary information from the facilities, including through compliance assistance visits. Compliance assistance visits may lead to higher quality site security plan submissions, even though the visits appear to be a significant drain on DHS resources. In principle, such visits may lower the future authorization inspection burden, as CFATS inspectors will be familiar with security measures at the chemical facility. Such familiarity may hasten the actual authorization inspection. The DHS has also suggested that higher risk-tier facilities benefit more from these types of assistance visits due to the complexity of the facility, the potential presence of multiple chemicals of interest, and the more stringent risk-based performance standards that apply. Lower risk-tier facilities may not need such visits because these facilities may be less complex and inspectors may develop best practices through the compliance assistance visits of higher-tiered facilities. However, the converse might be true instead. Smaller facilities with less security experience may benefit more from such visits. Some policy makers have questioned whether the low inspection rate is due to constraints in the number of chemical facility security inspectors hired by DHS or the availability of appropriated funding. The CFATS regulations state that DHS will inspect the implementation of site security plans at all facilities and require that facilities resubmit their Top-Screen and, if so directed by DHS, their security vulnerability assessment and site security plan every two years for Tier 1 and Tier 2 facilities or three years for Tier 3 and Tier 4 facilities. This would require DHS to perform over 1,400 inspections annually to inspect every facility's implementation of its site security plan. The DHS has asserted that each inspection would require two or more inspectors and approximately one week to perform. The DHS appears to have requested sufficient inspectors to manage the workload associated with a reinspection cycle of every two years for top tier facilities and every three years for lower tier facilities, but such a staffing level may be insufficient to address the large number of initial regulatory submissions or a more frequent reinspection cycle or the use of inspectors to perform compliance assistance visits. This level of staffing would appear to require at least several years of inspections to reduce the backlog created from the initial site security plan submissions, even if DHS performed only authorization inspections. A June 2012 DHS analysis estimated that DHS might perform 813 inspections annually. At this rate, DHS would require approximately five years to complete the initial inspections. If DHS were to hire additional inspectors, it might reduce the backlog of site security plans but also run the risk of having additional unnecessary staff in future years. The DHS might hire temporary or short-term staff to augment the inspector cadre, but the need to train such employees for CFATS-specific inspections may pose challenges. Finally, because DHS has focused on inspecting those facilities in the highest risk tier, it potentially faces the most complicated inspection environments. Inspections of lower risk tier facilities may pose fewer complications, take less time, and involve fewer inspectors. If so, DHS might quickly and substantially increase the number of facilities inspected by focusing efforts on lower tier facilities. Through this approach, DHS might gain insight and experience among the inspector cadre while reducing some national risk. Federal Preemption of State Activities The original statute did not expressly address the issue of federal preemption of state and local chemical facility security statute or regulation. When DHS issued regulations establishing the CFATS program, DHS asserted that the CFATS regulations would preempt state and local chemical facility security statute or regulation that "conflicts with, hinders, poses an obstacle to or frustrates the purposes of" the federal regulation. After the regulation's release, Congress amended DHS's statutory authority to state that only in the case of an "actual conflict" would the federal regulation preempt state authority. Few states have established independent chemical facility security regulatory programs, and conflict between the federal and state activities has not yet occurred. The DHS did not identify any state programs that conflict with the CFATS regulations. The DHS has also not altered its regulatory language in response to the statutory amendment. Advocates for federal preemption call for a uniform security framework across the nation. They assert that a "patchwork" of regulations might develop if states independently develop additional chemical facility security regulations. Variation in security requirements might lead to differing regulatory compliance costs, and companies might suffer competitive disadvantage based on their geographic location. Supporters of a state's right to regulate chemical facility security claim that the federal regulation should be a minimum standard with which all regulated entities must comply. They assert that DHS should allow states to develop more stringent regulations than the federal regulations. They claim such regulations would increase security. Some supporters of state regulation suggest that more stringent, conflicting state regulations should preempt the federal regulations. Such a case might occur if a state regulation mandated the use of a particular security approach at chemical facilities, conflicting with the federal regulation that adopts a performance-based, rather than prescriptive, approach. The desire to retain industries that might relocate if faced with increased regulation arguably would temper state inclinations to require overly stringent or incompatible regulations. Some policy makers may assert that chemical facility security should be left to the states rather than be implemented by the federal government. If Congress allows the statutory authority to expire and does not appropriate funds for the further implementation of CFATS, the federal authority would lapse, and state and local jurisdictions would be solely responsible for regulating chemical facility security. Transparency The CFATS process involves determining chemical facility vulnerabilities and developing security plans to address them. Information developed in this process is not openly disseminated. The CFATS program categorizes this information as Chemical-terrorism Vulnerability Information (CVI) and provides penalties for its disclosure. Some advocates have argued for greater transparency in the CFATS process, even if the program does not provide detailed information regarding potential vulnerabilities and specific security measures. They assert that those individuals living in surrounding communities require such information to effectively plan and make choices in an emergency. The current statute and regulation prohibit public disclosure of CVI. Only specific "covered persons" may access CVI. While acknowledging a legitimate homeland security need to limit dissemination of security information, some policy makers have questioned whether such limitations hinder other efforts. For example, first responders and community representatives have highlighted how such information protection regimes may impede emergency response and the ability of those in the surrounding community to react to emergency situations at the chemical facility. Additionally, worker representatives have raised concerns that these limitations and the lack of mandated inclusion of worker representatives may impede worker input into security plans. The current information protection regimes for chemical facility security information, CVI under CFATS and Sensitive Security Information (SSI) under the Maritime Transportation Security Act (MTSA), do not contain penalties for incorrectly marking information as protected. Only disclosure of correctly marked information is penalized. Additionally, the chemical facility is responsible for identifying and appropriately marking protected information. These information markings only would be assessed in the case of dispute. As was asserted during congressional oversight, this disparity may lead to a tendency by regulated entities, in order to protect themselves against potential liability or scrutiny, to erroneously limit dissemination of information that should be made available to the public. Additionally, the existing statute contains no provisions explicitly protecting or allowing for concerned covered persons to divulge CVI or to challenge the categorization of information as protected in an attempt to inform authorities about security vulnerabilities or other weaknesses. Depending on the circumstances, those individuals might be penalized for their disclosure of protected information. The CFATS regulations, reflecting this inherent tension, provide for a DHS point of contact to which such information might be revealed, but also state "Section 550 did not give DHS authority to provide whistleblower protection, and so DHS has not incorporated specific whistleblower protections into this regulation." Definition of Chemical Facility The DHS regulates an assortment of entities that possess and manufacture chemicals of interest. Thus, the term chemical facility encompasses many types of facilities, including agricultural facilities, universities, and others. With DHS defining chemical facilities according to possession of a chemical of interest, it regulates facilities not part of the chemical manufacturing and distributing chain. Stakeholders have expressed concern that the number of entities so regulated might be unwieldy and that the regulatory program might focus on many chemical facilities that pose little risk rather than on those facilities that pose more substantial risk. For example, during the rulemaking process, DHS received commentary and revised its regulatory threshold for possession of propane, stating: DHS, however, set the [screening threshold quantities] for propane in this final rule at 60,000 pounds. Sixty thousand pounds is the estimated maximum amount of propane that non-industrial propane customers, such as restaurants and farmers, typically use. The Department believes that non-industrial users, especially those in rural areas, do not have the potential to create a significant risk to human life or health as would industrial users. The Department has elected, at this time, to focus efforts on large commercial propane establishments but may, after providing the public with an opportunity for notice and comment, extend its [CFATS] screening efforts to smaller facilities in the future. This higher [screening threshold quantity] will focus DHS's security screening effort on industrial and major consumers, regional suppliers, bulk retail, and storage sites and away from non-industrial propane customers. In 2007, when developing its interim final rule, DHS estimated the expected number of regulated facilities and identified them by primary risk category: release due to loss of containment or potential for theft and diversion. In 2012, DHS analyzed the number of facilities with final tier assignments and identified their primary risk category. As seen in Table 4 , initial expectations of the distribution of facilities by primary risk did not match the risk types of the actual regulated facilities. Academic institutions have asserted that DHS should not apply CFATS regulations to them because of the dispersed nature of chemical holdings at colleges and universities. These institutions claim that regulatory compliance costs would not be commensurate with the risk reduction. The DHS has identified that a college or university with a high-risk facility on campus might choose to implement security measures at the specific location rather than across the entire campus. The DHS has already implemented select regulatory extensions for agricultural chemical users, though not distributors. While the regulatory compliance costs likely decrease at lower risk tiers compared to higher risk tiers, all regulated entities bear compliance costs as continued annual expenses. As mentioned above, the statutory authority underlying CFATS exempts several types of facilities, including water and wastewater treatment facilities. The federal government does not regulate water and wastewater treatment facilities for chemical security purposes. Instead, current chemical security efforts at water and wastewater treatment facilities are voluntary in nature. Some advocacy groups have called for inclusion of currently exempt facilities, such as water and wastewater treatment facilities. Some drinking water and wastewater treatment facilities possess amounts of chemicals of interest and would lead to regulation if located at a different type of facility. Advocates for their inclusion in security regulations cite the presence of such potentially hazardous chemicals and their relative proximity to population centers as reasons to mandate security measures for such facilities. In contrast, representatives of the water sector point to the critical role that water and wastewater treatment facilities have in daily life. They caution against including these facilities in the existing regulatory framework because of the potential for undue public impacts. They cite, for example, loss of basic fire protection and sanitation services if the federal government were to order a water or wastewater utility to cease operations for security reasons or failure to comply with regulation. If Congress were to remove the drinking water and wastewater treatment facility exemption, the number of regulated facilities might substantially increase, placing additional burdens on the CFATS program. The United States contains approximately 52,000 community water systems and 16,500 wastewater treatment facilities. These facilities vary substantially in size and service. The number of regulated facilities would depend on the criteria used to determine inclusion, such as chemical possession or number of individuals served. It is likely that only a subset of these facilities would meet a regulatory threshold. In 2011, a DHS official testified that approximately 6,000 such facilities would likely meet the CFATS threshold. Identification of Non-Responsive Facilities Although facilities with greater than screening threshold quantities of chemicals of interest must submit information to DHS under the Top-Screen process, an unknown number of facilities do not provide such information. One limited survey of community hospitals reported that 56% of respondents were aware of CFATS reporting requirements. Another example appears to be the West Fertilizer Company, which reported more than a threshold amount of chemical of interest to the EPA under the Risk Management Plan (RMP) program but did not file with DHS under CFATS. The DHS refers to these non-compliant facilities as "outliers." Congressional policy makers have raised the concern that many facilities may still not have properly reported to DHS. The number of facilities not complying with CFATS reporting requirements is unknown. If DHS lacks information about a facility's chemical holdings, it is unlikely to be able to identify it as an outlier. As noted above, DHS has regulatory authority to direct specific facilities to comply with CFATS, but DHS might not issue such orders without information indicating that a facility is out of compliance. In 2009, DHS listed some identification mechanisms in use at that time. These mechanisms included receiving information from the public through the DHS CFATS Tip Line; cross-referencing with information from other federal regulatory programs, such as the Environmental Protection Agency's (EPA's) Risk Management Planning (RMP) program (see text box below); and a pilot program with the state of New York and the state of New Jersey to identify non-responsive facilities in those states. Since then, DHS has also created the CFATS Share tool through which state Homeland Security Advisors, appropriate DHS components, and other stakeholders have access to data on the CFATS-regulated facilities within their jurisdictions. In addition, DHS participates "in engagements with various State Homeland Security Advisors (HSA) and other state and local security partners. The Department also has participated in numerous meetings with Local Emergency Planning Committees, Area Maritime Security Committees, Sector Coordinating Councils, and Fusion Centers." The DHS terminated some of these activities but continues others. Integration of this information with the CFATS program may pose challenges due to different data formats, resource availability, and limited utility. The DHS has requested $3 million in funding for FY2015 to develop an automated process to collect and analyze data provided by other federal, state, and local partners. As part of this process, DHS plans to compare information from EPA Risk Management Program and the Superfund Amendments and Reauthorization Act Title III data from all 50 states annually to identify potentially non-compliant facilities. Inherently Safer Technologies Previous debate on chemical facility security has included whether to mandate the adoption or consideration of changes in chemical processes to reduce the potential consequences following a successful attack on a chemical facility. Suggestions for such changes have included reducing the amount of chemical stored onsite and changing the chemicals used. In previous congressional debate, these approaches have been referred to as inherently safer technologies or methods to reduce the consequences of a terrorist attack. A fundamental challenge for inherently safer technologies is how to compare one technology with its potential replacement. It is challenging to unequivocally state that one technology is inherently safer than the other without adequate metrics. Risk factors may exist outside of the comparison framework. Some experts have asserted that the metrics for comparing industrial processes are not yet fully established and need additional research and study. A committee of the National Research Council of the National Academies has recommended that DHS support research and development to foster cost-effective, inherently safer chemistries and chemical processes. The National Academies has identified as a potential concern that inherently safer process analyses may become narrowly focused and its outcomes inappropriately weighted. A facility might consider many additional factors beyond homeland security implications when weighing the applicability and benefit of switching from one process to another. These factors include cost, technical challenges regarding implementation in specific situations, supply chain impacts, quality and availability of end products, and indirect effects on workers. Supporters of adopting these approaches as a way to improve chemical facility security argue that reducing or removing these chemicals from a facility will reduce the incentive to attack the facility. They suggest that reducing the consequences of a release also lowers the threat from terrorist attack and mitigates the risk to the surrounding populace. They point to facilities that have voluntarily changed amounts of chemicals on hand or chemical processes in use as examples that facilities can implement such an approach in a cost-effective, practical fashion. Opponents of mandating what proponents call inherently safer technologies question the validity of the approach as a security tool and the government's ability to effectively oversee its implementation. Industrial entities assert that process safety engineers within the regulated industry already employ such approaches and that these are safety, not security, methods. They assert that process safety experts and business executives should determine the applicability and financial practicality of changing existing processes at specific chemical facilities. A 2011 industry survey stated that, of those respondents that assessed using alternative chemicals or processes, 66.4% determined such alternatives were not technically feasible. Opponents of an inherently safer technology mandate also question whether the federal government contains the required technical expertise to adjudicate the practicality and benefit of alternative technological approaches. A third opposing view states concern that few existing alternative approaches are well understood with regard to their unanticipated side effects. They claim that researchers should continue to study these alternative approaches rather than immediately apply them, since unanticipated side effects could injure business and other interests. The DHS has engaged in research and development activities within its Science and Technology (S&T) Directorate to develop a better understanding of inherently safer technology, including efforts to define inherently safer technology. The NPPD has not adopted the results from these research and development efforts within its regulatory context. Congress has directed DHS to detail and report to Congress the Department's definition of inherently safer technology as it relates to chemical facilities under the purview of CFATS. Some industry representatives have asserted that an inherently safer technology mandate might have a potentially significant negative financial impact. Regulated entities incur a cost when meeting existing CFATS requirements, and small businesses may be challenged to make additional necessary capital investments. In its interim final rule, DHS estimated that even without an inherently safer technology requirement CFATS "may have a significant economic impact on a substantial number of small entities." Because of the performance-based nature of the regulatory requirement, it is difficult to detail the exact impact on small businesses. Adding an inherently safer technology requirement might increase the cost of CFATS compliance and might disproportionately affect small entities not already incorporating such activities in their business processes. Policy makers in previous Congresses highlighted the issue of small business impact, especially in the context of requiring additional measures that might hurt productivity. Personnel Surety A recurring issue in chemical facility security is ensuring that individuals with known terrorist affiliations do not gain access to high-risk facilities. The CFATS program addresses this concern by establishing a personnel surety risk-based performance standard in regulation. This performance standard requires facilities to conduct background checks on employees and unescorted visitors and provide identifying information to DHS for use in screening employees against the Terrorist Screening Database (TSDB). The DHS has not fully established the process by which CFATS-regulated facilities can meet this standard. The DHS issued a series of information collection requests from 2009 to 2011 that described how DHS would gather and use information on employees at CFATS-regulated facilities and requested public comment. Stakeholders and policy makers raised concerns that the DHS approach seemed to duplicate existing requirements underpinning the Transportation Worker Identification Credential (TWIC). In addition, DHS did not plan to accept existing TWIC cards as meeting the CFATS screening requirement. In July 2012, DHS withdrew this proposed personnel surety program from Office of Management and Budget review. The DHS asserts that its position on how to comply with the personnel surety standard has "evolved" in response to industry-provided information. The DHS engaged in industry outreach activities through conference calls with industry associations and meetings with Chemical Sector Coordinating Council leadership and members. In March 2013 and February 2014, DHS released notices of a new information collection request for compliance with the CFATS personnel surety program. The proposed personnel surety program contains provisions similar to those in the earlier information collection requests. The DHS proposes that regulated entities would provide certain identifying information to DHS before giving individuals access to restricted areas within a chemical facility. The DHS would use that information to screen employees and unescorted visitors against the TSDB. As with the prior personnel surety proposals, DHS would still require facilities to provide identifying information even for employees or visitors who have a TWIC card or another credential that is issued only following screening against the TSDB. The DHS asserts the purpose of this requirement is to allow DHS to verify that the credential is still valid, not to perform an additional background check. The DHS would alternatively allow facilities to use approved electronic reader devices to verify the validity of TWIC cards, but not other credentials. While DHS plans eventually to require implementation of the personnel surety program at facilities in each risk tier, it would limit the initial program to only Tier 1 and Tier 2 facilities. The DHS has indicated that this new information collection request clarifies that DHS will implement the personnel surety program in phases; that DHS will accept third-party submission of information on behalf of regulated entities; that facilities will not need to submit information each time an affected individual seeks access; and that entities with multiple regulated facilities may submit information on a company-wide basis, rather than separately for each facility. Additionally, the DHS requests comment on mechanisms to use electronic verification and validation of TWIC cards rather than requiring submission of information to DHS. The extent to which this new information collection request addresses industry concerns is not yet resolved. Industry stakeholders, in comments on the information collection requests, highlight the importance of recognizing other credentials, question whether the information regarding visitors could be obtained in the requisite time, and suggest that the number of individuals who would require screening may be larger than DHS estimates. Policy Options The existing statutory authority for CFATS expires on December 13, 2014. The 113 th Congress has passed H.R. 4007 , which authorizes DHS to regulate chemical facilities for security purposes through the Homeland Security Act. This bill will repeal the existing statutory authority on the effective date of the act (30 days after enactment). Many of the existing authorities are present in H.R. 4007 , but it also provides DHS with new authorities, such as the ability for certain covered chemical facilities to self-certify the sufficiency of their security plans. The DHS may use the existing regulations and issue new regulations as necessary to implement the new authority. The 113 th Congress may address chemical facility security through several options. Congress may continue its oversight of DHS's efforts to implement this program. Congress might also take legislative action to extend further the existing statutory authority by revising or repealing its sunset provision; codifying the existing regulations; amending the existing statutory authority; addressing existing programmatic activities; or restricting or expanding the scope of chemical facility security regulation. If Congress does not act and allows the statutory authority to expire, regulated entities may question the application and enforcement of the CFATS regulations. In the case where Congress allows the statutory authority to expire, but Congress appropriates funds for enforcing the CFATS program, DHS will likely be able to enforce the CFATS regulations. The GAO has found that in the case where a program's statutory authority expires, but Congress explicitly appropriates funding for it, the program may continue to operate without interruption. If Congress allows the statutory authority to expire and also does not appropriate funding for implementing the CFATS program, the CFATS regulations will likely also lapse. In this case, the states would likely become the primary source of any chemical facility security regulation. Continue Congressional Oversight Under one possible policy option, interested Members of Congress or congressional committees might continue their oversight of the CFATS program. Historically, much of the congressional debate has considered legislative options to reauthorize the existing statute or authorize the CFATS program through a different statutory vehicle. Congressional committees have accepted the assurances of DHS officials regarding CFATS activities even as DHS failed to meet its self-established deadlines. The program's critical self-assessment and DHS's lack of identifying the West Fertilizer Company as a CFATS-regulated facility may lead congressional oversight to increase focus on program performance, use of appropriations, and internal oversight. Congressional oversight of the program's implementation, enforcement, and efficacy may play a key role in determining the sufficiency of the existing authority and regulations. Maintain the Existing Regulatory Framework The existing statutory authority places much of the CFATS regulatory framework at the discretion of the Secretary of Homeland Security. The DHS is still in the process of implementing these regulations and has not yet determined their effectiveness. Congress might choose to maintain the existing regulations by extending the statutory authority's sunset date or codifying the existing regulations. Also, as noted above, allowing the statutory authority to expire could maintain, in effect, the existing regulatory framework if Congress continues to fund implementation, although this might lead to legal challenge. Extend the Sunset Date Congressional policy makers might choose to extend the current statutory authority for a fixed or indefinite time. Congress has enacted a series of limited extensions of the statutory authority since its inception. H.J.Res. 130 extends the existing statutory authority through December 13, 2014. Extending the existing statutory authority may provide regulated entities continuity, protect them from losing those resources already expended in regulatory compliance, and avoid providing a competitive advantage to those regulated entities that remained out of regulatory compliance. An extension may allow assessment of the efficacy of the existing regulations and inclusion of this information in any future attempts to revise or extend DHS's statutory authority. Moreover, since DHS is in the process of implementing current regulations, some policy makers argue for a simple extension without changing statutory requirements. The Obama Administration FY2015 budget requests an extension of the statutory authority until October 4, 2015, but the Obama Administration also supports enacting a longer duration or permanent statutory authority. The Administration's Chemical Facility Safety and Security Working Group's report to the President called for action from Congress to provide permanent statutory authorization for the CFATS program. Congress might make the existing program permanent by removing the statutory authority's sunset date. Some regulated entities support converting the existing program into a program with permanent or long-term authorization. The removal of the sunset date would make the statutory authority permanent, maintain the current discretion granted to the Secretary of Homeland Security to develop regulations, and might allow long-term assessment of the efficacy of the existing regulations. Making the existing statute permanent would provide consistency in authority and remove the statutory pressure to reauthorize the program. In contrast, the presence of a sunset date for the statutory authority arguably increases the likelihood of congressional attention to chemical facility security as a legislative topic. Some advocates who wish for more regular congressional review of the statutory authority might oppose removing its sunset date. Codify the Existing Regulations Congressional policy makers might choose to affirm the existing regulations by codifying them or their principles in statute. Such codification could reduce the discretion of the Secretary of Homeland Security to alter the CFATS regulations in the future. The existing statutory authority grants broad discretion to the Secretary to develop many elements of the CFATS regulations. Future Secretaries may choose to alter its structure or approach and still comply with the existing statute. Policy makers might identify specific components of the existing regulation that they wish any future regulation to retain and codify those portions. Specifying these components might limit the ability of the Secretary to react to changing circumstance, gained experience, and new knowledge. On the other hand, the codified portions might enhance the regulated community's ability to plan for future expenses and requirements. Alter the Existing Statutory Authority Congressional policy makers might choose to alter the existing statutory authority to modify the existing regulations, address stakeholder concerns, or broadly change the regulatory program. Accelerate or Decelerate Compliance Activities The DHS bases its schedule for facility CFATS compliance on the chemical facility's assigned risk tier. Those chemical facilities assigned to higher risk tiers have a more accelerated compliance and resubmission schedule than those assigned to lower risk tiers. Congressional policy makers might attempt to accelerate the compliance schedule by increasing funding available to DHS for CFATS, thereby increasing the ability of DHS to provide feedback to regulated entities, review submissions, and inspect facilities filing site security plans. Additional funding might reduce or mitigate inefficiencies or delays related to DHS processing of submissions. Alternatively, policy makers might provide DHS with the authority to use third parties as CFATS inspectors. The DHS could then augment the number of CFATS inspectors to meet increased demand or delegate inspection authority to state and local governments. Third-party inspectors might allow DHS to draw on expertise outside of the federal government in assessing the efficacy of the implemented site security activities. The DHS may need to define the roles and responsibilities of these inspectors and how DHS will assess and accredit their qualifications. The DHS has stated its intent to issue a rulemaking regarding the use of third-party inspectors but has not yet done so. The use of third-party inspectors might lead to concerns about equal treatment of chemical facilities by different third-party inspectors, and questions about whether homeland security inspections of this type are an inherently governmental responsibility that only federal employees should perform. Congress might direct DHS to increase its activities on identifying noncompliant facilities. Following an explosion in West, TX, DHS identified that the facility had not complied with CFATS, though it reportedly possessed more than a screening threshold quantity of chemicals of interest. Congressional policy makers may prioritize identifying those facilities that have not yet reported over other parts of the CFATS process, depending on their view of the relative risk reduction of these activities. Finally, Congress might determine that DHS has sufficient resources to accelerate compliance activities but is restrained by some other procedural factor. Some congressional policy makers assert that the internal and external reviews of the CFATS program indicate internal challenges and claim "the basic programmatic building blocks of CFATS are missing." Congressional policy makers might direct DHS to refine its internal procedures, streamline its review process, reduce the timeframe for response and interaction with regulated entities, or otherwise enact process improvements. Conversely, congressional policy makers might choose to slow the implementation schedule of the chemical facility security regulations. Concern about the impact of the regulation on small businesses or other entities might lead to a decelerated compliance schedule. The DHS has already implemented select regulatory extensions for certain agricultural operations. Congressional policy makers might direct DHS to provide longer submission, implementation, and resubmission timelines for those regulated entities that might suffer disproportionate economic burdens from compliance. Incorporate Excluded Facilities Policy makers might remove some or all of the statutory exclusions from the CFATS program. The Administration has supported revising the existing exclusions to provide a more comprehensive chemical facility security approach. The DHS supports modifying the existing exemption for (1) facilities regulated under the Maritime Transportation Security Act (MTSA) to increase security at these facilities to the CFATS standard and (2) facilities regulated by the Nuclear Regulatory Commission to clarify the scope of the exemption. In addition, DHS and the Environmental Protection Agency (EPA) have called for additional authorities to regulate water and wastewater treatment facilities: The Department of Homeland Security and the Environmental Protection Agency believe that there is an important gap in the framework for regulating the security of chemicals at water and wastewater treatment facilities in the United States. The authority for regulating the chemical industry purposefully excludes from its coverage water and wastewater treatment facilities. We need to work with the Congress to close this gap in the chemical security authorities in order to secure chemicals of interest at these facilities and protect the communities they serve. Water and wastewater treatment facilities that are determined to be high-risk due to the presence of chemicals of interest should be regulated for security in a manner that is consistent with the CFATS risk and performance-based framework while also recognizing the unique public health and environmental requirements and responsibilities of such facilities. The EPA has testified that the Obama Administration believes that EPA should be the lead agency for chemical security for both drinking water and wastewater systems, with DHS supporting EPA's efforts. The EPA also supports providing states with an important role in regulating chemical security at water systems, including determinations, auditing, and inspecting. In contrast, the Administration's Chemical Facility Safety and Security Working Group's report to the President called for action from Congress to remove the exemption for water and wastewater treatment facilities. According to the report, DHS could then regulate security at these facilities in collaboration with the EPA. If Congress provides the executive branch with statutory authority to regulate water and wastewater treatment facilities for chemical security purposes, it may weigh several policy decisions. Among these choices are which facilities should be regulated; how stringent such security measures should be; what federal agency should oversee them; and whether compliance with these security measures is practicable given the public nature of many water and wastewater treatment facilities. One option for congressional policy makers might be to include water and wastewater treatment facilities under the existing CFATS regulations, effectively removing the exemption currently in statute. This would place water and wastewater treatment facilities on par with other possessors of chemicals of interest. The DHS would provide oversight of all regulated chemical facilities. Opponents might claim that activities under CFATS, such as vulnerability assessment, duplicate existing requirements under the Safe Drinking Water Act. Also, opponents of such an approach cite the essential role that water and wastewater treatment facilities play in daily life and assert that several authorities available to DHS under CFATS, such as the ability to require a facility to cease operations, are inappropriate if applied to a municipal utility. Congressional policy makers might mitigate some of these concerns by requiring DHS to consult with EPA regarding its regulation of water and wastewater treatment facilities and harmonizing existing vulnerability assessment requirements. Another option might be to grant statutory authority to regulate water and wastewater treatment facilities for security purposes to EPA. Some water-sector stakeholders suggest that EPA retaining the lead for water and wastewater treatment facilities would be more efficient. Providing EPA the authority to oversee security as well as public health and safety operations may reduce the potential for redundancy and other inefficiencies. If policy makers assign responsibility for chemical facility security at different facilities to different agencies, each agency will promulgate separate rules. These rules may be similar or different depending on the agencies' statutory authority, interpretation of that authority, and ability of the regulated entities to comply as well as any interagency coordination that might occur. Some industry representatives have expressed concern regarding the effects of multiple agencies regulating security at drinking water and wastewater treatment facilities. They assert that municipalities that operate both types of facilities might face conflicting regulations and guidance if different agencies regulate drinking water and wastewater treatment facilities. Congress may wish to assess the areas where such facilities are similar and different in order to provide authorities that meet any unique characteristics. Any new regulation of drinking water and wastewater treatment facilities is likely to cause the regulated entities, and potentially the federal government, to incur some costs. Representatives of the water and wastewater sectors argue that local ratepayers will eventually bear the capital and ongoing costs incurred due to increased security measures. Congressional policy makers may wish to consider whether the regulated entities and the customers they serve should bear these costs, as is done for other regulated chemical facilities, or whether they should be borne by the taxpayers in general through federal financial assistance to the regulated entities. Additionally, if inclusion of other facility types significantly increases the number of regulated entities, the regulating agency may require additional funds to process regulatory submissions and perform required inspections. Harmonize Regulations Other security statutes, such as MTSA, apply to some facilities exempt from the existing chemical facility security regulations. The DHS supports modifying the existing exemption for MTSA-regulated facilities to increase security at these facilities to the CFATS standard and modifying the existing exemption for facilities regulated by the Nuclear Regulatory Commission to clarify the scope of the exemption for NRC-regulated facilities. The EPA has testified that the Obama Administration believes that DHS should be responsible for ensuring consistency of high-risk chemical facility security across all critical infrastructure sectors. If Congress modifies these exemptions, conflicts might arise between requirements under chemical facility security regulations and these other provisions. One approach to resolving these conflicts is to identify which statute would supersede the others. Critics of such an approach might assert that the superseding statute does not contain all of the protections present in the other statutes. Another approach might be to require agencies to generally harmonize the regulations implementing each statute. Regulatory agencies might identify and determine the best ways to meet statutory requirements while also limiting regulatory duplication or contradiction. Such harmonization might reduce the regulatory burden on companies possessing facilities regulated under two frameworks, such as MTSA and CFATS, by allowing a single security approach to the regulations. For example, equivalent credentialing of workers under both regulatory frameworks might limit the regulatory cost of compliance, in contrast to requiring two distinct security credentials. The DHS has established a joint NPPD/U.S. Coast Guard (USCG) working group to evaluate and, where appropriate, implement methods to harmonize the CFATS and MTSA regulations. In contrast, if the process of harmonization leads to a significant increase in security requirements, the regulatory burden faced by industry might also increase. The USCG and NPPD have signed a memorandum of agreement regarding collaborative use of security risk management information developed by each entity. Congress previously expressed its expectation that DHS would execute a memorandum of agreement between NPPD and USCG regarding harmonization of chemical security responsibilities under CFATS and MTSA no later than March 30, 2012. The DHS did not meet this expectation, and Congress reaffirmed this direction in March 2013. Increase Interagency Coordination Congress may also focus on the interaction between different federal agencies, or between federal and state agencies, regulating facilities possessing chemicals of interest. States and the EPA, for example, receive information on certain chemical facilities through compliance with environmental regulations. The extent to which these agencies coordinate and exchange information with each other may affect overall regulatory compliance. The White House is coordinating a review of chemical safety and security regulations across departments and agencies for potential gaps in coverage and explore ways to mitigate those gaps through existing authorities. As early as 2009, DHS identified reconciling CFATS submissions with EPA RMP facility information as a way to reveal outliers. The West Fertilizer Company, for example, was compliant with the EPA RMP program and had provided a five-year update in 2011, but it was not identified by DHS as noncompliant under CFATS. Comparing federally held information on regulated facilities may be effective in identifying outliers. Such a process likely would occur through data analysis rather than through outreach activities, a potentially less costly procedure. The success of this approach would depend on the quality of self-reporting by regulated entities. In the case of the West Fertilizer Company, its report to EPA might have indicated to DHS that it should also have reported to DHS, but this approach would not allow DHS to identify a facility that fails to self-report to any agency. In order to identify such facilities, DHS has reengaged with EPA regarding RMP data and has identified some outlier facilities. Similarly, DHS might attempt to collect chemical holdings data from other governmental entities, including state and local regulatory agencies. State and local regulatory agencies may possess more diverse information about chemical holdings at particular facilities than federal agencies. For example, under Title III of the Superfund Amendments and Reauthorization Act (SARA; P.L. 99-499 ), the Emergency Planning and Community Right-to-Know Act (EPCRA) requires certain facilities to submit chemical inventories to state and local planning authorities and the local fire department, so-called "Tier II" reporting. Reporting to states under EPCRA results in chemical inventories while reporting to EPA under the RMP program is required only for select chemicals. For example, EPCRA-based reporting to the state of Texas showed the presence of ammonium nitrate at the West Fertilizer Company. Ammonium nitrate does not require reporting under the RMP program but is a CFATS chemical of interest. The DHS might request such information from state or local authorities and use it to verify facility compliance with CFATS reporting requirements. The DHS is in the process of contacting certain state officials regarding facilities containing chemicals within their jurisdictions. The DHS requests specific funding for FY2015 to establish a capacity for such analysis on an annual basis. Because of the range of information possessed by various federal, state, and local regulatory agencies, this approach may provide a greater insight into the identities of non-compliant facilities but also be resource intensive, as different state and local agencies store such data in various, potentially incompatible formats. In addition, industry stakeholders may have concerns about the identification and subsequent protection of proprietary or competitive information arising from the aggregation of different regulatory filings. Consider Inherently Safer Technologies Congressional policy makers may choose to address the issue of inherently safer technologies, sometimes called methods to reduce the consequences of terrorist attack. The current statute bars DHS from mandating the presence or absence of a particular security measure. Therefore, DHS cannot require a regulated facility to adopt or consider inherently safer technologies. Congress could choose to continue the current policy or provide DHS with statutory authority regarding inherently safer technologies at regulated chemical facilities or require efforts regarding inherently safer technologies. One policy approach might be to mandate the implementation of inherently safer technologies for a set of processes. Another policy approach might be to mandate the consideration of implementation of inherently safer technologies with certain criteria controlling whether implementation is required. A third policy approach might be to mandate the development of a federal repository of inherently safer technology approaches and consideration of chemical processes against those options listed in the repository. Stakeholders might assess and review the viability of applying these inherently safer approaches at lower cost if such information were centralized and freely available. Alternatively, policy makers might establish an incentive-based structure outside of the chemical facility security mandate to encourage the adoption of inherently safer technologies by regulated entities. The Obama Administration supports use of inherently safer technologies to enhance security at high-risk chemical facilities in some circumstances. It has established a series of principles directing its policy: The Administration supports consistency of inherently safer technology approaches for facilities regardless of sector. The Administration believes that all high-risk chemical facilities, Tiers 1-4, should assess [inherently safer technology] methods and report the assessment in the facilities' site security plans. Further, the appropriate regulatory entity should have the authority to require facilities posing the highest degree of risk (Tiers 1 and 2) to implement inherently safer technology methods if such methods demonstrably enhance overall security, are determined to be feasible, and, in the case of water sector facilities, consider public health and environmental requirements. The Administration believes that the appropriate regulatory entity should review the inherently safer technology assessment contained in the site security plan for all Tier 3 and Tier 4 facilities. The entity should be authorized to provide recommendations on implementing inherently safer technologies, but it would not have the authority to require facilities to implement the inherently safer technology methods. The Administration believes that flexibility and staggered implementation would be required in implementing this new inherently safer technology policy. A congressional mandate for regulated entities to adopt or consider adopting inherently safer technologies may have benefits and drawbacks. It may lead regulated entities to consider factors such as homeland security impact in their chemical process assessments. Some experts assert that existing chemical process safety activities consider and assess inherently safer technology approaches though not necessarily in a homeland security context. These assessments may lead to changes in chemical process when deemed safer, more reliable, and cost-effective. The extent to which homeland security impact has factored into these industry decisions is unknown, but DHS has identified cases where chemical facilities have voluntarily modified chemical processes to lower their CFATS tier. An additional complication to assessing inherently safer technology is the varying amounts and quality of information available regarding industrial implementation of inherently safer technologies. While some facilities have converted to processes generally deemed as inherently safer, other facilities may not have sufficient information available to effectively assess the impacts from changing existing processes to ones considered inherently safer. The differences that exist among chemical facilities, in terms of chemical process, facility layout, and ability to finance implementation, may challenge mandatory implementation of inherently safer technologies at regulated entities. Finally, the National Academies have identified that the chemical industry lacks a common understanding and set of practice protocols for identifying safer processes. Therefore, it seems likely that any such mandate will also require accompanying outreach and educational activities for regulated entities. Even the mandatory consideration of inherently safer technologies may place a financial burden on some small regulated entities. Congress might limit mandatory measures to those facilities considered by DHS to pose the most risk or might provide such financial assistance to regulated facilities. Policy makers might choose to try to further incentivize regulated entities to adopt inherently safer technologies. Under the CFATS regulations, facilities that adopt inherently safer technologies might change their assigned risk tier by reducing the amount of chemicals of interest they store. As of December 2014, more than 3,000 facilities had removed or reduced the amount of chemicals of interest stored onsite and no longer qualify as a high-risk facility. Policy makers might provide regulated entities that adopt inherently safer technologies with additional financial or regulatory incentives. Alternatively, policy makers might direct DHS or another agency to perform inherently safer technology assessments for regulated entities, transferring the cost of such assessment from the facility to the federal government. The regulated entity or the overseeing agency might use the results of these assessments to guide adoption of inherently safer technologies. Modify Information Security Provisions Congressional policy makers might choose to increase transparency in the CFATS process by altering the information security provisions of the program. Such an approach might include increasing the number and type of individuals granted access to CVI, improving information exchange with first responders, and adjusting the manner by which courts and administrative proceedings handle CVI. The Obama Administration has testified that CVI is a distinct information protection regime and expressed support for maintaining CVI in its current form. Congress might choose to amend the existing statutory authority to address policy concerns. Policy makers might direct DHS to make specific types of information, such as the results of enforcement activities or the approval of successful implementation of a site security plan, more generally available. As more information about the vulnerability assessment and the security process becomes available, the potential that adversaries might combine this disparate information to obtain insight into a security weakness may increase. Congressional policy makers might require that the executive branch or another entity identify the threats or vulnerabilities that might accrue from release of a greater amount of chemical facility security information prior to implementing such a policy change. Congressional policy makers might choose to alter the information protection regime afforded to chemical facility security information by specifically expanding access to first responders. The existing regulation explicitly states that it does not protect from disclosure information developed in response to other laws or regulations, such as the Emergency Planning and Community Right-to-Know Act (EPCRA). Enhancing first responder access to such information might minimize perceived barriers to disclosing information during an accident. For example, Congress might mandate that each jurisdiction with a regulated chemical facility contain a first responder designated as a covered individual. Conversely, congressional policy makers might choose to further limit dissemination of CVI so as to increase barriers to its release. Congress might prohibit DHS from sharing such information outside of the federal government or further limit CVI access to state and local officials by establishing additional eligibility criteria. Limiting the number of individuals with access to CVI may make it more difficult for those wishing to do harm to obtain technical or operational security information. Conversely, state and local officials may not support such an approach, as limitations on distribution may also adversely affect emergency response at a regulated facility or inhibit the ability of state and local law enforcement officials to provide targeted protection of particular chemical facility assets. Policy makers might also choose to address the issue of identifying and marking protected information by mandating review of marked documents. Congressional policy makers might assign this responsibility to review and certify marked information to the chemical facility. Alternatively, the federal government might review and certify documents marked CVI on a regular basis. Industry representatives may not support such a requirement due to the additional regulatory burden caused by the review. While such review might potentially limit incorrect marking, it may inhibit information reporting by regulated entities to the federal government. Additionally, absent a penalty for incorrect marking, it is unclear how to discourage incorrect marking of non-security materials in order to avoid public release. Congressional policy makers may also address concerns raised regarding the ability of concerned individuals to report misdeeds by creating a "whistleblower" reporting mechanism. One approach might be to codify the current mechanism of reporting such concerns to DHS or a similar federal entity, such as an agency Inspector General. Alternatively, Congress can create a more general exemption to the penalties arising from disclosure of protected information for those individuals who report such concerns to federal officials if that is needed to protect whistleblowers. As part of a whistleblower mechanism, policy makers might choose to extend protections against retaliation or other job-related actions to those individuals availing themselves of current or newly established reporting mechanisms. Preempt State Regulations The 110 th Congress addressed the issue of federal preemption of state chemical facility security statutes and regulations by placing in statute the requirement that federal regulation preempt the state regulation only when an "actual conflict" occurs between them. Congressional policy makers may choose to further limit the cases where federal regulation would preempt state regulation by affirming the right of states to make chemical facility security regulations that are more stringent than federal regulation even if they conflict. Alternatively, policy makers may choose to increase the number of cases where federal regulations preempt those of a state by expanding the types of conflict, beyond "actual," that will lead to preemption. Congressional Action The annual appropriations process provides funding for implementation of chemical facility security regulation. The 113 th Congress, through H.J.Res. 130 , extended the statutory authority through December 13, 2014, and provided appropriations for CFATS implementation. The 113 th Congress has passed H.R. 4007 , which authorizes DHS to regulate chemical facilities for security purposes through the Homeland Security Act. This bill will repeal the existing statutory authority on the effective date of the act (30 days after enactment). Many of the existing authorities are present in H.R. 4007 , but it also provides DHS with new authorities, such as the ability for certain covered chemical facilities to self-certify the sufficiency of their security plans. The DHS may use the existing regulations and issue new regulations as necessary to implement the new authority. Other chemical facility security legislation has also been introduced in the 113 th Congress. Modify the Existing Authority Legislation in the 113 th Congress has been introduced in the House that would modify the existing authority. Of this legislation, the 113 th Congress has passed H.R. 4007 . H.R. 4007 H.R. 4007 , as passed the Senate, passed the House on December 11, 2014. This bill will repeal Section 550 of P.L. 109-295 on the effective date of the act (30 days after enactment), but DHS may use the existing regulations and issue new regulations as necessary to implement the new authority. Senate-Passed H.R. 4007 , the Protecting and Securing Chemical Facilities from Terrorist Attacks Act of 2014, as amended, passed the Senate on December 10, 2014. The Senate Committee on Homeland Security and Governmental Affairs reported the bill on September 18, 2014. The act would establish a Chemical Facility Anti-Terrorism Standards Program within DHS. It would require the Secretary of Homeland Security to establish risk-based performance standards through the program and mandate that the Secretary identify chemical facilities of interest and covered chemical facilities. Chemical facilities of interest would be those chemical facilities possessing certain chemicals in greater than threshold quantities. Covered chemical facilities would be chemical facilities of interest designated by the Secretary as meeting certain security risk criteria. Facilities regulated under MTSA; public water systems; wastewater treatment works; facilities owned or operated by the Department of Defense and Department of Energy; and facilities regulated by the Nuclear Regulatory Commission would be excluded from the definitions of chemical facility of interest and covered chemical facility. Chemical facilities of interest would submit Top-Screen information to DHS, while covered chemical facilities would also submit a security vulnerability assessment, and develop, submit, and implement a site security plan. The act would require the Secretary to review and approve or disapprove such security vulnerability assessments and site security plans, though not on the basis of the presence or absence of a particular security measure. It would allow the Secretary to approve alternative security programs if the programs meet DHS requirements. The act would allow the Secretary to recommend additional security measures so that an alternative security program would meet DHS requirements. The act would also provide a mechanism for Tier 3 and Tier 4 chemical facilities to self-certify the sufficiency of their site security plans to DHS. The act would prohibit DHS from disapproving the site security plans of such "expedited approval facilities." It would allow DHS to assess facility compliance with the risk-based performance standards and the self-certified site security plans. The act would allow the Secretary to recommend additional security measures so that a self-certified site security plan would meet DHS requirements and allow the Secretary to develop templates for use in developing self-certified site security plans. The Secretary would be required to evaluate this aspect of the chemical facility security program and report the results to the Senate Committee on Homeland Security and Governmental Affairs and the House Committee on Homeland Security. H.R. 4007 , as passed the Senate, would require the Secretary to audit and inspect covered facilities. It would explicitly allow the Secretary to permit non-departmental and nongovernmental entities to perform such activities and would allow nongovernmental personnel to provide administrative and logistical services to DHS in support of audits and inspections. It would limit approval of site security plans and determination of compliance with an approved site security plan to the Secretary and the Secretary's designees within DHS. It would also require the Secretary to set standards for departmental and nongovernmental inspectors. Also, the act would allow a covered facility to satisfy a personnel surety performance standard by using any federal screening program that periodically vets individuals against the terrorist screening database, including the DHS personnel surety program. The act would provide a mechanism for addressing covered facility noncompliance including the issuance of penalties. The Secretary would also have the authority to issue certain emergency orders that would take effect immediately. Owners or operators of chemical facilities of interest that fail to comply with or knowingly submit false information under the CFATS regulations would be liable for a civil penalty. The act, as passed the Senate, would require the Secretary to consult with other federal agencies, relevant business associations, and public and private labor organizations to identify potentially noncompliant facilities. The act would provide protections to information developed pursuant to the act and would explicitly exempt such information from the Freedom of Information Act. It would allow the Secretary to share information with covered facilities, state and local government officials, as well as first responders through state and local fusion centers. The act would also require the Secretary to establish a reporting procedure for employees of a chemical facility to confidentially submit information to DHS. In addition, the Secretary would be required to acknowledge receipt of such information, review it, and take appropriate actions to address any substantiated problems or deficiencies. The act would expressly prohibit retaliation against employees using this process. The Secretary would be granted the discretion to use existing and new regulations to implement these authorities. In addition, it would direct DHS and GAO to provide various reports on the program. H.R. 4007 , as passed the Senate, also would allow the Secretary to provide guidance on recordkeeping, reporting, physical security, and cybersecurity compliance to regulated small chemical facilities. Finally, the bill would require the Secretary to commission a third-party study on vulnerabilities associated with the existing CFATS program. H.R. 4007 , as passed the Senate, would repeal Section 550 of P.L. 109-295 on the effective date of the act (30 days after enactment). It contains a sunset date, and the statute would expire four years after the effective date of the act. It does not contain an authorization of appropriations. House-Passed H.R. 4007 , the Chemical Facility Anti-Terrorism Standards Program Authorization and Accountability Act of 2014, was passed by the House of Representatives on July 8, 2014. On June 23, 2014, the House Committee on Homeland Security amended the bill as forwarded by the Subcommittee on Cybersecurity, Infrastructure Protection, and Security Technologies and reported it, as amended, to the House of Representatives. On April 3, 2014, the Subcommittee on Cybersecurity, Infrastructure Protection, and Security Technologies, of the House Committee on Homeland Security, amended the bill as introduced and ordered it forwarded to the full committee with a favorable recommendation, as amended. The act would establish a Chemical Facility Anti-Terrorism Standards Program within DHS. It would require the Secretary of Homeland Security to establish risk-based performance standards through the program and mandate that chemical facilities of interest and covered facilities submit security vulnerability assessments and develop and implement site security plans. Chemical facilities of interest would be those chemical facilities possessing certain chemicals in greater than threshold quantities. Covered chemical facilities would be chemical facilities of interest designated by the Secretary as meeting certain security risk criteria, excluding facilities regulated under MTSA; public water systems; wastewater treatment works; facilities owned or operated by the Department of Defense and Department of Energy; facilities regulated by the Nuclear Regulatory Commission; and certain rail facilities regulated by the Transportation Security Administration. The act would require the Secretary to review and approve or disapprove such security vulnerability assessments and site security plans, though not on the basis of the presence or absence of a particular security measure. It would allow the Secretary to approve alternative security programs if the programs meet DHS requirements. Also, the act would allow a covered facility to satisfy a personnel surety performance standard by using any federal screening program that periodically vets individuals against the terrorist screening database, including the DHS personnel surety program. It also would prohibit the Secretary from requiring a covered facility to submit information about individuals with access to the facility unless the individual was vetted under the DHS personnel surety program or had been identified as presenting a terrorism security risk. H.R. 4007 , as passed the House, would require the Secretary to audit and inspect covered facilities and explicitly allows the Secretary to permit non-departmental and nongovernmental entities to perform such activities. It would also require the Secretary to set standards for departmental and nongovernmental inspectors. The act would provide a mechanism for addressing covered facility noncompliance including the issuance of penalties. Also, it would require the Secretary to consult with other federal agencies and relevant business associations to identify potentially noncompliant facilities. The act would provide protections to information developed pursuant to the act. It would allow the Secretary to share information with covered facilities, state and local government officials, as well as first responders through state and local fusion centers. The Secretary would be granted the discretion to use existing and new regulations to implement these authorities. In addition, it would direct DHS and GAO to provide various reports on the program. H.R. 4007 , as passed the House, also would require the Secretary to make available information about protections for providing information to DHS, allow the Secretary to provide guidance on physical security compliance to regulated small chemical facilities, and provide authorization of appropriations from FY2015 through FY2018 at $87.436 million. Finally, the bill would require the Secretary to establish an outreach implementation plan, submit a plan to Congress on CFATS metrics, and commission a third-party study on vulnerabilities associated with the existing CFATS program. H.R. 4007 , as passed the House, does not contain a sunset date. In February 2014, Secretary of Homeland Security, Jeh Johnson, testified that he was in support of H.R. 4007 , as introduced, stating: I have reviewed H.R. 4007 . I think it is a good bill. I'm very supportive of it. Indeed, my folks tell me, "We wish we could extend the period longer." We have a regulatory scheme that we have put in place. I agree with you, that over the last year, it's gotten better. That all stems from an appropriations measure, not an authorizations measure. I've read this bill. I think it's a good bill. Our critical infrastructure folks think it's a good bill. And I support it. In addition, several industry organizations have expressed support for H.R. 4007 . In contrast, a labor representative asserted that the bill fails to address several weaknesses present in the current CFATS program. H.R. 68 H.R. 68 was referred to the House Committee on Energy and Commerce and the House Committee on Homeland Security. The act would prohibit the Secretary of Homeland Security from approving a chemical facility site security plan if the plan did not meet or exceed existing state or local security requirements. It would allow the Secretary of Homeland Security to mandate the use of specific security measures in site security plans. The bill would also cause CVI to be treated as sensitive security information in both general and legal proceedings. Finally, the act would no longer prohibit third-party individuals from bringing suit in court to require the Secretary of Homeland Security to enforce chemical facility security regulations against a chemical facility. S. 67 S. 67 , the Secure Water Facilities Act, was referred to the Senate Committee on Environment and Public Works. The act would authorize the EPA Administrator to regulate community water systems and wastewater treatment facilities for security purposes. S. 67 also would authorize implementation of methods to reduce the consequences of a chemical release from an intentional act. Among other provisions, the Administrator would be directed to promulgate regulations as necessary to prohibit the unauthorized disclosure of controlled information. S. 67 would authorize the Administrator to provide grants or enter into cooperative agreements with states or regulated entities to assist in regulatory compliance. S. 68 S. 68 , the Secure Chemical Facilities Act, was referred to the Senate Committee on Homeland Security and Governmental Affairs. The act would codify aspects of the CFATS regulation. It would require facilities to evaluate whether the facility could reduce the consequences of an attack by using a safer chemical or process. The act would authorize DHS to require implementation of those safer measures if a facility has been classified as one of the highest-risk facilities, implementation of safer measures is feasible, and implementation would not increase risk overall by shifting risk to another location. Among other provisions, S. 68 also would increase the participation of employees and employee representatives in developing security plans. S. 68 would alter the current information control regime, aligning it with that for sensitive security information. Finally, S. 68 would allow third-party individuals to file suit against the Secretary of Homeland Security or submit a petition to the Secretary to enforce compliance with statute. S. 814 S. 814 , the Protecting Communities from Chemical Explosions Act of 2013, was referred to the Senate Committee on Homeland Security and Governmental Affairs. The act would levy a civil penalty on owners or operators of a facility that does not file Top-Screen information when possessing a chemical of interest at above the screening threshold quantity. It would also establish a criminal penalty if a facility owner, a facility operator, or an officer of an entity that owns or operates a facility intentionally fails to file Top-Screen information when the facility possesses a chemical of interest at above the screening threshold quantity. Extend the Existing Authority The current statutory authority to regulate security at chemical facilities expires on December 13, 2014. Historically, Congress has extended this authority through appropriations acts. The Administration's budget requests that the statutory authority be extended to October 4, 2015. H.J.Res. 130 H.J.Res. 130 extends the current statutory authority to December 13, 2014. P.L. 113-164 P.L. 113-164 , Continuing Appropriations Resolution, 2015, extended the current statutory authority to December 11, 2014. H.R. 4903 H.R. 4903 , Department of Homeland Security Appropriations Act, 2015, would extend the current statutory authority to October 4, 2015. In addition, the act would prohibit DHS from using any funds appropriated by the act for certain personnel surety activities at chemical facilities. The DHS would not be able to require a chemical facility to employ or not employ a particular security measure for personnel surety if the facility has adopted certain personnel measures. These personnel measures must be designed to verify and validate an individual's identification; check an individual's criminal history; verify and validate an individual's legal authorization to work; and identify individuals with terrorist ties. The act would expressly allow a facility to use any federal screening program "that periodically vets individuals against the terrorist screening database, or any successor to such database, including the Personnel Surety Program of the Department of Homeland Security" to satisfy the requirement to identify individuals with terrorist ties. H.Rept. 113-481 H.Rept. 113-481 , the report accompanying H.R. 4903 , would recommend $83 million for Infrastructure Security Compliance, $3.7 million less than the Administration's request. According to the House Committee on Appropriations, this recommended funding would "enhance critical efforts related to compliance with CFATS, including developing an automated process for identification of CFATS outliers, addressing concerns raised by GAO regarding the risk-tiering methodology, and fulfilling other requirements." The report also expresses the committee's determination that "DHS should not mandate how a covered chemical facility meets the personnel surety standard if the facility has already adopted a rigorous process to verify and validate identity, check criminal history, verify and validate legal authorization to work, and identify individuals with terrorist ties by using a federal vetting program, such as one that periodically vets individuals." The report would also direct the Under Secretary of NPPD to report to the appropriations committees within 120 days and semiannually thereafter on the implementation of the CFATS program. Finally, the report would encourage DHS to work with the Chemical Sector Coordinating Council to disseminate information to the chemical sector, about proven next-generation sealing technologies. S. 2534 S. 2534 , Department of Homeland Security Appropriations Act, 2015, would extend the current statutory authority to October 4, 2015. S.Rept. 113-198 S.Rept. 113-198 , the report accompanying S. 2534 , would recommend $87 million for Infrastructure Security Compliance, $249 thousand less than the Administration's request. The report would also direct the Under Secretary of NPPD to report within 90 days and semiannually thereafter on the implementation of the CFATS program. The report would be delineated by risk tier and include the number of facilities covered, inspectors, completed inspections, inspections completed by region, pending inspections, days inspections are overdue, enforcements resulting from inspections, and enforcements overdue for resolution. The report also would direct NPPD to brief the Senate Committee on Appropriations within 90 days on the progress made on improving chemical facility security coordination among federal agencies and fulfilling the recommendations made in the report of the Chemical Facility Safety and Security Working Group established by Executive Order 13650. In addition, the report urges NPPD to "find the best possible path to ensure safety while not overburdening the industry with excessive regulatory requirements. In particular it is imperative that NPPD work with industry on a viable solution to personnel surety." It also encourages NPPD to consider chemical neutralization technologies when creating comprehensive and integrated standard operating procedures for a unified federal approach for identifying and responding to risks in chemical facilities. Finally, the report would direct NPPD to consider the eligibility of chemical security inspectors for administratively uncontrollable overtime and keep the Senate Committee on Appropriations apprised of developments in this area. P.L. 113-76 P.L. 113-76 , the Consolidated Appropriations Act, 2014, became law on January 17, 2014. It extended the statutory authority through October 4, 2014, and provided appropriations for the federal government for FY2014. A joint explanatory statement for P.L. 113-76 contained specific directions for the CFATS program, as did the House and Senate reports accompanying their respective passed and reported homeland security appropriations bills. Joint Explanatory Statement The joint explanatory statement for P.L. 113-76 provided $81.0 million for Infrastructure Security Compliance, $4.8 million less than the Administration's request. The joint explanatory statement clarified that The language and allocations contained in the House and Senate reports should be complied with and carry the same weight as the language included in this explanatory statement, unless specifically addressed to the contrary in the final bill or this explanatory statement. The joint explanatory statement contained certain requirements for DHS with respect to chemical facility security and the CFATS program. It directed NPPD to, as detailed in the House report, provide a report within 90 days of enactment to the appropriations and authorizing committees explaining how ISCD will further improve the review process for regulated facilities. The joint explanatory statement directed NPPD to report to the appropriations and authorizing committees not later than April 15, 2014, on the steps NPPD is taking to avoid costly duplication of programs, as detailed in the House report. The report is also to describe how NPPD is helping to ensure the safety of facilities and whether DHS intends to mandate how a covered chemical facility meets the personnel surety standard, particularly in cases where the facility has already adopted strong and identifiable personnel measures designed to verify identity, check criminal history, validate legal authorization to work, and identify individuals with terrorist ties. The statement further directed the Under Secretary of NPPD to provide a report within 90 days of enactment to the appropriations committees on the implementation of the CFATS program, as detailed in the Senate report. This report shall be in lieu of language in the House report directing NPPD to provide a detailed expenditure plan. In lieu of the requirement in the Senate report for the Chemical Sector Coordination Council to develop recommendations to improve coordination on chemical security and safety, the joint explanatory statement directed NPPD to continue implementing the requirements designated in Executive Order 13650. The joint explanatory statement stated its expectation that NPPD provide regular updates on the progress of implementing improvements, the status of corrective measures being taken to ensure awareness of facilities that fall under the purview of the CFATS program, and the need for any additional funding requirements that emerge to address coordination needs. In lieu of language in the House report, the joint explanatory statement directed NPPD to report semiannually to the appropriations committees on progress in complying with all the DHS Office of Inspector General recommendations made on ISCD's management practices related to CFATS. The joint explanatory statement also directed ISCD to improve the compliance of current Top-Screen registrants, such as through ongoing, proactive risk monitoring, data management, and the verification of business information in lieu of language in the House report. H.Rept. 113-91 H.Rept. 113-91 , the House Committee on Appropriations report accompanying H.R. 2217 , would have recommended $77.1 million for Infrastructure Security Compliance, $8.7 million less than the Administration's request. The report cites "the continued delays in the implementation of the Chemical Facility Anti-terrorism Standards (CFATS) program" and "the Infrastructure Security Compliance Division's (ISCD) inability to mitigate real risks" as the reason for the decrease. The House committee report would direct DHS to perform certain activities and to provide several reports to congressional policy makers. It would direct NPPD to report on how it will further accelerate the site security plan review process and detail actions DHS is taking to better manage the CFATS program. The committee report also expresses the committee's expectation that NPPD will comply with the recommendations of the DHS Inspector General regarding the CFATS program and would direct NPPD to report to the committee on its compliance with those recommendations. It would direct the Under Secretary for NPPD to report on steps NPPD is taking to leverage existing personnel surety infrastructure within DHS and industry and to ensure that DHS does not inadvertently compromise facility safety due to overzealous protection of criminal investigations. It would direct DHS to review CFATS program implementation and collaboration and communication within ISCD and with the regulated community. The review also would address improvement of facility identification methodology used by ISCD, information sharing with state entities by ISCD, and efforts to address stakeholder concerns. The report also states the committee's expectation that NPPD will provide it with a comprehensive update on measures being taken to ensure that facilities with chemicals of interest are notified by ISCD when they fall within the purview of the CFATS program, an estimate of the potential number of outlier facilities, and a detailed performance evaluation of CFATS inspectors. S.Rept. 113-77 S.Rept. 113-77 , the Senate Committee on Appropriations report accompanying H.R. 2217 , would have recommended $85.5 million for the Infrastructure Security Compliance, $0.2 million less than the Administration's request. The Senate committee report would direct DHS to perform certain activities and to provide several reports to congressional policy makers. It would require DHS to report semiannually on the coordination of chemical security efforts within DHS and across departments and agencies and direct DHS to work in conjunction with the Office of Management and Budget to review and synchronize federal entities involved in chemical security activities. In addition, the report would direct NPPD to support the Chemical Sector Coordination Council in an effort to develop and provide to the committee recommendations to improve the coordination among federal agencies, streamline reporting requirements, and improve the CFATS program. The report would direct NPPD to report semiannually on the implementation of the CFATS program including the number of facilities covered, inspectors, completed inspections, inspections completed by region, pending inspections, days inspections are overdue, enforcements resulting from inspections, and enforcements overdue for resolution, with the data delineated by tier. P.L. 113-73 P.L. 113-73 , which made further continuing appropriations for FY2014, became law on January 15, 2014. It extended the statutory authority through January 18, 2014. P.L. 113-46 P.L. 113-46 , the Continuing Appropriations Act, 2014, became law on October 17, 2013. It extended the statutory authority through January 15, 2014. P.L. 113-6 P.L. 113-6 , the Consolidated and Further Continuing Appropriations Act, 2013, became law on March 26, 2013. It extended the statutory authority through October 4, 2013.

The Department of Homeland Security (DHS) has had statutory authority to regulate chemical facilities for security purposes since the 109th Congress. The 113th Congress extended this authority through December 13, 2014, and has passed H.R. 4007, which provides new statutory authority. Congressional policy makers have debated the scope and details of reauthorization and continue to consider establishing an authority with longer duration. Some Members of Congress support an extension, either short- or long-term, of the existing authority. Other Members call for revision and more extensive codification of chemical facility security regulatory provisions. Questions regarding the current law's effectiveness in reducing chemical facility risk and the sufficiency of federal chemical facility security efforts exacerbate the tension between continuing current policies and changing the statutory authority. Congressional policy makers have questioned DHS's effectiveness in implementing the authorized regulations, called chemical facility anti-terrorism standards (CFATS). The DHS finalized CFATS regulations in 2007. Since then, the site security plans for 900 chemical facilities have been approved in the CFATS process, which starts with information submission by chemical facilities and finishes with inspection and approval of facility security measures by DHS. Additionally, DHS has inspected some facilities for subsequent compliance activities. Several factors, including the amount of detailed information provided to DHS, the effectiveness of DHS program management, and the availability of CFATS inspectors, likely complicate the inspection process and lead to delays in inspection. Policy makers have questioned whether the compliance rate with CFATS is sufficient to mitigate this homeland security risk. For additional analysis of CFATS implementation, see CRS Report R43346, Implementation of Chemical Facility Anti-Terrorism Standards (CFATS): Issues for Congress. Key policy issues debated in previous Congresses contribute to the current reauthorization debate. These issues include the adequacy of DHS resources and efforts; the appropriateness and scope of federal preemption of state chemical facility security activities; the availability of information for public comment, potential litigation, and congressional oversight; the range of chemical facilities identified by DHS; and the ability of inherently safer technologies to achieve security goals. The 113th Congress considered various approaches to this issue. Both the House and Senate homeland security appropriations acts would extend the duration of the statutory authority until October 4, 2015. The House and the Senate have passed an amended version of H.R. 4007. This bill will repeal Section 550 of P.L. 109-295 on the effective date of the act (30 days after enactment), and authorize the DHS to regulate chemical facilities for security purposes through the Homeland Security Act. Many of the existing authorities are present in H.R. 4007, but it also provides DHS with new authorities, such as the ability for certain covered chemical facilities to self-certify the sufficiency of their security plans. The DHS may use the existing regulations and issue new regulations as necessary to implement the new authority.

Background Historically, crime control has been the responsibility of local and state governments, with little involvement from the federal government. However, as crime became more rampant in the United States, the federal government increased its support for domestic crime control by creating a series of grant programs designed to assist state and local law enforcement. In the late 1980s through the mid-1990s, Congress created the Edward Byrne Memorial Formula Grant (Byrne Formula Grant) program and the Local Law Enforcement Block Grant (LLEBG) program, along with other grant programs, to assist state and local law enforcement in their efforts to control domestic crime. In 2005, however, legislation was enacted that combined the Byrne Formula Grant and LLEBG programs into the Edward Byrne Memorial Justice Assistance Grant (JAG) program. This report provides background information on the JAG program. It begins with a discussion of the programs that were combined to form the JAG program: the Byrne Formula Grant and LLEBG programs. The report then provides an overview of the JAG program. This is followed by a review of appropriations for JAG and its predecessor programs going back to FY1998. JAG Predecessor Grant Programs As mentioned, prior to creating the JAG program in the middle part of the past decade, Congress provided federal assistance to state and local governments for a variety of criminal justice programs through the Byrne Formula Grant and LLEBG programs. Each program is briefly described below. Edward Byrne Memorial Formula Grant Program The Byrne Formula Grant program was authorized by the Anti-Drug Abuse Act of 1988 ( P.L. 100-690 ). Funds awarded to states under the Byrne Formula Grant program were to be used to provide personnel, equipment, training, technical assistance, and information systems for more widespread apprehension, prosecution, adjudication, detention, and rehabilitation of offenders who violate state and local laws. Grant funds could also be used to provide assistance (other than compensation) to victims of crime. Twenty-nine "purposes areas" were established by Congress to define the nature and scope of the programs and projects that could be funded with the formula grant funds. The Local Law Enforcement Block Grant Program The purpose of the LLEBG program, which was also a formula grant program, was to provide units of local government with federal grant funds so they could either hire police officers or create programs that would combat crime and increase public safety. Like the Byrne Formula Grant program, LLEBG had program purpose areas outlining what types of programs LLEBG funds could support. There were six program purpose areas that governed how state and local governments could use their funding under the LLEBG program. Edward Byrne Memorial Justice Assistance Grant (JAG) Program The Violence Against Women and Department of Justice Reauthorization Act of 2005 ( P.L. 109-162 ) combined the Byrne Grant programs and LLEBG into the Edward Byrne Memorial Justice Assistance Grant program (JAG). Congress consolidated the programs to streamline the process for states applying for funding under the programs. JAG funds are allocated to the 50 states, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, America Samoa, and the Northern Mariana Islands. The formula used by the JAG program to allocate funds combines elements of the formulas used in the Byrne Formula Grant program and LLEBG. Under the current JAG formula, the total funding allocated to a state is based on the state's population and reported violent crimes. Specifically, half of a state's allocation is based on a state's respective share of the United States' population. The other half is based on the state's respective share of the average number of reported violent crimes in the United States for the three most recent years for which data are available. Under current law, each state and territory is guaranteed to receive no less than 0.25% of the amount appropriated for the JAG program in a given fiscal year (i.e., the minimum allocation). Therefore, after each state's allocation is calculated using the JAG formula, if a state's allocation is less than the minimum allocation, the state receives the minimum allocation as its award. If a state's initial allocation was greater than the minimum amount, then the state receives the minimum allocation plus a share of the remaining funds based on the state's proportion of the country's population and the reported number of violent crimes (population and violent crime data for the states that received the minimum allocation as their award are excluded when allocating the remaining funds for the states that receive more than the minimum allocation). After each state's allocation is calculated, 40% of the state's allocation is directly awarded to units of local government. Awards to units of local government under JAG are made the same way they were under LLEBG; namely, each unit of local government's award is based on the jurisdiction's proportion of the average number of violent crimes committed in its respective state. Only units of local government that would receive $10,000 or more are eligible for a direct allocation. The balance of funds not awarded directly to units of local government is administered by the state, which must be distributed to state police departments that provide criminal justice services to units of local government and to units of local government who were not eligible to receive a direct award from Bureau of Justice Assistance (BJA). Also, like the Byrne Formula Grant program, each state is required to "pass through" a certain percentage of the funds directly awarded to the state. For JAG, the pass-through percentage is calculated as the ratio of the total amount of expenditures on criminal justice by the state for the most recent fiscal year to the total amount of expenditures on criminal justice by both the state and all units of local government in the past fiscal year. The Violence Against Women and Department of Justice Reauthorization Act of 2005 consolidated the program purpose areas under the Byrne Formula Grant and LLEBG programs into a total of seven program purpose areas under the JAG program. The seven broad program purpose areas are intended to give states and local units of government flexibility in creating programs to address local needs. JAG funds can be used for state and local initiatives, technical assistance, training, personnel, equipment, supplies, contractual support, and criminal justice information systems to improve or enhance such areas as law enforcement programs; prosecution and court programs; prevention and education programs; corrections and community corrections programs; drug treatment programs; planning, evaluation, and technology improvement programs; and crime victim and witness programs (other than compensation). The program purposes areas are broad enough to allow programs funded under the Byrne Grant program and LLEBG to continue to be funded under JAG. Appropriations for the Byrne Formula Grant, LLEBG, and JAG Programs Funding for JAG has averaged $440 million per fiscal year since Congress started appropriating funding for the program in FY2005. However, as shown in Table 1 , funding for the program fluctuated over that time period. The appropriations data also show that there has been a general downward trend in providing assistance to state and local law enforcement through these formula grant programs. Trends in funding for the Byrne Formula Grant, LLEBG, and JAG programs roughly mirror those of other Department of Justice (DOJ) grant accounts. The amounts appropriated for JAG over the fiscal years have been below the amount authorized for the program, which was $1.095 billion per fiscal year for FY2006-FY2012. Since funding was authorized for the program in FY2006, the most Congress appropriated for JAG—$546 million for FY2009—represented 50% of the amount authorized per fiscal year.

The Edward Byrne Memorial Justice Assistance Grant (JAG) program was created by the Violence Against Women and Department of Justice Reauthorization Act of 2005 (P.L. 109-162), which collapsed both the Edward Byrne Memorial Formula (Byrne Formula) Grant and the Local Law Enforcement Block Grant (LLEBG) into a single program. This report provides a brief overview of JAG and its funding. JAG funds are awarded to state and local governments based on a statutorily defined formula. Each state's allocation is based on its proportion of the country's population and the state's proportion of the average total number of reported violent crimes (homicide, rape, robbery, and aggravated assault) for the last three years. After a state's allocation is calculated, 60% goes directly to the state government and the remaining 40% is awarded directly to units of local government in the state. State and local governments can use their JAG funding for programs or projects in one of seven purpose areas: (1) law enforcement programs; (2) prosecution and court programs; (3) prevention and education programs; (4) corrections and community corrections programs; (5) drug treatment programs; (6) planning, evaluation, and technology improvement programs; and (7) crime victim and witness programs (other than compensation). Funding for JAG has averaged $440 million per fiscal year since Congress started appropriating funding for the program in FY2005. However, funding for the program fluctuated over that time period. The appropriations data also show that since FY1998 there has been a general downward trend in providing assistance to state and local law enforcement through the LLEBG, Byrne Formula, and JAG grant programs.

Introduction Rising competition for energy in China, Japan, and South Korea are of interest to U.S. policymakers for three primary reasons. First, the surge in China's energy needs has emerged as a major factor in influencing world oil prices. Second, the tightening global oil market could increase the bargaining power of oil exporting countries, possibly driving a wedge between the United States and our Asian allies over important foreign policy issues. Third, competition in Asia over access to energy supplies could significantly alter the geopolitics of the region, with important ramifications for U.S. foreign policy. Analysts alarmed at the developing trends are quick to mention that energy insecurity is often cited as the proximate cause of the Japanese attack on Pearl Harbor in 1941. The Role of Congress Congress plays an important role in developing U.S. foreign policy and energy policy. In addition to its ongoing oversight and legislative responsibilities, in 1975, through the passage of the Energy Policy and Conservation Act ( P.L. 94-163 ), Congress authorized U.S. participation in the International Energy Agency (IEA), the creation of a strategic petroleum reserve (SPR), and support for efforts to enhance energy efficiency and alternatives to petroleum. These measures are among those proposed by many analysts to address current concerns about how China's demand will impact the global oil markets and national security. Congress also established the United States-China Economic and Security Review Commission in 2000 to review the national security implications of trade and economic ties between the United States and the People's Republic of China, including an assessment of China's energy needs and strategies. When the China National Offshore Oil Corporation (CNOOC) attempted to acquire the U.S. energy company Unocal for $18.5 billion in cash in June 2005, Congressional opposition to the takeover played a key role in the eventual CNOOC withdrawal of its bid in August 2005. Congressional activity included hearings, statements, studies, letters to the Secretary of Treasury, and legislation aimed at the Committee on Foreign Investment in the United States (CFIUS). Profiles of Country Energy Sectors Japan's Energy Sector As the world's fourth-largest consumer of energy, Japan, with few indigenous natural supplies, has long depended on external sources to keep its economy running. Economic slowdown and efficiency measures have helped keep Japan's consumption of oil steady since 1980, but Japan's government has consistently demonstrated concern with energy security, particularly its dependence on the volatile Middle East for oil supplies. Since the 1970s, Japan has embarked on a focused campaign of diversification of suppliers and forms of energy, conservation, the establishment of strategic oil reserves, and research devoted to alternative energy sources. Japan's stockpiles are among the highest in the world. Japan also subsidizes its oil companies working overseas, a strategy that has cost millions and, by many accounts, met with only limited success. Observers point out that Japanese policymakers have linked energy policy and security policy, citing threats to the Persian Gulf or to the sea lanes that bring oil to Japan. Japan is a member of the International Energy Agency (IEA). National Energy Strategy Japan has invested heavily in diversification, successfully reducing its share of petroleum as its primary energy sources from over 70% in 1970 to under 50% in 2004. Since the 1973 Arab oil embargo, Japan has increasingly relied on nuclear power generation to reduce its dependence on oil and curb carbon emissions. Safety concerns have at times shaken the public's confidence in the industry and led to temporary declines in power generation when plants are shut down following accidents. Despite occasional setbacks, however, Japan remains the third-largest user of nuclear energy in the world and depends on nuclear reactors for over one third of its electricity. Japan has 55 light-water nuclear power reactors and has plans to build up to 13 more over the next decade. Japan relies on natural gas for about 14% of its energy consumption, importing primarily from Southeast Asia (40% from Indonesia, 20% from Malaysia) in the form of liquified natural gas (LNG). Japanese firms have embarked on a major project to develop the natural gas and oil on the Russian island of Sakhalin, located just 160 km from Japan's northern border. Japanese electric and gas companies have secured contracts to receive gas in the form of LNG from Sakhalin; beginning in 2009, Sakhalin should provide about 8.5% of Japan's LNG. Earlier plans to build a gas pipeline to Japan have stalled because of lowered expectations for demand from the Japanese market. Japan has been a world leader in creating a more energy-efficient economy. Its per capita energy consumption is one of the lowest in the developed world at 175.6 million Btu, versus the U.S. value of 340 million Btu. It has invested in energy conservation programs and national energy savings plans to reduce per capita consumption to lower levels. Japan has also committed funds to developing solar, hydro, and other carbon-free, environmentally friendly renewable energy sources. Japanese automakers are leaders in producing hybrid cars which over time are expected to reduce dependency on petroleum. Japan has a dual interest in improving efficiency: to enhance its energy security and to meet its own environmental goals, particularly emissions targets set under the Kyoto Protocol. The announcement of a "New National Energy Strategy" in Japan in 2006 sets ambitious goals for increasing conservation, lowering oil dependence, developing more nuclear energy, and increasing the amount of equity oil overseas. Analysts say the strategy may reflect a shift toward a more state-directed, interventionist approach. Foreign Suppliers Japanese oil firms have actively sought foreign supplies of energy on several continents for decades to reduce its dependence on the Middle East. The companies have been active in the oil-rich Caspian region, specifically in Azerbaijan and Kazakhstan. The Russian Far East has also been identified as an attractive alternative supplier (see later section). Although Japan earlier worked to diversify its supply elsewhere in East Asia, imports from China and Vietnam reportedly dried up after 2000 as those countries become net importers themselves. In an indication of both increased political rivalry and the quest for assured supply to resources, Beijing and Tokyo have had diplomatic confrontations over the territorial rights of parts the East China Sea, an area with at least some oil and gas reserves. In 2006, Japan imported 2% of its crude oil from Sudan. Japan's Engagement with the Middle East Despite attempts at diversification, Japan still imports close to 90% of its oil from the Middle East. This dependence has driven Tokyo's Middle East policy, which at times has been at odds with American policy in the region. Japan has actively sought supplies in the region for four decades and has maintained diplomatic relations with OPEC (Organization of Petroleum Exporting Countries) nations to serve its energy needs. After the 1973 oil crisis, the Japanese government undertook a new policy toward the Middle East, emphasizing its support for the Palestinians and developing relationships with regional powers independent of the United States. In relations with Iran in the 1990s, Tokyo adopted the European "critical dialogue" approach, which emphasized engagement through trade and investment to moderate Tehran's hardliners. Japan has distributed millions in Official Development Assistance (ODA) to the region to further economic development. Japan's major trading companies reportedly are heavily involved in investment in the Middle East and receive substantial government support for their activities. As part of the effort to strengthen dialogue with Arab nations, Japan has engaged in the Israel-Palestinian peace process by hosting conferences and facilitating governmental and business exchanges. Tension with U.S. Over Iran The conflict between Japan's energy diplomacy and U.S. security interests is particularly evident in the case of Iran, which is the world's fourth largest producer of oil, and is accused by the United States of pursing a nuclear weapons program and supporting international terrorism. The loss of drilling rights in the Khafji concession in Saudi Arabia in 2000 compelled Japanese policymakers to turn their attention to cultivating a nearly $3 billion deal with Tehran in the large Azadegan oilfield in southwestern Iran. The field was reportedly expected to produce up to 300,000 barrels a day, nearly 10% of Japan's crude imports, once operational. The Bush Administration voiced its concerns to Japanese officials about investment in Iran based on its suspected nuclear weapons development program. Though such pressure reportedly stalled negotiations in 2003, the deal was salvaged and signed in 2004. However, as Iran became increasingly defiant of International Atomic Energy Agency (IAEA) demands to open up its facilities for inspection and the United Nations Security Council imposed sanctions on Iran, Japan adjusted its position. In October 2006, Japan's Inpex firm (about 30% of the company is held by the Japanese government) reduced its stake in the project from 75% to 10% and transferred operational authority to a national Iranian oil company. The consortium of firms working on Azadegan was reportedly nervous that it will lose its rights to the deal, possibly to China. Press reports indicate that since Japan's reduced involvement, China and India have stepped up their activities in energy deals with Iran. Korea's Energy Sector The Republic of Korea has a similar energy portfolio to Japan, but its production and consumption of energy is slightly less efficient and less environmentally-advanced. South Korea is the world's fourth largest oil importer and second largest LNG and coal importer (after Japan). It depends on oil for about half of its energy consumption. Korea's consumption of energy has remained flat since 2000, and, like Japan, all its energy imports must arrive by boat because of the division of the Korean peninsula. Energy consumption per capita is 181 million Btu. The government has built up a strategic oil reserve, managed by the state-owned Korea National Oil Corporation. Like Japan's trading houses, the Korean chaebol are active in the Middle East energy sector. Korea is a member of the International Energy Agency. National Energy Strategy President Lee Myung-bak, elected in late 2007, has indicated that he would like to focus on energy diplomacy during his term. Ongoing restructuring of the energy industry, including the deregulation and privatization of the Korea Gas Corporation (Kogas) has progressed slowly because of labor union and other interest group opposition. South Korea has increased its nuclear power generation, although has struggled to find appropriate sites for new plants due to limited land availability. After ratifying the Kyoto Protocol on greenhouse gas emissions (though it is not an Annex I party, so is not under the same obligations to reduce emissions), the government made plans to introduce up to twelve new nuclear plants before 2015. Relatively little attention has been given to the development of renewable energy resources. Because most of the imported petroleum comes from the Middle East (Saudia Arabia alone provides about one third of its imports), South Korea has taken measures to diversify its sources by seeking equity stakes in energy exploration worldwide, including South America, the Middle East, and Asia. Russia's geographic proximity makes it an attractive supplier for Korea, and it increased its imports of both oil and gas from Russia in 2007. Emphasis on Natural Gas Korea has turned increasingly to natural gas for its power needs, importing considerably more LNG in recent years. Energy specialists assert that Korea's domestic configuration and infrastructure lend itself well to increasing natural gas usage, and the government has promoted demand through tax incentives and other measures. Natural gas in the form of LNG makes up about 10% of South Korea's consumption, and is mostly imported from Qatar, Indonesia, Malaysia, and Oman. Increasing the use of natural gas has taken on added importance as South Korea has found coal prices from China, a major supplier, spiking due to increased domestic demand in China. Kogas has signed a long-term deal to import LNG from the Sakhalin-2 project. Kogas also hopes to eventually import gas by pipeline from Siberia, but has expressed frustration with the slow pace of progress on several proposed pipeline projects from Russia. North Korea Factor For South Korea, the uncertainty of the future of the Korean peninsula makes it difficult to consider long-term strategies for energy security. In the event of a collapse of the regime in Pyongyang and reunification with the South, Korea would certainly face rising demand for energy, as North Korea has a critical energy deficit already. North Korea has very little operational infrastructure, its electrical grid is in poor condition, and transportation systems are weak or failing. North Korea relies on coal for about 85% of its energy consumption. Energy has played a central and controversial role in the ongoing Six-Party Talks among the United States, China, North Korea, South Korea, Japan, and Russia to deal with North Korea's nuclear weapons programs. Under the 1994 Agreed Framework, North Korea was to be provided with two light water reactors (LWRs) to compensate for shutting down its Yongbyon nuclear reactors. Under the February 2007 agreement, Russia, South Korea, China, and the United States are providing heavy fuel oil to North Korea in exchange for disablement of key nuclear facilities. Proponents of engagement with North Korea may support the construction of gas pipelines or other energy infrastructure through North Korea to link the peninsula and other Asian markets with resources from the Russian Far East. Such arrangements would provide Pyongyang with foreign exchange in the form of transit payments, and could provide energy without relying on its nuclear program. Some who support the expansion of the Six-Party Talks to a broader regional security forum have pointed to energy as a potential platform for region-wide cooperation. China's Energy Sector China's energy demand has changed dramatically in line with its rapid economic growth as its GDP continues to grow at a double-digit clip annually. Between 2000 and 2007, China's energy consumption doubled. Previously almost entirely dependent on coal, China has turned increasingly to oil to satisfy its soaring energy demands. Although coal still provides nearly 70% of energy consumption, China surpassed Japan in 2003 to become the world's second largest oil consuming country after the United States. The source of nearly 30% of world oil demand growth since 2000, China is projected to demand over 16 million barrels per day by 2030. Electricity and coal consumption have grown by 60% since 2000. By nearly every conceivable metric, China has become a primary driver in world energy markets. According to the IEA, China is on course to overtake the United States as the world's largest consumer of energy by 2010. Government Activism Beijing has become increasingly concerned about its growing energy needs. Experts say that the electricity crisis of 2003-2004, during which areas of China suffered from shortages and blackouts, surprised Beijing and drove a new approach to managing China's energy security. The formation of the Energy Leading Group, headed by Premier Wen Jiabao, and the State Energy Office in 2005, to coordinate all agencies' efforts, reflected the leaders' dissatisfaction with the existing energy policymaking apparatus. However, critics say that China's overall energy strategy is still hindered by inter-agency conflict and tension between the government and the national oil companies (NOCs). The creation of coordinating bodies is unlikely to eradicate the problems of competing interests, manpower and funding shortages, and the larger firms' influence. Beijing's 11 th Five-Year Plan for 2006-2010 indicates the pursuit of comprehensive energy strategies, including a targeted 20% reduction in energy intensity (consumption per unit of GDP) by 2020. This indicates a shift to emphasizing demand moderation instead of only focusing on expanding the supply of energy. China has also imposed fuel economy standards and a tax on large cars. Under the Tenth Fiscal Five-Year Plan for 2001-2005, the government began creating a strategic petroleum reserve for its energy sector, although filling the stockpile has been slow because of the high price of crude oil. The government has agreed to finance the construction of an SPR, and has set the final target at 90 days, the IEA requirement, although doubts remain about how quickly that can be accomplished. There appear to be cleavages within the leadership on whether to embrace market forces to meet China's energy needs or to continue to pursue equity oil, and differences on the broader question of whether to engage China in global and regional initiatives designed to facilitate cooperation among oil importers. Among those who argue against multilateral engagement, distrust of the United States appears to be strong. Some in China see "economic nationalism" as a threat to their energy security, citing the scuttled 2005 Unocal deal and a similar defeat of a bid for Russian oil producer Slavneft in 2002. Pursuit of Alternatives to Oil Beijing has worked to diversify its supplies aside from oil by aggressively pursuing several other forms of energy, but all face limitations. Energy specialists say that despite interest in increasing the percentage of nuclear power, hydropower, renewables, and natural gas, these alternatives to oil are likely to remain a small portion of the mix. Major initiatives include expanding the national gas infrastructure and developing gas-fired power plants that will use liquefied natural gas instead of oil. Natural gas is an attractive long-term alternative for China in that it is plentiful outside the Middle East and relatively environmentally friendly. Development of both domestic reserves and overseas gas exploration are ongoing. In the short term, however, the cost of gas infrastructure and of gas itself, as well as the availability of inexpensive coal as a substitute, likely will preclude extensive use of natural gas. China has pursued a nuclear power program with the help of European manufacturers, and plans to add up to 30 reactors to its existing 11 reactors by 2020. Despite misgivings about providing nuclear equipment to China, the United States and Japan reportedly have loosened restrictions on supplying parts to Chinese plants in the interest of safe operations. After suffering from widespread electricity shortages for several years, China has approved scores of new electricity generating projects and limited the number of rolling blackouts and manufacturing disruptions. The largest hydropower project by far is the Three Gorges Dam; upon completion, expected in 2011, the project will have the world's largest electric generation capacity (18.2GW). Beijing has cautiously begun to restructure electric power production and distribution, but many bureaucratic hurdles and inefficiencies remain. As demand increased, Beijing began allowing foreign companies to invest in the Chinese energy sector and has made efforts to shift away from the state-owned model. Although very modest progress has been made in developing competition among the many power generating plants, critics point out that the absence of a true national electric grid leaves some areas with surplus power despite the national shortage of generating capacity. Coal's Bounty and Detriment China became a net importer of coal for the first time in 2007. China is currently the world's number one producer and consumer of coal; although coal is expected to decline as a percentage of China's energy consumption, overall use of coal is likely to rise in absolute terms in the coming years. Some experts predict that China could double or even triple its use of coal by 2020. The destructive environmental impact of coal use has led to severe air pollution in many Chinese cities and spurred international pressure to reduce emissions. In addition, despite attempts to impose stricter safety standards on China's 24,000 coal mines, thousands of miners die each year from accidents. Severe winter weather in China in late 2007 demonstrated China's strained and fragile rail capacity, a further challenge for coal. After blizzards halted trains, coal was not able to reach power stations, causing widespread blackouts. Although rail expansion continues, the capacity cannot keep up with the demand for transit of coal and other commodities. Switching to travel by road is a far less efficient option. Seeking Energy and Partnerships Overseas China currently depends on the Middle East for roughly half of its oil imports with Saudi Arabia providing the largest amount. Beijing has aggressively sought to buy into foreign oilfields in over 30 countries, many of them outside the Middle East. In general, Beijing has taken a bilateral approach to ensuring its oil supply. Not a member of the International Energy Agency, China does not participate in broad multilateral energy coordination fora. Chinese companies have acquired oil concessions in Central Asia, East Asia, the Middle East, Latin America, North America, and Africa. Africa and Russia have provided the largest growth opportunities, as supplies from East Asia have declined in percentage of China's total imports. China's political leaders have actively encouraged new cooperation, and energy deals are often packaged with other financial assistance incentives and high-level dialogue. For example, a China-Africa summit conference in Beijing in November 2006 brought together nearly 50 African heads of state and ministers to explore investment and aid agreements, and President Hu toured eight African countries in February 2007 to seek further cooperation. However, energy analysts point out that the Chinese national oil companies (NOCs) pursue deals on a profit-driven basis, and hold increasing clout over other elements of the national energy policymaking process. Analysts also argue that the NOCs competitiveness stems mostly from their willingness to accept higher risk and lower returns on investment rather than direct government support. Particular inroads have been made in the Caspian region, most prominently a landmark accord between China and Kazakhstan that gives CNPC a 60% stake in the Kazakh state firm Aktobemunaigaz. An oil pipeline carrying Kazakh oil to China was completed in late 2005, and crude delivery began in July 2006. U.S. oil majors had also tried unsuccessfully to secure access to Kazakhstan's oil, estimated at about 35 billion barrels of discovered reserves. In addition to Kazakh deals, strategic acquisitions in Azerbaijan and preferential rights to develop natural gas in Turkmenistan have also heightened Beijing's presence in Central Asia. As these deals have progressed, China has strengthened the Shanghai Cooperation Organization (SCO), a regional security organization that includes China, Russia, Kazakhstan, Uzbekistan, Tajikistan, and Kyrgyzstan. The SCO flexed its political muscle when it called for timetables for the withdrawal of "appropriate participants in the antiterrorist coalition" from the region at its June 2005 meeting; shortly after, the Uzbek president ordered U.S. forces to leave their bases by the end of the year. China's energy relationship with Sudan has raised concern among some U.S. officials because of the ongoing atrocities in Darfur. CNPC has invested at least $8 billion in Sudan's oil sector, and received 5% of its oil imports from Sudan in 2005. Some analysts say that increased international pressure to cease dealings with Sudan is making some in Beijing question whether the investment in Sudan is worth a loss of Chinese "soft power" on the global stage. Despite working to reduce dependence on the Middle East, China reportedly considers its relationship with Iran crucial to maintaining energy security. The number of energy-related deals has reportedly risen substantially between Beijing and Tehran, as have overall trade and commercial ties. Beginning in the 1980s, Beijing provided Tehran with military equipment, including technology that some assert could be used for creating weapons of mass destruction and assisting with missile programs. China reportedly agreed to cease sending Iran dual use technology in 1997 and, according to some analysts, its arms sales to the region have dwindled. Others claim that the flow of arms continues. Under the Iran Sanctions Act ( H.R. 6198 , P.L. 109-293 ), which made WMD and advanced conventional weapons exports to Iran sanctionable, the United States has imposed sanctions on Chinese companies at least seven occasions. U.S.-China Bilateral Energy Cooperation Energy issues are among those included in the Strategic Economic Dialogue, an effort begun by former Deputy Secretary of State Robert Zoellick in 2005 and continued under Secretary of Treasury Henry Paulson. The twice annual talks mark the first regular exchange between senior officials in the U.S.-China bilateral relationship. According to Department of Energy officials, bureaucrats are more engaged on cooperative energy agreements as a result of the SED. These efforts have included protocols on fossil energy, renewables, and energy efficiency; a Memorandum of Understanding in which the United States agrees to export technology for four AP1000 nuclear reactors if purchased from Westinghouse; and the Oil and Gas Industry Forum, which brings together U.S. and Chinese private sector companies. The Bush Administration has also touted the Asia-Pacific Partnership (APP) for Clean Development and Climate to develop clean energy technologies with private sector partners; the forum includes the United States, Japan, South Korea, India, China, and Australia. The APP is mostly focused on the "deployment" of new technologies, as opposed to research and development. Rising Competition Over Access to Oil and Gas in the Russian Far East As China and Japan scramble to meet their energy needs while reducing dependence on the Middle East, the largely undeveloped resources of neighboring Siberia have become a prize. Although the Russian Far East's promise is significant, many strategists have cast doubt on the commercial viability of tapping the Far East's reserves. This has not discouraged China and Japan from engaging in a bidding war over Russian projects to bolster their energy security. Boasting huge reserves of natural gas (1,680 trillion cubic feet of proven reserves, nearly twice that of Iran) and potentially rich oil fields, Moscow has played Tokyo and Beijing off one another to maximize concessions for itself. Although China and Japan have expressed frustration with Russia's opaque policymaking, the proximity of Siberian energy supplies remains attractive. Diplomatic and Economic Rivalry over Angarsk/Taishet Pipeline The largest and most contentious project thus far has centered on the destination of a pipeline originating in an eastern Siberian oilfield in the Lake Baikal region. An agreement between Russia and China, endorsed by presidents Putin and Hu in May 2003, cleared the way for the pipeline to go from the city of Angarsk to Daqing, China's flagship oilfield with refining facilities in the industrial northeast. The arrangement stalled, however, after the arrest of Russian oil tycoon Mikhail Khodorkovsky, chairman of Yukos, the company that brokered the deal and planned to construct the pipeline. In 2005, Moscow reversed course and designated the route preferred by Japan: from the nearby city of Taishet to the Russian port of Nakhodka, near Vladivostok on the Sea of Japan and a short tanker trip away from Japan. Presently, the Kremlin's position appears to try to satisfy both demands by postponing the decision on the ultimate destination to a later date. Most energy analysts caution that the decision is far from finalized and that significant obstacles remain to realizing any arrangement. The Nakhodka option is far more expensive and ambitious: the pipeline would cover over 2,580 miles and cost up to $18 billion, according to some estimates, compared to the 1,400 mile, estimated $2.5 billion that the Daqing route would cost. But the Japanese proposal also offered nearly full financing for the construction and oil exploration, largely through the government owned Japan Bank for International Cooperation (JBIC), and Russia would own and control the entire length of the pipeline. Japan is anxious to diversify its suppliers, and analysts estimate that if Japan imported a million barrels a day from Russia, its dependence on the volatile Middle East would fall by 10-15%. Moscow Equivocates Russia, flush with oil revenues because of the high price of oil worldwide, has resisted making a firm commitment to either project, and instead claims it will try to satisfy both Japan and China's appetite for relatively nearby energy supplies. In September 2005, Putin announced that the pipeline would be built first from Taishet to Skovorodino, near the Chinese border, and then on to Daqing. Later, the pipeline would be extended to Nakhodka and the Asia-Pacific market, in order to diversify its exports, Putin continued. Although estimates vary widely, the initial phase, to be completed in 2009, is estimated at a capacity of 300,000 barrels per day; some figures cite the final pipeline capacity at 1.6 million barrels per day. Before the pipeline is extended to Nakhodka, about one third of the deposits would be transported to the Pacific—presumably for Japan, and possibly South Korea—by rail. Construction on the first stage began in April 2006. As construction costs have continued to climb, oil analysts are casting more doubt on whether the volume of reserves could satisfy the pipeline projections. In addition to the obvious benefits of extracting the most lucrative deal, Moscow has its own strategic calculations to consider as well. The downside of constructing a pipeline to Daqing is the sole dependence on the Chinese market, while the Pacific option would open up other Asian markets and possibly the United States. Despite their past rivalry, Beijing and Moscow have stepped up relations, including holding regular bilateral military exercises. Russia is the top supplier of arms to China, and both countries are wary of the U.S. military presence in Central Asia. Russia has promised to increase the supply of oil by rail to China. Through the Shanghai Cooperation Organization, Russia and China successfully called for a withdrawal of American forces from Uzbekistan in summer 2005. Building a pipeline into China would solidify the growing partnership. Yet expanding economic ties with Japan is also attractive for Russia; restricting the pipeline to only China risks alienating a potentially valuable source of capital and technical expertise. Natural Gas Competition Ahead? As the world's largest exporter of natural gas and with abundant reserves, Russia is poised to be a natural gas superpower. Projects under development now in Sakhalin and for the massive Kovykta gas field in the eastern Siberian region of Irkutsk indicate that China and Japan, along with South Korea, are major potential markets. As a result, East Asian governments have been actively engaged in negotiations with Gazprom, the state-owned agency responsible for coordinating all gas exports to Asia. Natural gas is an attractive alternative to oil because of its relative proximity in a less volatile region than the Middle East and its milder environmental impact. Gas pipeline politics could develop similarly to the competition over the Angarsk/Taishet oil pipeline. So far Beijing's and Tokyo's projects have been mostly divided geographically: China is pursuing gas supplies from the Kovykta field while Japan is mostly focused on securing gas from neighboring Sakhalin. However, the uncertainty of the development schemes, particularly whether the gas will be shipped by pipeline or in the form of liquified natural gas (LNG), indicates that competition will continue. Gazprom is reportedly considering a variety of options for exporting gas: Rusia Petroleum (a subsidiary of TNK-BP), the China National Petroleum Corp, and Korea Gas Corp signed an agreement for a pipeline to extend from East Siberia to China and South Korea, but Gazprom also is assessing the possibility of developing a giant pipeline system to connect to the Japanese market as well. Sakhalin Resources Under Development With natural gas reserves estimated at 96 trillion cubic feet and oil reserves at about 14 billion barrels, the Russian island of Sakhalin, north of Japan, is primed to become a major gas supplier to the region as well as an important oil producer. Revenue from ongoing projects has spurred rapid development of the island's infrastructure. Sakhalin I, led by ExxonMobil with Russian, Indian, and Japanese consortium partners, has begun providing oil to Asian markets and natural gas to the Russian market. Consortium members are divided on whether future natural gas exports will be shipped by pipeline or as LNG. Sakhalin II, under the Gazprom/Shell/Mitsubishi/Mitsui consortium, is the largest single foreign investment in Russia and expects to become Russia's first LNG facility in 2008. Sakhalin II will supply natural gas to the United States, Japan, and South Korea. Chinese and Indian firms are among those competing for a stake in the Sakhalin III development (oil and gas), and several other Sakhalin projects are in preliminary stages. The question of whether to transport gas by pipeline or through liquefaction is linked to broader issues of national energy security. Japan, as the primary market, prefers the pipeline option because it ensures an exclusive supply and helps to diversify its energy sources away from the Middle East. Sakhalin I reportedly may be hoping for additional incentives from the Japanese government to pursue the technically difficult pipeline proposal. LNG producers, on the other hand, are eyeing other potential markets, including South Korea, China, and the United States. The Sakhalin energy projects, particularly Sakhalin II, are seen as a major test of the feasibility of foreign direct investment and frontier development in Russia. In late 2006, Sakhalin II's consortium agreed to cede a majority stake to Gazprom, Russia's national natural gas monopoly. The project had been held up because of a revoked approval that cited environmental concerns, although energy analysts say that the environmental issues were used as a ploy to pressure the foreign investors into accepting Russian state control. Most international observers agree that the episode indicates that Moscow wishes to expand its control over energy projects and assert its policy of "resource nationalism." Assessing the U.S. Strategic Interest U.S. interests in Asian energy issues are manifold and complicated by sometimes competing economic and security priorities. U.S. international economic policy emphasizes free trade and open markets. As the world's largest consumer of energy, the United States has an interest in getting as many energy resources to market as possible in order to keep supply high. However, concern about China's rising economic and political power and security commitments in the region prevent U.S. policymakers from approaching the issue from a strictly economic standpoint. U.S. officials have resisted getting directly involved in the competition between China and Japan over pipeline routes from Russia. Policy analysts are divided on which of the pipeline routes better serves the U.S. national interest. Reducing China's dependence on the Middle East could enhance its sense of energy security, therefore lessening the likelihood of potentially destabilizing partnerships between Beijing and OPEC members. If China feels threatened, the chances of conflict likely increase. On the other hand, pipelines between China and Russia could lead to much closer economic and political ties between the two giants, and potentially a large regional bloc that could exclude the United States. Some foreign policy analysts see a strong partnership between Moscow and Beijing as unfavorable to Washington. Implications The long-term potential consequences of rising energy competition in East Asia range from dire predictions of military conflict to scenarios for unprecedented regional cooperation. This section will explore different arguments about outcomes, as well as consider the possible impact on U.S. foreign relations. Bilateral Relationships with Asian Allies Energy security is an essential concern for the governments of Japan and South Korea, both key American partners in Asia. A fundamental basis for the U.S. alliances has been the maintenance of stability to promote open trade and investment in the region. This arrangement has allowed Seoul and Tokyo to secure access to distant energy sources, particularly in the Middle East. As competition intensifies because of China's demand, the U.S. alliances might face new strains. Japan's and South Korea's energy dependence, and any threat to existing supplies, may affect their willingness to support U.S. policies, particularly in the Middle East. The tension between Tokyo and Washington over the Azadegan deal in Iran may foreshadow more diplomatic difficulties ahead. On the other hand, concerns about access to energy resources could also strengthen alliance cooperation. Japanese leaders have indicated their view that energy and security are interlinked. Japanese leaders have asserted that stability in the Middle East is in Japan's national interest because of its dependence on the region's oil. If Japan continues to move slowly toward becoming a more "normal" nation by developing military capabilities beyond its own self-defense, it may be more willing to move beyond its "free rider" approach to the Middle East. Japan's unprecedented deployment of Self Defense Forces to Iraq, as well as its active encouragement of Southeast Asian nations to join the U.S.-led Proliferation Security Initiative, may be indications of this trend. Resolving the issue of North Korea's nuclear weapons programs is crucial to maintaining the U.S.-South Korean alliance; a diplomatic solution through the Six-Party Talks will likely require careful attention to the considerable energy needs of the peninsula. Enhanced Regional Cooperation Some analysts point out the potential for unprecedented cooperation among Asian countries, with the shared goal of enhancing energy security for the region. Various regional groupings, including ASEAN Plus Three (Southeast Asian nations plus Japan, South Korea, and China), APEC (the Asia Pacific Economic Cooperation forum), and the East Asia Summit, have introduced programs for enhancing energy cooperation as high oil prices have continued. At the 2007 East Asia Summit, leaders pushed for concerted effort to explore nuclear, hydropower, and biofuel alternatives. If institutions devoted to shared infrastructure and information are developed, East Asia may find the mechanisms helpful for other political, economic, and security-related issues. Although such a development may lessen dependence on the United States for stability, which could threaten U.S. influence in the region, stronger regional dialogue might also allow for a drawdown of the U.S. military presence in the region. Heightened Sensitivity of Sea Routes The strategic importance of the transit routes of the South China Sea, particularly the narrow Strait of Malacca, is likely to become more pronounced as Asian dependence on oil from the Middle East grows. More than half of China's and 70% of Japan's oil supplies from the Middle East pass by ship through the Strait, a pass that faces organized piracy and could easily be blocked militarily. In the event of a confrontation between the United States and China, the Strait of Malacca is one of the most likely flashpoints for military conflict. China does not have the naval might to prevent an economic blockade by a power like the United States, a fact that drives its desire to invest in closer energy sources. As China's military modernizes, one of its key objectives is likely to be the protection of its sea lanes to the Middle East. Increased Russian Stature Particularly if Asian consumers turn more to natural gas to satisfy their energy needs, Russia stands to gain considerable leverage in the Asia-Pacific. Some energy analysts have dubbed Russia "the gas superpower" based on its massive proven reserves. If foreign investment and infrastructure in Russia improve, presumably so too will Russia's potential strategic economic power. In the oil markets as well, Russia's untapped reserves and its status as a major non-OPEC producer are already increasing its regional influence, evidenced in the Chinese and Japanese bids for early inroads. Moscow may find that the energy sector provides a way to reassert itself in East Asia, where Russia's power has been greatly diminished since the fall of the Soviet Union. Renewed 'Great Game' Rivalries in Central Asia China's thirst for oil has led to new partnerships with Central Asian states, an area of traditional rivalry between great powers. Russia, China, and the United States will likely remain attentive to the sensitive issue of pipeline construction in the region. Russia retains considerable influence over the Caspian region because the existing pipeline network crosses through Russian territory. Moscow is also wary of expanding Chinese presence in the Russian Far East, fearing that Beijing's influence will grow in a region already populated with hundreds of thousands of ethnic Chinese. Although Moscow may be challenged by Beijing's inroads with members of the former Soviet empire, the two powers appear to have moved toward cooperation to counter U.S. presence in the region. In addition to holding large-scale bilateral military exercises, Moscow and Beijing have beefed up the influence of the Shanghai Cooperation Organization. According to some analysts, the development of China-Central Asia-Russia energy cooperation lessens U.S. strategic leverage considerably. As U.S. foreign policy has emphasized democracy and human rights, some analysts see the leadership of Central Asian republics drawn toward a more sympathetic Beijing and Moscow. As economic and political partnerships between China and the republics grow, observers suggest that Beijing's increasing presence might have a negative effect on the struggling democratic and market reforms in Central Asian states. Casus Belli for Major Conflict? Some energy experts suggest that China's quest for energy security will inevitably lead it to aggressively seek new sources of supply in the Middle East. Given that U.S. alliance partners Japan and South Korea have been willing to engage countries like Iran to secure energy contracts, some fear that a rising China would be even more assertive in cultivating relationships with U.S. adversaries. Some scholars have posited that Asian nations' competition for energy supplies with the West could lead to an eventual Middle East-Asia nexus, in which Asian governments become closer politically with the Gulf states in order to secure long-term access, thereby marginalizing U.S. power. Other observers have envisioned dire scenarios that could emerge from a protracted U.S.-China struggle over oil, including an increasingly close China-Saudi Arabia relationship that could lay the groundwork for a world war-level conflict. Other analysts, however, point to the reported decrease in China's weapons trade with Iran and the fact that China did not side with Iraq in the U.S.-led invasion in 2003. The current leadership in China places economic development as a high priority, and many assert that China will not initiate military action based solely on energy resources unless it is seriously threatened. In addition, Beijing would likely be reluctant to challenge the United States for access to energy supplies because of its need for American investment and U.S. markets. Options for Congress and Executive Branch Policymakers Taking a More Aggressive Approach to Securing Exclusive U.S. Access to Energy Supplies As the world's sole superpower, the United States has pursued an energy policy that, while protecting the American interest in securing energy suppliers, also generally assures access for other energy consuming states. Some analysts suggest that with China and other economies developing voracious appetites of their own, a policy of explicitly attempting to lock up energy resources for the United States alone is warranted. Such a policy, which might include more diversification from the Middle East, may deny the "free-rider" option to other nations, including U.S. allies. Bilateral Measures with U.S. Allies Increased transparency and energy sector reform could alleviate many of the strains placed on the energy industry that threaten to spur conflict in East Asia. Transparent pricing allows oil to be traded efficiently and visibly. In general, the region's refining sector has moved toward deregulation, but many barriers remain to outside competition. Similar obstacles to open market competition exist in the power sectors in Japan and South Korea. The United States could seek to reduce these barriers by encouraging its allies to create independent regulatory bodies. Some specialists suggest that U.S. officials could also work with the Japanese and South Korean governments in restoring public confidence in nuclear energy by sharing technology and expertise, as available, to assure safer operation of nuclear reactors. Some say that collaboration on energy research might also be beneficial in fostering a cooperative, market-based approach to energy security, in addition to offering the promise of technological breakthroughs that eventually reduce global dependency on oil. The Department of Energy has taken modest steps to enhance energy efficiency cooperation with Asian nations, including efforts to develop fuel cell technology research and development with the Japanese government; to cooperate with Chinese officials in pursuing cleaner air, with a particular focus on the 2008 Olympic Games to be held in Beijing; and to promote the use of cleaner-burning fuels and reform in the energy sector in the Philippines. Greater Bilateral Efforts with China Energy competition and security are among the many issues included in the debate over how the United States should deal with a rising China. Some policymakers and experts resist the idea of aiding China's increasing prosperity, viewing Chinese growth as a serious security risk for the United States. Others see the potential for mutually-beneficial Sino-American cooperation because of the shared interest in stability in oil-producing regions. Today China is labeled by many as a "free-rider," in that it reaps the rewards of the security that American power brings to the Middle East and Asia. Allowing China to continue to be a "free rider" could lessen the risk of conflict. Assertions of military strength or regional tension over access to oil supplies could cause price spikes in the global market, which would be harmful to U.S. interests as well. Positive bilateral relationships and overall regional stability might enhance the perception of oil as a global commodity. As the consumption giant in the region, China likely could benefit from U.S. assistance in developing alternatives to oil, such as bio-fuels or coal-based fuels, hydrogen and natural gas. Japan could also be helpful to China in developing energy conservation strategies; encouraging Japan to include energy efficiency programs as part of its development assistance to China could also serve the U.S. interest. In addition, some analysts suggest the United States or its allies could consider providing technical assistance to China in expanding its strategic stockpile of oil. According to this view, the "cushion" of a strategic reserve would allow China to cope better with a short-term disruption to global oil supply without causing shocks to the market. The campaign to pressure Beijing to become a "responsible stakeholder" in the world encompasses energy cooperation with the United States and the international energy community. Enhanced funding and attention to energy cooperation programs (see " U.S.-China Bilateral Energy Cooperation " section above) under the overall engagement of the Strategic Economic Dialogue could support this approach. U.S. Leadership in Developing Multilateral Cooperation If, as many analysts believe, further globalization of the energy market will reduce the potential for major power conflict and instability, strong leadership is essential to coordinate cooperation between actors. Many feel the United States should take the role of rule-setter and enforcer through economic organizations, military cooperation (for safe transit of energy resources), technical expertise, approval of international development assistance, and the promotion of common standards and shared infrastructure. In their view, expanded American engagement can help lead energy security to a more open, regulated mode instead of actors resorting to old-style "resource diplomacy." Some energy specialists have suggested that inviting China to join the International Energy Agency (IEA) could alleviate many of the concerns of managing China's surging demand. The Paris-based agency, made up of the 27 industrialized countries that comprise the Organization for Economic Cooperation and Development (OECD), including Korea and Japan, is committed to ensuring energy security through cooperative solutions and safeguards, such as national strategic stockpiles. Proponents assert that engaging China in the IEA mechanism could help to maintain the stability of world oil prices as well as lessen Beijing's sense of strategic vulnerability that could ultimately lead to military rivalry. Providing a multilateral safety net could discourage China from taking measures such as hoarding oil (some observers claim that China hoarded up to 30 million barrels ahead of the invasion of Iraq in 2003) that put pressure on the world market. However, opponents may argue against admitting China into the agency because the current members are defined as being industrialized democracies, a category which does not include China because of its Communist political system. Others have suggested that the IEA could create a mechanism specifically for emerging markets that does not demand full membership in the agency but still provides a mechanism to mitigate the effects of supply disruptions, as well as inclusion in coordinating the release of reserves. Another approach might be for the IEA to sponsor oil stockpiles in regions of concern. Another multilateral alternative for the U.S. could be one of forming a regional energy coordination body. Some analysts advocate the creation of an Asian version of the IEA in order to share information, transfer conservation technology, and coordinate regional strategic stockpiles to reduce the effects of supply disruptions. A multinational framework could spur concerted efforts to make projects like gas pipelines feasible and beneficial for the region as a whole. A possible coordinating institution is the Asian Pacific Economic Cooperation (APEC) forum, which has called for cooperation in developing measures to ensure energy security for the region. As energy cooperation between northeast Asian countries improves, strategies to develop the Russian Far East might energize regional trade and spur economic growth. A regional approach likely would require considerable U.S. and international leadership, such as the assistance of international financial institutions to develop shared infrastructure and consultation on establishing shared guidelines and enforcement mechanisms. Iran Sanctions Act Enforcement Under the Iran Sanctions Act ( P.L. 104-172 , originally known as the Iran-Libya Sanctions Act), non-U.S. companies that invest over $20 million annually in Iran or Libya are subject to sanctions. However, ILSA has never been invoked to punish companies, and only one official waiver has been granted (to Russian, Malaysian, and French companies to develop gas reserves in southern Iran by President Clinton in 1998). Meanwhile, since the passage of the legislation, billions reportedly have been invested in Iran's oil and gas sector without being sanctioned, mostly by European companies. Under ILSA, the United States has the option to impose sanctions on companies involved in such ongoing deals with Iran, but most observers say that the Bush Administration is unlikely to take this step.

Asia has become a principal driver in world energy markets, largely due to China's remarkable growth in demand. As the gap between consumption and production levels in Asia expands, the region's economic powers appear to be increasingly anxious about their energy security, concerned that tight supplies and consequent high prices may constrain economic growth. Rising energy competition in East Asia promises to affect U.S. policy in many ways, from contributing to price spikes because of China's rapidly increasing demand to altering the geostrategic landscape in the years to come as regional powers struggle to secure access to energy supplies. This report analyzes how China, Japan, and South Korea's pursuits to bolster their energy security impacts U.S. interests. It also examines decisions being made by Asian states now that will significantly shape global affairs in the future, how these decisions might play out, and how Congress and the executive branch might play a role in those decisions. China, Japan, and South Korea have been moving aggressively to shore up partnerships with existing suppliers and pursue new energy investments overseas, often downplaying doubts about the technical feasibility and economic profitability of new development. Their outreach to suppliers includes the development of close ties with Iran, a key concern to U.S. policymakers given skepticism about Tehran's nuclear program. This report outlines the energy portfolios and strategies of the three countries, including their pursuit of alternatives to petroleum. The Russian Far East, with vast energy reserves and relative geographical proximity to northeast Asian markets, is already an arena for competition among the Asian powers. The current struggle between China and Japan over access to Russian oil via a pipeline from Siberia may be indicative of more conflicts ahead. If Russia continues to attract commercial and political overtures to gain access to its resources, Moscow stands to gain considerably more power in international affairs. The possible implications of the surge in energy competition are wide-ranging, from provoking military conflict to spurring unprecedented regional cooperation. Depending on how events unfold, the U.S. alliances with Japan and South Korea, as well as relationships with Russia and China, could be challenged to adapt to changing conditions. Central Asia, with its considerable energy supplies and key strategic location, has re-emerged as an arena for geopolitical contests among major powers. Many analysts concur that it is in the interest of the United States for the governments of China, Japan, and South Korea to approach energy policy from a market perspective. They believe that if Beijing, Tokyo, and Seoul instead link energy supply with overall security, the potential for conflict and instability is heightened. The report concludes with a number of options, including those that U.S. policymakers might pursue to encourage a trend towards cooperation and the de-politicization of energy policy. This report will be updated periodically.

The Range of Possible Models for Measuring AYP for Schools and LEAs While AYP definitions or standards may vary in a multitude of respects, their basic structure generally falls into one of three general categories. The No Child Left Behind Act statute, as implemented by ED currently, places primary emphasis on one of these models, while incorporating a second model as an explicitly authorized alternative. In recent years, critics of current policy have increasingly focused their attention on a third model of AYP, which is the primary topic of this report. The three basic structural forms for AYP of schools or LEAs are the group status , successive group improvement , and individual/cohort growth models. In the context of these terms, "group" (or "subgroup," in the case of detailed demographic categories) refers to a collection of pupils that is identified by their grade level and usually other demographic characteristics (e.g., race, ethnicity, or economic disadvantage) as of a point in time, such as all Hispanic 3 rd grade pupils enrolled in a school or LEA in a particular year. The actual pupils in a "group" may change substantially, or even completely, from one year to the next. In contrast, a "cohort" refers to a collection of pupils in which the same pupils are followed from year-to-year, such as the Hispanic pupils who entered 3 rd grade in a school, LEA or state in fall 2002, and have been followed as a cohort since that time. The key characteristic of the group status model is a fixed "annual measurable objective" (AMO), or required threshold level of achievement, that is the same for all pupil groups, schools, and LEAs statewide in a given subject and grade level. Under this model, performance at a point in time is compared to a benchmark at that time, with no direct consideration of changes over a previous period. The key characteristic of the successive group improvement model is a focus on the rate of change in achievement in a subject area from one year to the next among groups of pupils in a grade level at a school or LEA (e.g., the percentage of this year's 5 th grade pupils in a school who are at a proficient or higher level in mathematics compared to the percentage of last year's 5 th grade pupils who were at a proficient or higher level of achievement). Finally, the key characteristic of the individual/cohort growth model is a focus on the rate of change over time in the level of achievement among cohorts of the same pupils. Such models may compare current performance of specific pupils or cohorts to past performance, or may project future performance of pupils/cohorts based on past changes in their performance level. Growth models are longitudinal , based upon the tracking of the same pupils as they progress through their K-12 education careers. While the progress of pupils is tracked individually, results are typically aggregated when used for accountability purposes. Aggregation may be by demographic group, by school or LEA, or other relevant characteristics. In general, growth models would give credit for meeting steps along the way to proficiency in ways that a status model typically does not. To help illustrate the basic differences among these three AYP models, simplified examples of basic aspects of each are described below. The reader should keep in mind many other variations of these model types are possible. A group status model, such as the current primary model of AYP under the NCLB (described further below), establishes a series of threshold levels or AMOs, which are percentages of pupils scoring at a proficient or higher level of achievement on state standards-based assessments of reading and mathematics. These AMOs have a starting point and a series of increases toward (in the case of the NCLB) an ultimate goal of 100% of pupils at a proficient or higher level of achievement, covering a multi-year period (for the NCLB, the period of 2001-2002 through 2013-2014). These AMOs are specific to each grade level and subject (reading or mathematics) at which state assessments are administered. A key feature of the AMOs in this model is that they are the same for all pupil groups—the "all pupil" group as well as each of the demographic subgroups specified under the NCLB (pupils with disabilities, pupils from low-income families, pupils with limited English proficiency, etc.). This model focuses solely on current year performance of the pupils currently enrolled in each school/LEA for every grade level at which assessments are administered. Comparisons to previous year performance play no role in AYP determinations. An example of a simplified successive group improvement model is the secondary ("safe harbor") model authorized under the NCLB. Under this model, as embodied in the NCLB, the basic structure of the AYP system is the same as described above, but the primary focus shifts to the change from the previous year for each group assessed. If any specified demographic group fails to meet the primary group status AYP criterion described above, the school or LEA is still deemed to meet AYP standards if the percentage of pupils scoring below the proficient level declines by 10% in comparison to the previous year for pupils in that grade level and demographic group. Thus, the primary focus shifts to the change in achievement from the previous year, comparing (for example) this year's pupils from low-income families in the particular school/LEA/grade level to last year's pupils from low-income families enrolled in that school/LEA/grade level (i.e., the pupils are in the same demographic category, but are not necessarily the same pupils). An individual/cohort growth model begins by tracking the performance of individual pupils over multiple (at least two) years. The performance of pupils in the same grade level who share relevant demographic characteristics within a school, LEA, or the state overall may be combined into a cohort. The change in scores for this cohort is compared to a standard of expected growth . The expected growth may be either "data-driven" (e.g., the statewide average rate of achievement growth for all pupils, or the predicted rate of growth statewide for pupils with similar demographic characteristics), or "policy-driven" (a multi-year growth path sufficient to meet an ultimate goal, such as the NCLB requirement for all pupils to reach a proficient or higher level of achievement by 2013-2014). A school or LEA is deemed to meet AYP requirements if the achievement growth of each relevant cohort of pupils meets the expected level of growth. The path of expected growth, as well as the starting points for the growth path, will likely differ for each relevant demographic group of pupils. Some growth models, often called value-added models , also incorporate a variety of statistical controls, adjustments to account for pupil demographic characteristics or past achievement, to sharpen the focus on estimating the impact of specific teachers, schools, or LEAs on pupil achievement and to measure pupil growth against predicted growth for pupils with similar characteristics, but these are not essential elements of all growth models. Proponents argue that such models, with their controls for background characteristics and past learning, maximize the focus on factors that are under the control of teachers and other school staff. The Tennessee Value-Added Assessment System (TVAAS) is one specific form of growth model that uses pupil background characteristics, previous performance, and other data as statistical controls in order to focus on estimating the specific effects of particular schools, districts, teachers or programs on pupil achievement. The AYP Models Explicitly Authorized by the NCLB The primary model of AYP under the NCLB currently is a group status model. As noted in the example above, group status models set as their AMOs threshold levels of performance, expressed specifically in terms of the percentage of pupils scoring at a proficient or higher (advanced) level on state assessments of reading and mathematics. These AMOs must be met by any school or LEA, both overall and with respect to all relevant pupil subgroups, in order to make AYP, whatever the school's or LEA's "starting point" (for the multi-year period covered by the accountability policy) or performance in the previous year. This AMO "uniform bar" is applicable to all pupil subgroups of sufficient size to be considered in AYP determinations. The threshold levels of achievement are to be set separately for reading and math, and may be set separately for each level of K-12 education (elementary, middle, and high schools). For example, it might be required that 45% or more of the pupils in any of a state's public elementary schools score at the proficient or higher level of achievement in reading in order for a school to make AYP. The initial minimum starting point for the "uniform bar" is to be the greater of (a) the percentage of pupils at the proficient or advanced level of achievement for the lowest-achieving pupil subgroup in the base year (2001-2002), or (b) the percentage of pupils at the proficient or advanced level of achievement for the lowest-performing quintile (5 th ) of schools statewide in the base year. The "uniform bar" must generally be raised at least once every three years, although in the initial period it must be increased after no more than two years. Such group status models attempt to emphasize the importance of meeting certain minimum levels of achievement for all pupil groups, schools, and LEAs, and arguably apply consistent expectations to all pupil groups. The secondary model of AYP under the NCLB currently is the "safe harbor" provision, an example of a successive group improvement model. This is an alternative provision under which schools or LEAs that fail to meet the usual requirements may still be deemed to have made AYP if they meet certain other conditions. A school where aggregate achievement is below the level required under the group status model described above would still be deemed to have made AYP, through the "safe harbor" provision, if, among relevant pupil groups who did not meet the primary AYP standard, the percentage of pupils who are not at the proficient or higher level in the school declines by at least 10% (not 10 percentage points) , and those pupil groups make progress on at least one other academic indicator included in the state's AYP standards. For example, if the standard AMO is 45%, and a school fails to meet AYP because of the performance of one pupil group (e.g., the mathematics scores of white pupils) and the percentage of such pupils scoring at a proficient or higher level the previous year was 30%, then the school could still make AYP if the percentage of white pupils scoring at a proficient or higher level increases to at least 37% (the 30% from the previous year plus 10% of (100%-30%), or seven percentage points). During debates over the adoption of NCLB in 2001, much of the attention was focused on successive group improvement models of AYP, not group status or individual/cohort growth models. Both the Senate-passed version, and the primary elements of the House-passed version, of the bill ( H.R. 1 , 107 th Congress) that became NCLB embodied successive group improvement concepts of AYP. Relatively little attention was paid to individual/cohort growth models during consideration of NCLB. The group status model adopted by the conferees on H.R. 1 as the primary AYP concept under NCLB substantially resembled the pre-NCLB AYP definition used in the state of Texas. Possible reasons why relatively little attention was devoted to individual/cohort growth models of AYP during consideration of NCLB in 2001 include the fact that they were used by few states at the time to meet accountability requirements under either state law or under federal law preceding NCLB (the Improving America's Schools Act of 1994); the implicit demand for resources (both extensive, pupil-level longitudinal data systems and analytical capacity in state educational agencies); their relative complexity, compared to the status and improvement models; their assumed requirement for annual pupil assessments throughout all, or at least most, of pupils' K-12 education careers, which very few states had in place; and the difficulty (although not the impossibility) of integrating into growth models an ultimate goal of all pupils at a proficient or higher level of achievement by a specified time. The remainder of this report will focus almost totally on individual/cohort growth models of AYP versus group status models, and little further attention will be paid to successive group improvement models of AYP. This is primarily because the "safe harbor" alternative model of AYP is already available (unlike the individual/cohort growth model alternative), and because it has reportedly been invoked relatively infrequently. Some analysts argue the "safe harbor" provision is used infrequently because it sets a very challenging standard, at least for pupil groups that are currently at relatively low levels of proficiency, and that the required 10% reduction in pupils below the proficient level should be reduced, perhaps to 3%-4%. Growth Model Alternatives to NCLB's Statutory Models of AYP For the sake of simplicity, in the remainder of this report we will refer to the three AYP models by the abbreviated titles of "status," "improvement," and "growth" models. In recent years, as experience with NCLB requirements for AYP has been accumulated within states, LEAs, and schools, increased attention has been devoted by some analysts and administrators to the possible use of growth models of AYP under NCLB. While there are many possible variations of growth models, they would all appear to violate certain explicit statutory provisions of NCLB, at least as those were originally interpreted by ED. At the least, a growth model would involve the use of differing AMOs for different pupils, and this would violate the uniform bar approach of the primary AYP model of NCLB. Growth models would also provide for different starting points or improvement paths for different pupils. Growth Models Under the Pilot Program and 2008 Regulations In November 2005, the Secretary of Education announced a growth model pilot program under which initially up to 10 states would be allowed to use growth models to make AYP determinations for the 2005-2006 or subsequent school years. In December 2007, the Secretary lifted the cap on the number of states that could participate in the growth model pilot, and regulations published in October 2008 incorporate this expanded policy. The models proposed by the states must meet at least the following criteria (in addition to a variety of criteria applicable to all state AYP policies—that is, measure achievement separately in reading/language arts and mathematics): they must incorporate an ultimate goal of all pupils reaching a proficient or higher level of achievement by the end of the 2013-2014 school year; achievement gaps among pupil groups must decline in order for schools or LEAs to meet AYP standards; annual achievement goals for pupils must not be set on the basis of pupil background or school characteristics; annual achievement goals must be based on performance standards, not past or "typical" performance growth rates; the assessment system must produce comparable results from grade-to-grade and year-to-year; and the progress of individual students must be tracked within a state data system. In addition, applicant states must have their annual assessments for each of grades 3-8 approved by ED, and these assessments must have been in place for at least one year previous to implementation of the growth models. In January 2006, ED published peer review guidance for growth model pilot applications. In general, this guidance elaborates upon the requirements described above, with special emphasis on the following: (a) pupil growth targets may not consider their "race/ethnicity, socioeconomic status, school AYP status, or any other non-academic" factor; (b) growth targets are to be established on the basis of achievement standards, not typical growth patterns or past achievement; and (c) the state must have a longitudinal pupil data system, capable of tracking individual pupils as they move among schools and LEAs within the state. The requirements for growth models of AYP under this pilot are relatively restrictive. The models must be consistent with the ultimate goal of all pupils at a proficient or higher level by 2013-2014, a major goal of the statutory AYP provisions of NCLB. More significantly, they must incorporate comparable annual assessments, at least for each of grades 3-8 plus at least one senior high school year, and those assessments must be approved by ED and in place for at least one year before implementation of the growth model. Further, all performance expectations must be individualized, and the state must have an infrastructure of a statewide, longitudinal database for individual pupils. Proposed models would have to be structured around expectations and performance of individual pupils, not demographic groups of pupils in a school or LEA, although individual results would have to be aggregated for the demographic groups designated in NCLB. According to ED, 20 states have submitted applications to be allowed to use growth models to make AYP determinations beginning with either the 2005-2006 or 2006-2007 school years. Two states, North Carolina and Tennessee, were approved to use proposed growth models in making AYP determinations on the basis of assessments administered in the 2005-2006 school year. Thirteen additional states—Alaska, Arkansas, Arizona, Colorado, Delaware, Florida, Iowa, Michigan, Minnesota, Missouri, Ohio, Pennsylvania, and Texas—have been approved to participate in the pilot program subsequently. The growth models for individual states are briefly described below. Under Alaska's growth model, pupils will be included in the proficient group if their achievement level trajectory is on a growth path toward proficiency within three additional years for pupils in grades 4-9, or within two additional years for pupils in grade 10. (Alaska currently has no standards-based assessments for grades beyond 10.) Pupils in the 3 rd grade (the earliest grade at which state assessments are administered) will be measured on the basis of status only, not growth. The growth model will not apply to pupils with disabilities who take alternate assessments. In Arizona, the growth model will be applicable to pupils in grades 4-8 only. Pupils will be included in the proficient group if their achievement level trajectory is on a growth path toward proficiency within three years or by 8 th grade, whichever comes first. Pupils in the 3 rd grade (the earliest grade at which state assessments are administered) will be measured on the basis of status only, not growth. Unlike some other states participating in the growth model pilot, pupils with disabilities who take the state's alternate assessment will be included in the Arizona growth model. Under the Arkansas policy, AYP will be calculated each year on the basis of both statutory provisions and using the state's growth model, and a school will meet AYP standards if it qualifies using either method. Under the growth model, pupils in grades 4-8 will be deemed to be proficient if they are on a growth path toward proficiency by the end of 8 th grade. Pupils already proficient must be on a path to continue to be proficient through grade 8 (i.e., growth path criteria will be applied to all pupils, proficient and non-proficient). In Colorado, the growth model will be applicable to pupils in grades 4-10, but will not include pupils with disabilities who take alternate assessments. Pupils will be included in the proficient group if their achievement level trajectory is on a growth path toward proficiency within three years or grade 10 (if earlier); growth calculations will include currently proficient students only if they are on a trajectory to maintain proficiency over the next three years or grade 10. AYP will be calculated each year on the basis of both statutory provisions and using the state's growth model, and a school will meet AYP standards if it qualifies using either method. Under the Delaware growth model, AYP will be calculated each year on the basis of both the statutory provisions and using the state's growth model, and a school will meet AYP standards if it qualifies using either method. Individual pupil performance will be tracked from one year to the next. Specified numbers of points will be awarded on the basis of changes (if any) in pupils' performance level; points will be awarded for partial movement toward proficiency, but not for movement beyond proficiency. The average growth scores for schools and LEAs to meet AYP standards increase steadily until 2013-2014, by which time all pupils would be expected to achieve at a proficient or higher level. Under the Florida model, AYP will be determined separately for each pupil subgroup in each school or LEA (i.e., not for schools or LEAs as a whole) using the statutory models plus a growth model, and the school or LEA will meet AYP standards if each pupil subgroup makes AYP using any of the three models. Florida's growth model will be essentially the same as the current status model except that proficient pupils will include both those currently scoring at a proficient or higher level and those who are on an individual path toward proficiency within three years. The model will be applied to AYP determinations for grades 3-10 (with some modifications for pupils in grade 3). Under the Iowa model, pupil tests score ranges below proficient have been divided into three categories: Hi Marginal, Lo Marginal, and Weak. A student who rises from one of these levels to a higher level, and has not previously attained the higher level, will be deemed to have met "Adequate Yearly Growth" (AYG). For schools and LEAs that have not met AYP though application of the standard status and safe harbor models, students making AYG will be added to those scoring proficient or above, and this combined total will be used in determining whether the school or LEA makes AYP for the year. Students beginning at the Weak level must reach proficiency within three years, those beginning at Lo Marginal must become proficient within two years, and those beginning at Hi Marginal must reach proficiency within one year. By 2014, the growth model would no longer be used, and all pupils will be expected to achieve at a proficient or higher level. In Michigan, students have been deemed to be proficient if their achievement test scores are at a proficient or advanced level, or if the scores of individual students are within two standard errors of measurement (in effect, a 95% confidence interval) of the test score cut point for proficiency (such students are considered to be "provisionally proficient"). The growth model adds a third category of students "on trajectory" toward proficiency. To determine whether students are on trajectory toward proficiency, each of the proficiency levels is divided into three sub-levels. Similar, but slightly different, procedures are applied to Michigan's MI-Access Functional Independence alternate assessment. The growth model does not cover high school students. If a student's performance improves over the previous year by a number of sub-levels such that, if the improvement continued at the same rate in the future, they would reach proficiency within three years, they are counted as being on trajectory toward proficiency. Thus, the total of students scoring at a proficient level plus non-proficient students on a trajectory toward proficiency within three years plus those who are provisionally proficient would be compared to the total number of students tested in each relevant subgroup. In Minnesota, both the statutory models of AYP and a growth model will be applied in all AYP determinations, and AYP will be made if either of these criteria are met. The Minnesota growth model incorporates a "value table" under which varying amounts of partial credit will be given for growth among sub-levels of achievement below proficient. The partial credit will be greater, the greater the student's achievement growth. The resulting calculations will converted to a scale consistent with the standard AMOs in reading and mathematics to determine if the AMOs have been met. Pupils at all grade levels will be included, as well as pupils with disabilities taking alternate assessments, as long as two consecutive years of assessment results in Minnesota are available for the pupils. In Missouri, if students currently scoring below a proficient level are on track to be proficient within either four years or by 8 th grade, whichever occurs first, they will be added to the number of students currently scoring at a proficient or higher level. Students in grades 3 and 8 will be evaluated on the basis of the status model and "safe harbor" only. No confidence intervals will be applied to growth model calculations. Only the current status and safe harbor models will used for AYP determinations for grades 9-12. Students with disabilities, including those taking the state's alternate assessment for students with the most severe cognitive disabilities, will be included in the growth model, applying trajectories and achievement levels associated with either the regular or alternate assessments. The North Carolina policy adds a projection component to the current group status model. If the achievement level of a non-proficient pupil is on a trajectory toward proficiency within four years, then the pupil is added to the proficient group. The trajectory calculations will be made for pupils in the 3 rd through 8 th grades. Ohio has adopted a variation of the "projection" or "on track to proficiency" approach that is common to the North Carolina, Tennessee, Arkansas, and Florida models. After application of the standard status and safe harbor models, if any pupil group fails to meet AYP, then a determination will be made if a sufficient proportion of pupils in the group is on track toward meeting the required proficiency threshold as of a "target grade." In the case of elementary and middle schools, the target grade will be either the grade level following the highest grade offered by the school (i.e., for a K-5 school, the 6 th grade), or four grades beyond the pupil's current grade, whichever comes first. In the case of a high school, pupils would have to be on track toward proficiency by the 11 th grade. Pupils currently scoring at a proficient level but who are projected to be below the proficient level by the target grade will not be considered to be proficient. Pennsylvania's growth model will be applied in cases where AYP is not met under the statutory models of AYP. The growth model will consider whether each pupil is projected to be proficient in one to three years (the time period varies by grade level). If a currently proficient pupil is projected to score below proficient, he or she will be considered non-proficient under the growth model. Under the Tennessee policy, schools and LEAs will have two options for meeting AYP: meeting either the AYP standards under the group status or successive group improvement models of current law, or meeting AYP standards according to a "projection model." Under the projection model, pupils are deemed to be at a proficient or higher level of achievement if their test scores are projected to be at a proficient or higher level three years into the future, on the basis of past achievement levels for individual pupils. Tennessee's projection model will not be applied to high schools. In Texas, a projection component is added to the current group status model. If the achievement level of a non-proficient pupil is projected to be at or above the proficient level by the next "high stakes grade" (5, 8, or 11), then the pupil is added to the proficient group. Projections will be based on current year scores for individual pupils in both reading and math plus mean scores in reading or math (depending on the subject for which the projection is being calculated) for the school they attend. This technique will be applied to pupils taking the general state assessment as well as the TAKS-M Alternate Assessment; pupils with more substantial cognitive disabilities who take the TAKS-Alt Alternate Assessment will be included in the growth model but using a different method based on their rate of improvement among sub-levels of achievement. Overall, most of the growth models approved by ED thus far are based upon supplementing the number of pupils scoring at a proficient or higher level with those who are projected, or deemed to be on a trajectory, to be at a proficient level within a limited number of years. Eleven of the fifteen approved models follow this general approach. Among these states, a distinction may be made between eight states (North Carolina, Arkansas, Florida, Alaska, Arizona, Missouri, Michigan, and Texas) that combine currently proficient pupils with those not proficient who are "on track" toward proficiency, and four states (Ohio, Pennsylvania, Tennessee, and Colorado) that consider only projected proficiency levels for all pupils (i.e., currently proficient pupils who are not on track to remain proficient are counted as not proficient) when the growth model is applied. In contrast, the models used by at least three other states—Delaware, Iowa, and Minnesota—focus on awarding credit for movement of pupils among achievement categories up to proficiency. A 2009 evaluation report by ED focuses on the two states approved to use a growth model for AYP determinations in the 2005-2006 school year, North Carolina and Tennessee. In these two states, use of the growth models had minimal impact on AYP determinations based on 2005-2006 test results—no schools in North Carolina and only seven schools in Tennessee made AYP through use of the growth model, but would not have made AYP through the methods explicitly authorized in the ESEA. Issues Regarding Growth Model Alternatives to AYP Models in the NCLB Statute Why is there increased interest in growth models for determining AYP under NCLB? What might be the major advantages and disadvantages of growth models of AYP, in comparison to status or improvement models? These questions are addressed in the following pages. Are Growth Models of AYP More Fair and Accurate than Status or Improvement Models? Many proponents of growth models for school/LEA AYP see them as being more fair—to both pupils and school staff—and accurate than status or improvement models, primarily because they can be designed to take into consideration the currently widely varying levels of achievement of different pupil groups. Growth models generally recognize the reality that different schools and pupils have very different starting points in their achievement levels and recognize progress being made at all levels (e.g., from below basic to basic, or from proficient to advanced), giving credit for all improvements over previous performance. Growth models would likely increase the ability to attribute pupil achievement to their current school, as opposed to their past schools or background characteristics, especially (but not only) if controls (and/or predicted growth elements) are included in the model. They more directly measure the effect of schools on the specific pupils they serve over a period of years, attempting to track the movement of pupils between schools and LEAs, rather than applying a single standard to all pupils in each state. They have the ability to focus on the specific effectiveness of schools and teachers with pupils whom they have actually taught for multiple years, rather than the change in performance of pupil groups among whom there has usually been a substantial amount of mobility. They can directly (as well as indirectly) adjust for non-school influences on achievement, comparing the same students across years and reducing errors due to student mobility. Proponents of growth models often argue that status models of AYP in particular make schools and LEAs accountable for factors over which they have little control, and that status models focus insufficiently on pupil achievement gains, especially if those gains are below the threshold for proficient performance, or gains from a proficient to an advanced level. Status models, such as the current primary model of AYP under NCLB, might even create an undesirable incentive for teachers and schools to focus their attention, at least in the short run, on pupils who are only marginally below a proficient level of achievement, in hopes of bringing them above that sole key threshold, rather than the most disadvantaged pupils whose achievement is well below the proficient level. The current status model of AYP also confers no credit for achievement increases above the proficient level, that is, bringing pupils from the proficient to the advanced level. At the same time, growth models of AYP have the significant disadvantage of implicitly setting lower thresholds or expectations for some pupil groups and/or schools. Although any growth model deemed consistent with NCLB would likely need to incorporate that act's ultimate goal of all pupils at a proficient or higher level of achievement by 2013-2014 (see below), the majority of such models used currently or in the past do not include such goals, and tend to allow disadvantaged schools and pupils to remain at relatively low levels of achievement for considerable periods of time. Growth models of AYP may be quite complicated, and may address the accountability purposes of NCLB less directly and clearly than status or (to a lesser extent) improvement models. If the primary purpose of AYP is to determine whether schools and LEAs are succeeding at raising the achievement of their current pupils to challenging levels, with those goals and expectations applied consistently to all pupil groups, then the current provisions of NCLB might more simply and directly meet that purpose than growth model alternatives. Pupil mobility among schools and LEAs is substantial, and has important implications for all models of AYP. However, its implications are multifaceted, and do not necessarily favor a particular AYP model. Growth models have the advantage of attempting to track pupils through longitudinal data systems. But if they thereby attribute the achievement of highly mobile pupils among a variety of schools and LEAs, accountability is dispersed. At the same time, the presence of highly mobile pupils in the groups considered in determining AYP under status and improvement models may seem unfair to school staff. However, the impact of such pupils in school-level AYP determinations is limited by NCLB's provision that pupils who have attended a particular school for less than one year need not be considered in such determinations. Are Growth Models of Greater Value than Status or Improvement Models for Purposes Other than Accountability? Growth models of AYP may offer increased value for purposes other than meeting the school and LEA accountability requirements of NCLB. These other purposes may include diagnosing pupil needs, conducting educational research, or pinpointing the specific impact of teachers, schools, or other educational resources on pupil achievement. These advantages derive largely, but not solely, from the incorporation of longitudinal pupil tracking systems within growth models. Of course, current law does not prevent the use of growth models, under state authority, as a diagnostic/research/alternative accountability tool separate from the AYP and other requirements of NCLB. While the current statutory text and policy guidance associated with NCLB discourage the use of separate state and federal accountability systems for schools and LEAs, they are not prohibited in practice, and separate accountability systems are currently being used by several states alongside the AYP system required by NCLB. Finally, the usefulness of a model of AYP for purposes other than accountability may be of limited relevance to a debate over whether such a model should be used for the accountability purposes of NCLB. Do States Have Sufficient Resources to Develop and Implement Growth Models? It is generally agreed that growth models of AYP are more demanding than status or improvement models in several respects, especially in terms of data requirements and analytical capacity. For a longitudinal data system sufficient to support a growth model, it is likely that states would need to have pupil data systems incorporating at least the following: 1. A unique statewide student identifier. 2. The ability to produce comparable results from grade to grade and from year to year (vertically-scaled assessments). 3. Student-level enrollment, demographic and program participation information. 4. Information on untested students. 5. Student level graduation and dropout data. 6. State-wide audit system. Although the availability of information on state data systems is insufficient to enable one to determine with precision how many states could or could not currently implement such models if they chose to do so, it is very likely that growth models generally require resources and data systems that many states currently lack. This concern is being addressed in part through an ED program intended to help states design, develop, and implement statewide, longitudinal data systems. An initial appropriation of $24.8 million was provided for this program, administered by ED's Institute of Education Sciences (IES), for FY2005. Subsequently, $24.6 million was appropriated for each of FY2006 and FY2007, and $48.3 million for FY2008. Thus far, a total of 27 states have received awards through two rounds of competition. In addition, $250 million was recently appropriated for this program for FY2009 under H.R. 1 , the American Recovery and Reinvestment Act. Under this program, aid is to be provided to state educational agencies (SEAs) via cooperative agreements, not grants, to allow increased federal involvement in the supported activities. According to the announcement in the April 15, 2005 Federal Register , the program is intended "to enable SEAs to design, develop, and implement statewide, longitudinal data systems to efficiently and accurately manage, analyze, disaggregate, and use individual student data.... Applications from states with the most limited ability to collect, analyze, and report individual student achievement data will have a priority...." According to ED, the program is designed to help SEAs meet the AYP and reporting requirements of NCLB, as well as to conduct value-added or achievement growth research, including "meaningful longitudinal analyses of student academic growth within all subgroups specified by the No Child Left Behind Act of 2001." There will also be an emphasis on encouraging data sharing among states, while at the same time protecting the security and privacy of data. Are Growth Models Consistent with NCLB's Ultimate Goal? Most growth models used before initiation of ED's growth model pilot, or still used as part of state-specific accountability systems, have not incorporated an ultimate goal such as the one under NCLB—that all pupils reach a proficient or higher level of achievement by 2013-2014. Non-NCLB growth models have generally incorporated one of two types of growth target, the "how much improvement is enough" aspect of the model: (a) data driven/predicted growth, or (b) policy driven/required growth targets. The first type of growth target has been most common, while NCLB's ultimate goal would represent a growth target of the second variety, with separate paths (with presumably separate starting points) for each relevant pupil cohort. The models approved thus far under ED's growth model pilot arguably meet the ultimate goal requirement. However, under some of these models, pupils need only be proficient or on track toward proficiency within a limited number of years as of 2013-2014. Would Use of Growth Models Likely Reduce the Number of Schools/LEAs Identified as Failing to Meet AYP? With the initial implementation of the provisions of NCLB, several thousand public schools and hundreds of LEAs have been identified each year as failing to meet state AYP standards. It frequently appears to be implicitly assumed by potentially interested parties that widespread use of growth models of AYP would result in significantly smaller percentages of schools and LEAs being identified as failing to meet AYP standards. This view seems to be based largely on the assumption that differing starting points for various cohorts of pupils would involve lower starting points and initial AMOs for disadvantaged pupil groups, reducing the number of schools or LEAs that fail to meet AYP due to the performance of one or a few of such demographic groups. Indeed, it is easy to hypothesize that during the first few years of implementation of growth models of AYP, required performance thresholds would be relatively low for disadvantaged pupil cohorts, and fewer schools or LEAs would fail to meet AYP standards. However, if one assumes that any AYP model under NCLB must meet that act's ultimate goal requirement, with regular increases in AMOs leading toward the ultimate goal of all pupils at a proficient or higher level by 2013-2014, any significant reduction in the number of schools or LEAs failing to make AYP would likely be temporary. This is particularly true because we are already several years into NCLB's presumed overall timeline of 2001-2002 (the "base year" for AYP determinations) to 2013-2014. Of course, if it is assumed that use of growth models somehow improves the productivity of schools and LEAs—that is, by improving motivation of pupils or teachers, or by providing better diagnostic data on pupil achievement—then it is possible that this would ultimately reduce the number of schools/LEAs failing to meet AYP, but there is currently no direct proof that this would occur. As noted earlier, where estimates are available, the growth models approved for use under ED's pilot program appear to reduce the number of schools failing to meet AYP standards to a very limited degree. Can Growth Models Be Applied at Grade Levels Without Annual Assessments? The value and usefulness of growth models of AYP are highly dependent on a regular flow of valid information on pupil achievement levels. As a result, it is frequently assumed that growth models can be appropriately implemented only when achievement test results, linked to a continuum of state content and performance standards, are available at least annually. This creates difficulties for implementing growth models across the entire K-12 grade span, since NCLB requires the administration of state standards-based assessments in each of grades 3-8, plus only one senior high school grade. It may be possible to fully implement growth models only over grade ranges for which annual assessment results are available. Substantial difficulties might be presented by the large degree of variation in curriculum, and frequently in assessments, for senior high school pupils, although that can present difficulties under any of the three types of AYP model.

A key concept embodied in the accountability provisions of the Elementary and Secondary Education Act (ESEA), as amended by the No Child Left Behind Act of 2001 (NCLB, P.L. 107-110), is that of adequate yearly progress (AYP). In order to be eligible for grants under ESEA Title I, Part A—Education for Disadvantaged Pupils—states must implement AYP policies applicable to all public schools and local educational agencies (LEAs), based primarily on the scores of pupils on state assessments. Schools or LEAs that fail to meet AYP standards for two or more consecutive years face a variety of consequences. The primary model of AYP under the NCLB is a group status model. Such models set threshold levels of performance, expressed as a percentage of pupils scoring at a proficient or higher level on state assessments of reading and mathematics, that must be met by all pupils as a group, as well as pupils in designated demographic subgroups, in order for a public school or LEA to make AYP. Current law also includes a secondary model of AYP, a "safe harbor" provision, under which a school or LEA may make AYP if, among pupil groups who did not meet the primary AYP standard, the percentage of pupils who are not at the proficient or higher level declines by at least 10%. Substantial interest has been expressed in the use of individual/cohort growth models to meet the AYP requirements of the NCLB. Such AYP models are not consistent with certain statutory provisions of the NCLB, as those were originally interpreted by the U.S. Department of Education (ED). However, under a pilot program, ED has approved applications from 15 states for waivers to use growth models to make AYP determinations, and regulations adopted in late 2008 allow an unlimited number of states to apply for this option. Many proponents of growth models of AYP see them as being more fair and accurate than the models generally employed to meet NCLB requirements, primarily because they recognize the fact that different schools and pupils have different starting points in their achievement levels, and recognize progress being made at all levels. Growth models of AYP have the disadvantage of implicitly setting lower initial thresholds or expectations for some pupils. Although any growth model consistent with the NCLB would need to incorporate the act's ultimate goal of all pupils at a proficient or higher level of achievement by 2013-2014, such models used currently in state (non-NCLB) accountability plans do not include such goals and might allow disadvantaged schools and pupils to remain at relatively low levels of achievement for significant periods of time. Growth models of AYP may be quite complicated and may address the accountability purposes of the NCLB less directly and clearly than the currently statutory AYP models. The authorization for ESEA programs expired at the end of FY2008, and the 111th Congress is expected to consider whether to amend and extend the ESEA. This report will be updated regularly to reflect major legislative developments and available information.

Overview On January 1, 2018, the Medicare outpatient prescription drug benefit (Medicare Part D) began its 13 th year of operation. Congress created Part D in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173 ), effective January 1, 2006. The law also made Part D the primary source of drug coverage for individuals covered under both Medicare and Medicaid (so-called dual eligibles). Since that time, Part D has been modified by a series of statutes, including by the Patient Protection and Affordable Care Act of 2010 as amended (ACA; P.L. 111-148 ; P.L. 111-152 ). Part D coverage is provided through private insurance plans (PDPs) that offer only drug coverage, or through Medicare Advantage (MA) plans (MA-PDs) that offer drug coverage as part of a broader, Medicare Part C managed care benefit. Alternatively, beneficiaries may be enrolled in retiree prescription drug plans offered by their former employers. The MMA provides subsidies for retiree drug plans as an incentive to employers to continue such plans. (See " Retiree Drug Subsidy .") A growing number of employers and unions are also offering retirees (and their eligible spouses and dependents) Part D benefits through employer-group waiver plans (EGWPs). See " Employer Group Waiver Plans .") As of July 2018, 44.2 million Medicare beneficiaries were enrolled in Part D plans. Of that total, about 25.5 million were in PDPs, 18.0 million were in MA-PDs, and about 690,000 were in other types of plans. A major focus of the Part D program is providing subsidized coverage to qualified, low-income beneficiaries. Individuals with incomes up to 150% of the federal poverty level and limited assets are eligible for a low-income subsidy (LIS). The LIS reduces beneficiaries' out-of-pocket spending by paying for all, or some, of the Part D monthly premium and annual deductible, and limiting co-payments or coinsurance. The LIS is progressive, meaning the lowest-income beneficiaries receive the greatest assistance. An estimated 12.9 million beneficiaries will receive the LIS in 2018. The ACA made major changes to Part D in an effort to improve coverage and to make the premium structure more progressive, including requiring higher-income beneficiaries to pay more for coverage. Starting in 2011, the ACA required Part D enrollees with incomes above a certain threshold to pay a monthly surcharge in addition to their regular plan premiums. (See " Premium Surcharge for Higher-Income Enrollees .") In addition, the ACA phases out the "doughnut hole" by requiring drug manufacturers to provide discount for brand-name drugs purchased by beneficiaries in the Part D coverage gap, or "doughnut hole" and gradually phases in Medicare subsidies to cover 75% of the cost of generic drugs and 25% of the cost of brand name drugs in the coverage gap. (See " The Coverage Gap .") The ACA provisions were further modified by the Medicare Access and CHIP Reauthorization Act (MACRA; P.L. 114-10 ) and the Balanced Budget Act of 2018 (BBA 2018; P.L. 115-123 ), which, among other things, accelerated the closing of the coverage gap. Medicare Part D relies on participating private insurance plans to provide coverage and bear part of the financial risk of the program. All Part D plans must meet certain minimum requirements, though there are significant variations among plans in terms of benefit design including differences in premiums, drug formularies (i.e., lists of covered drugs), and cost sharing for particular drugs. In 2018, a total of 782 PDPs are offered nationwide, an increase of 36 (or 5%) from 2017 but a 12% reduction from 2016. Medicare beneficiaries have 23 PDPs and 17 MA-PDs to choose from in their geographic area, on average. Eligibility In general, anyone who is entitled to Medicare Part A and/or enrolled in Part B is eligible to enroll in a Medicare Part D drug plan. In addition, an individual must be a U.S. citizen or qualified alien and must permanently reside within one of the 34 designated PDP regions in the United States; anyone who is living abroad or is incarcerated is not eligible. For most people, joining Part D is voluntary, although dual-eligible beneficiaries (see " Full-Subsidy-Eligible Individuals ") are automatically enrolled. Medicare beneficiaries cannot be turned down for Part D coverage due to preexisting health conditions or high utilization of prescription drugs. Of the 58.6 million Medicare beneficiaries in 2017 who were eligible for Part D, 42.5 million (72.5%) were enrolled in a Part D plan and another 1.6 million (2.7%) had prescription drug coverage through a former employer that received a Part D subsidy for a portion of their coverage. Of the remaining 25% of Medicare beneficiaries, about half had drug coverage as generous as Part D through another source, such as the Federal Employees Health Benefits program, TRICARE, or private coverage. The remaining 12.5% of Medicare beneficiaries either had less generous coverage than Part D or no drug coverage at all. (See Table 1 .) Eligibility for Low-Income Assistance Beneficiaries with limited incomes and resources may qualify for assistance with their Part D premiums, cost sharing, and other out-of-pocket expenses. In 2018, a forecast 12.9 million Medicare beneficiaries received low-income subsidies (LIS). (See Table 2 below.) Full-Subsidy-Eligible Individuals Certain groups of Medicare beneficiaries automatically qualify (and are deemed eligible ) for the full low-income subsidy. So-called full benefit dual eligibles who qualify for Medicaid based on income and assets are automatically deemed eligible for Medicare prescription drug low-income subsidies. Additionally, those who receive premium and/or cost-sharing assistance from Medicaid through the Medicare Savings Program (MSP), plus those eligible for Supplemental Security Income (SSI) cash assistance, are automatically deemed eligible for full low-income subsidies. This group includes all eligible persons who (1) have incomes below 135% of the federal poverty level, or $16,389 for an individual and $22,221 for a couple in 2018; and (2) have resources below $7,560 for an individual and $11,340 for a couple in 2018. The limits are increased annually by the percentage increase in the Consumer Price Index (CPI). (See Table 3 .) The Centers for Medicare & Medicaid Services (CMS) deems individuals automatically eligible for LIS effective as of the first day of the month that they attain qualifying status (e.g., become eligible for Medicaid or SSI). The end date is, at a minimum, through the end of the calendar year within which the individual becomes eligible. Beneficiaries who are deemed LIS-eligible for any month during the period of July through December of one year are deemed eligible through the end of the following calendar year. CMS changes an individual's deemed status in mid-year only when such a change qualifies the beneficiary for a reduced co-payment obligation. Eligibility for the LIS is not always continuous from year to year. For example, LIS beneficiaries who lose eligibility for Medicaid or SSI during the year are not automatically qualified to receive the LIS the next year. Each September, CMS is to notify such individuals that their LIS-deemed status will end on December 31 of that year. Such individuals may reapply for the LIS, as they may qualify for the LIS through the application process. (See " LIS Enrollment .") At the end of each plan year, CMS reassigns LIS beneficiaries who are enrolled in Part D plans if their plan is terminated or raises its monthly premium to a level above the LIS benchmark premium for the plan region. The ACA altered the method for determining which Part D plans are eligible to enroll low-income beneficiaries so that more plans can qualify and, thus, reduce the number of low-income beneficiaries who are reassigned from year to year. According to CMS, 279,419 LIS beneficiaries enrolled in PDP plans and 91,419 in MA-PDs were reassigned for the 2017 plan year. Other-Subsidy-Eligible Individuals Other individuals with limited incomes and resources who do not automatically qualify may apply for the low-income subsidy and have their eligibility determined by either the Social Security Administration (SSA) or their state Medicaid agency. This group includes all other persons who (1) are enrolled in a PDP plan or MA-PD plan; (2) have incomes below 150% of the federal poverty level, $18,210 for an individual and $24,690 for a couple in 2018; and (3) have assets below $12,600 for an individual and $25,150 for a couple in 2018 (increased in future years by the percentage increase in the CPI). An individual who applies, and is deemed eligible for the LIS, is allowed to begin receiving benefits on the first day of the month in which the application was submitted. In most cases, this means that LIS status is applied retroactively. For example, if an LIS beneficiary was enrolled in a Part D plan prior to a determination of LIS eligibility, the Part D sponsor must ensure that the beneficiary is reimbursed for any premiums or cost sharing that should have been covered by the subsidy. If a person was not already eligible for Medicare, the LIS subsidy takes effect on the first day of the month when his or her Medicare eligibility begins. Initial LIS eligibility determinations are for no longer than 12 months. If the SSA or a state Medicaid agency later decides that an individual is no longer eligible for the LIS, that same entity also decides when the LIS benefits end. The end date is always the last day of a calendar month, though it may occur in any month of the year. Changes in LIS Status LIS determinations are also reviewed in the case of certain developments that could affect the amount of the subsidy. Throughout each plan year, CMS uses SSA data and state Medicare Modernization Act files to initiate the eligibility process for new recipients, and look for any changes in eligibility status for current, low-income beneficiaries. The ACA created new rules for LIS redeterminations subsequent to the death of a spouse. Beginning in 2011, the surviving spouse of an LIS-eligible couple receives a grace period for the determination or redetermination of benefits. For example, after the death of her spouse, a widow would fill out and send a Part D redetermination form to CMS. After CMS reviews the document, if the information indicates that the widow qualifies for a more generous subsidy or has a more favorable resources level for purposes of LIS calculations, the change would take effect in the month following the month when the redetermination report was received; if the information indicates no change in status, the widow would not be sent a redetermination form the following year (with some exceptions); and if the information indicates a need to reduce the LIS, or provides a less favorable resources level, the redetermination would be postponed. Enrollment in Part D Enrollment Periods A Medicare beneficiary who is signing up for Part D for the first time may do so in one of three different enrollment periods, depending on the individual's circumstances: Initial Enrollment Period for Part D; Annual Open Enrollment Period (or Annual Coordinated Election Period, AEP); or Special Enrollment Period (SEP). Individuals who qualify for LIS may enroll at any time. Initial Enrollment Period The initial enrollment period is the time during which an individual is first eligible to enroll in a Part D plan. Beneficiaries not yet enrolled in Medicare may join a drug plan at any time during their seven-month initial Medicare enrollment period. The Part D initial enrollment period is the same as the initial enrollment period for Medicare Part B. Coverage for new enrollees begins on the first day of the month following the month of enrollment, but no earlier than the first month they are entitled to Medicare. Individuals who become eligible for Medicare but have "creditable" coverage," which is prescription drug coverage that CMS estimates will provide at least the same level of benefits as Medicare's standard prescription drug package, may choose not to sign up for Part D during the initial enrollment period. Sources of possible creditable coverage include some employer-based prescription drug coverage, including the Federal Employees Health Benefits Program; qualified State Pharmaceutical Assistance programs (SPAPs); and military-related coverage (e.g., VA, TRICARE). However, these individuals could face a penalty if they let their creditable coverage lapse before enrolling in Part D. (See " Late Enrollment Penalty .") Annual Open Enrollment Period In general, an individual who does not sign up for Part D during his or her initial enrollment period may enroll only during the annual open enrollment period, held from October 15 to December 7 each year. Coverage then begins the following January 1. Beneficiaries already enrolled in a Part D plan may change their plans during the annual open enrollment period. Beneficiaries may wish to change plans for a variety of reasons, including changes in their health status and prescription drug needs or in response to modifications by their plans. Generally, sponsors make changes to plan benefits effective at the beginning of each calendar year. After the open enrollment period closes, most beneficiaries are locked into their Part D plans for the upcoming benefit year. Special Enrollment Periods There are limited occasions besides the annual open enrollment period when an individual may enroll in, or disenroll from, a Part D plan or switch from one Part D plan to another. These special enrollment periods (SEPs) are open to individuals who (1) move to a new geographic area, (2) involuntarily lose creditable coverage, (3) receive inadequate information about their creditable coverage status, (4) are subject to a federal error, or (5) are enrolled in a PDP that has failed or has been terminated . Late Enrollment Penalty A late enrollment penalty is assessed on persons who go without creditable drug coverage for 63 continuous days or more after the close of their initial enrollment period, and then sign up for Part D. The penalty is intended to encourage wider enrollment and prevent adverse selection, which can occur when healthy people put off buying insurance while those with a real or perceived need immediately enroll. If Part D enrollees are mainly those who are ill or have higher prescription drug costs, per-capita program costs can rise. Higher prices, in turn, may cause other enrollees (presumably healthier, less costly ones) to end coverage. Over time, if more persons drop out, program costs could become prohibitive. The Part D late penalty is based on the number of months an individual does not have creditable coverage. The penalty is calculated by multiplying 1% of the national base premium ($35.02 in 2018) by the number of full months an individual has been eligible but has gone without coverage. The final amount is rounded to the nearest $0.10. For example, if a beneficiary was eligible for Part D in June 2016 but did not sign up until the 2018 open enrollment period, (with coverage effective January 2018), and did not have creditable coverage during the 30-month interim period, the individual would pay an additional $10.50 per month. The late penalty is applied permanently to Part D premiums. Because the national base premium is recalculated annually, and the penalty is based on the base premium, the penalty amount will increase in subsequent years if the base premium rises. Dual-eligible and other LIS beneficiaries are not subject to the late enrollment penalty. Plan Selection Sponsors can alter a plan benefit package at the beginning of a new program year, including changing the mix of drugs in a formulary and/or modifying required cost sharing for certain drugs. Sponsors must mail an Annual Notice of Change (ANOC) to enrollees each year, to be delivered by September 30. The document describes any modifications to the plan's premiums, drug coverage, cost sharing, and other features for the coming benefit year. The delivery deadline is designed to ensure that beneficiaries have at least two weeks to review the information prior to October 15, the first day of the annual enrollment period. Sponsors are required to send beneficiaries other enrollment-related materials and information such as the Summary of Benefits and Evidence of Coverage documents. These documents offer information about a plan's formulary, general utilization management and pricing policies, information on beneficiary rights, and other information. Each year, Medicare beneficiaries face the need to review the cost of their current drug and health plans, (if in MA) including premiums, co-payments, and deductibles, and compare the cost and coverage to other plans in their area. Additionally, beneficiaries can examine whether plans have price tiers that increase or decrease the price of the drugs they use, whether the plans offer preferred pharmacy options, and what, if any, utilization management requirements the plans impose for drugs. (See " Drug Utilization Management Programs .") CMS posts information on its open enrollment web page to help beneficiaries compare Part D plan prices. Beneficiaries, and persons assisting them, can also use the Medicare drug plan finder. After a beneficiary enters information into the plan finder regarding medications being used, the dosages, and the pharmacy he or she plans to use, the plan finder displays Part D plans in the area that cover those particular drugs. The plan finder also provides information on quality ratings to make it easier to compare plans based on cost, quality, and performance ratings. CMS will send notices to beneficiaries in low-quality plans encouraging them to look at other, higher rated plans. (See "Low-Quality Plans.") Information on plan availability and characteristics can be obtained from a number of additional sources, including the Medicare toll-free information number (1-800-MEDICARE), State Health Insurance Assistance Programs (SHIPs), and other local organizations. Low-Quality Plans CMS uses a star-rating system to assess the quality of Part D plans. MA-PD sponsors are rated on up to 48 quality and performance measures, while PDP sponsors are assessed on up to 14 measures. Plans are ranked on a scale of one to five stars, with five stars considered excellent. By CMS practice, Part D Sponsors must provide star rating information to beneficiaries through a standard document that must be distributed with enrollment information and prominently posted on plan websites. CMS has determined that three stars is the lowest acceptable quality rating for a plan. Plans must display a special icon if they have a star rating of 2.5 or lower for three years of data. Plans with star ratings of less than three stars for three consecutive years may be terminated by CMS. In addition, CMS may disable the online enrollment function for plans with a low-rating icon and beneficiaries will be directed to contact the plan directly to enroll in the low-performing plan. Plans that receive five-star ratings may display a special icon recognizing them as high-performing plans. Part D enrollees are provided with a special enrollment period during which they can switch to a five-star plan, provided they meet other enrollment requirements. Plan Marketing Plan sponsors are required to provide timely and accurate information in their marketing materials. Since the implementation of Part D in 2006, plans have been required to submit all marketing materials to CMS for review. Starting in 2019, a smaller share of annual plan materials provided to enrollees and prospective enrollees will be subject to CMS prior review. Under revised rules, CMS is to classify activities and materials used to provide information to enrollees and prospective enrollees as communications. Marketing will be a subset of plan communications and will be defined, in part, as activities and the use of materials that are likely to lead a beneficiary to make an enrollment decision. For example, communications materials issued by a plan sponsor that simply described a Part D sponsor organization but did not include information about a plan's benefit structure, costs, or star ratings, would not be marketing information and would not be subject to prior review. A brochure issued by a plan sponsor that touted the benefits of joining a specific Part D plan and spelled out benefits and cost sharing would be considered marketing material and would be subject to review. In general, Medicare rules are designed to ensure that beneficiaries have complete and accurate information when making decisions about drug plans. For example, a plan that has received a four-star rating for one of the services it provides, but a three-star quality rating overall, cannot create promotional material stating that the plan is a four-star plan. Plans must use a standardized names and materials across their service region and must receive prior agreement from plan enrollees to provide certain information in a format other than a mailing. Plans are not allowed to market via unsolicited contacts, such as door-to-door sales. There are also limits on marketing and sales events. All plan sponsors must have interpreters in their call centers to translate for people who are not proficient in English. Plans are required to provide certain documents upon request or enrollment, such as a summary of benefits, the plan formulary, and a directory of contracting pharmacies. Plan sponsors may offer nominal gifts (worth $15 or less) to potential enrollees, though they may not take the form of cash or rebates. Enrollment Process Beneficiaries can join a Part D plan in a variety of ways including (1) filling out a paper application; (2) visiting a plan's website and enrolling online; (3) using the Medicare online enrollment center at http://www.medicare.gov ; (4) calling the company offering the drug plan; or (5) calling 1-800-MEDICARE. In general, a PDP sponsor cannot deny a valid enrollment request from any Part D-eligible individual residing in its service area. An individual (or his/her legal representative) must complete an enrollment request, and include all the information required to process the enrollment. Upon receiving an enrollment request, a PDP sponsor must provide, within 10 calendar days, (1) a notice of acknowledgement of receipt of the beneficiary's application, (2) a request for more information in cases of incomplete applications, or (3) a notice that the application has been denied, along with an explanation of the reasons why. Prior to the effective date of enrollment, under CMS rules, a plan sponsor must provide necessary information about being a member of the PDP, including the PDP rules and the member's rights and responsibilities. In addition, the PDP sponsor must provide the following: a copy of the completed enrollment form, if needed; a notice acknowledging receipt of the enrollment request providing the expected effective date of enrollment; and proof of health insurance coverage so that a beneficiary may begin using the plan services as of the effective date. For all enrollment requests, the PDP sponsor must submit the information necessary for CMS to add the beneficiary to its records as an enrollee of the PDP sponsor within seven calendar days of receipt of the compete enrollment request. LIS Enrollment Special enrollment rules apply to low-income individuals. Generally, there is a two-step process for low-income persons to gain Part D coverage. First, a determination must be made that they qualify for the assistance; second, they must enroll, or be enrolled, in a specific Part D plan. LIS enrollees have been allowed to change plans at any time during the plan year, unlike other Part D enrollees who generally may switch plans only during the annual enrollment period at the end of the year . Starting in 2019, LIS enrollees will no longer be allowed an open-ended, monthly SEP. Instead, LIS enrollees will be allowed an SEP once per calendar quarter during the first nine months of the year and also will be eligible for SEPs (1) within three months after the start of coverage or notification that they have been enrolled by CMS or a state in a Part D plan and (2) within three months after a change to their LIS or Medicaid status. The rules also place limits on SEPs for LIS enrollees who are identified by CMS as at risk of opioid abuse. (See " Part D Opioid Overutilization Monitoring .") Auto-Enrollment Full-benefit, dual-eligible individuals who have not elected a Part D plan are automatically enrolled into one by CMS. CMS first uses data provided by state Medicaid agencies to identify full-benefit, dual-eligible individuals. CMS then identifies plan sponsors that offer at least one Part D plan in the region offering basic prescription drug coverage with a premium at or below the low-income premium subsidy amount. If more than one sponsor in a region meets the criteria, CMS auto-enrolls beneficiaries on a random basis among available PDP sponsors. CMS next identifies individual plans offered by the sponsor that include basic drug coverage with premiums at or below the low-income premium subsidy amount. The beneficiary is then randomly assigned among the sponsor's plans meeting the criteria. If an individual is not eligible to enroll in a PDP because he or she is enrolled in a Medicare Advantage plan (other than a MA private-fee-for-service plan [MA-PFFS] that does not offer Part D, or a medical savings account [MSA] plan), CMS is to direct the MA organizations to facilitate the enrollment of these individuals into an MA-PD plan offered by the same MA organization. Some dual-eligible beneficiaries may find that they have been auto-enrolled in a plan that may not best meet their needs. For this reason, they are provided with more opportunities to change enrollment, with the new coverage effective the following month. (See " LIS Enrollment .") If an enrollee selects a plan with a premium above the low-income benchmark, however, he or she is required to pay the difference. Facilitated Enrollment CMS established a process labeled "facilitated enrollment" for enrollees in Medicare Savings programs (MSPs), SSI enrollees, and persons who applied for and were approved for low-income subsidy assistance. The basic features applicable to auto-enrollment for dual eligibles (i.e., identification of eligibility through SSA and/or Medicaid data, random assignment to plans with premiums below the low-income benchmark, and assignment of MA enrollees to the lowest-cost MA-PD plan offered by the MA organization) are the same for facilitated enrollment. Reassignment of Certain LIS Beneficiaries Drug plans may increase premiums at the beginning of a plan year, in some cases raising them above the benchmark for LIS beneficiaries. When that is the case, CMS is to reassign certain LIS recipients to different plans so they can continue to receive benefits without paying Part D premiums (or continue paying only a minimal amount). CMS may also automatically reassign LIS recipients if their current plan terminates operations. LIS beneficiaries who have voluntarily changed plans in previous years are not automatically reassigned by CMS, even if their plans charge premiums above the benchmark. LIS beneficiaries in MA-PD plans are automatically reassigned to PDP plans if their current plan ceases operations or they are affected by a reduction in the plan's service area. About 1.16 million LIS beneficiaries were enrolled in benchmark PDPs in 2016 that had terminated or did not qualify as benchmark plans in 2017. CMS reassigned 279,419 beneficiaries to different PDPs. Another 879,260 million LIS beneficiaries were not reassigned because they had previously switched plans voluntarily. The ACA made changes to Part D in an effort to reduce the need for automatic reassignment of LIS beneficiaries. For instance, the law changed the methodology for calculating the benchmark premium for some plans. In addition, PDPs with premiums above LIS-eligible levels no longer have LIS beneficiaries reassigned if they voluntarily agree to waive a de minimis portion of the premium above the benchmark. However, such plans would not qualify to receive other LIS beneficiaries who are automatically reassigned from their current plans. Part D Benefit Structure The MMA set out a standard prescription drug benefit structure. Plan sponsors may, and often do, offer different benefit designs and cost-sharing requirements, so long as they meet certain specifications. Under the standard benefit structure, with some exceptions, over the course of a year a beneficiary is responsible for paying (1) a monthly premium, (2) an annual deductible, and (3) co-payments or coinsurance for drug purchases. Additionally, for a certain period called the "coverage gap" (also known as the doughnut hole), beneficiaries face increased out-of-pocket costs. The ACA included provisions to gradually eliminate the coverage gap. (See " The Coverage Gap .") Actual costs to Part D beneficiaries vary from plan to plan depending on the benefit structure and coverage offered, the costs and amount of drugs they use, and the level of any additional assistance such as through a low-income subsidy. Premiums The majority of beneficiaries enrolled in Part D pay monthly premiums for Part D coverage. On average, beneficiary premiums represent 25.5% of the cost of a standard Part D plan, as determined through annual bids submitted by insurers. (See " Standard Prescription Drug Coverage .") The beneficiary premium does not cover costs for federal reinsurance or subsidies to low-income beneficiaries. The dollar amount of Part D premiums will vary by plan. Beneficiary premiums are based on average bids submitted by participating drug plans for basic benefits (the base beneficiary premium) each year and are adjusted to reflect the difference between the standardized bid amount of the plan the beneficiary enrolls in and the nationwide average bid. In 2018, the base beneficiary monthly premium, 25.5% of the average bid amount, is $35.02. Base premiums from 2006 through 2018 are shown in Figure 1 . Beneficiaries in plans with higher costs for standard coverage face higher-than-average premiums, while enrollees in lower-cost plans pay lower-than-average premiums for such coverage. Additionally, enrollees in MA-PD plans may have lower premiums if their plans choose to buy down, or reduce, the Part D premium. The monthly premium is applied to all persons enrolled in a specific plan, except those who are receiving low-income subsidies or are subject to a late enrollment penalty. Beneficiaries may pay plans directly or have premiums deducted from their Social Security benefits. Higher-income beneficiaries pay a monthly premium surcharge. Premium Surcharge for Higher-Income Enrollees When Part D began in 2006, all beneficiaries enrolled in the same plan (except those receiving the low-income subsidy) were subject to the same premium. Beginning in 2011, the ACA required Part D enrollees with higher earnings to pay higher premiums. The ACA Part D requirements are similar to the income-based premium structure that was already in place for Medicare Part B. Part D beneficiaries who have a modified adjusted gross income (MAGI) above set thresholds are now assessed a special surcharge, referred to as an income-related monthly adjustment amount (IRMMA), in addition to their regular PDP or MA-PD plan premiums. According to the SSA, less than 5% of Medicare enrollees have been subject to the IRMMA. The higher-income surcharge is calculated as the difference between the Medicare Part D base beneficiary premium (which represents 25.5% of the average national bid amount) and 35%, 50%, 65%, or 80% of the national average cost for providing Part D benefits, excluding federal reinsurance or subsidies. The surcharge is based on beneficiary income, with higher-income beneficiaries facing a larger surcharge. Because individual plan premiums vary, the law specifies that CMS calculate the Part D surcharge using the base premium, rather than each beneficiary's individual premium amount. (See Table 4 .) The ACA originally froze the income thresholds for the IRMMA through 2019. Section 402 of the MACRA maintained the freeze on the income thresholds for all income categories through 2017 and on the lower two high-income premiums tiers through 2019. Beginning in 2018, MACRA reduces the threshold levels for the two highest income tiers so that more beneficiaries will fall into the higher-percentage categories. Additionally, starting in 2020, the income thresholds for all income categories will be adjusted annually for inflation based on the 2019 income thresholds. This will, in effect, maintain the proportion of beneficiaries who pay the high-income premium. Section 53114 of BBA 2018 adds an additional high-income category beginning in 2019 for individuals with annual income of $500,000 or more or couples filing jointly with income of $750,000 or more. Enrollees with income equal to or exceeding these thresholds will pay premiums that cover 85% of the average per capita cost of the Part D benefits instead of 80%. The threshold for couples filing jointly in this new income tier will be calculated as 150% of the individual income level rather than 200% as in the other income tiers. This new top income threshold will be frozen through 2027 and will be adjusted annually for inflation starting in 2028 based on the CPI-U. The surcharge is calculated using a statutory formula that multiplies the base Part D premium by a set ratio. For 2018, the ratios are (35% − 25.5%)/25.5%; (50% − 25.5%)/25.5%; (65% − 25.5%)/25.5%, or (80% − 25.5%)/25.5%. For example, for 2018 (with a base premium of $35.02) the surcharge for an individual with a 2016 adjusted gross income between $133,500 and $160,000 would be calculated as IRMMA = $35.02 x ((65% − 25.5%)/25.5%) IRMMA = $35.02 x 1.549 IRMMA = $54.24, rounded down to the nearest dime = $54.20. Beneficiaries pay the surcharge directly to the federal government, rather than to Part D plans. When applicable, IRMMA will be withheld from an enrollee's monthly Social Security check, Railroad Retirement benefit, or federal pension payment, unless the benefit check is not sufficient for the purpose. If a beneficiary is directly billed for IRMAA, he or she has the option of paying through an electronic funds transfer or by other means. Qualified Drug Coverage Part D plan designs may vary, but all PDPs and MA-PDs must offer at least a minimum package of benefits. This minimum set, referred to as "qualified prescription drug coverage," may include either a standard package of prescription drug coverage established by Medicare or an alternative package that is actuarially equivalent. Plans may also offer "enhanced" coverage that exceeds the value of standard coverage. Premiums for these enhanced plans are generally higher than for standard plans. MA organizations offering MA-coordinated care plans are required to offer at least one plan for the service area that includes drug coverage. The drug coverage can be either basic coverage or enhanced coverage. Standard Prescription Drug Coverage Under the standard Part D benefit, a beneficiary first pays a deductible ($405 in 2018). After the deductible has been met, the beneficiary is responsible for 25% of the cost of prescription drugs (with the plan covering the remaining 75%) up to the initial coverage limi t ($3,750 in 2018). (See Figure 2 .) To reach the initial coverage limit in a 2018 standard plan, a beneficiary would pay the $405 deductible plus $836.25 in prescription costs, for total out-of-pocket costs of $1,241.25. The plan would pay the remaining $2,508.75. After the initial coverage threshold has been reached, a beneficiary enters the coverage gap or "doughnut hole" and is responsible for a larger share of prescription drugs costs until he or she accumulates $5,000 in total out-of-pocket costs in 2018 (for those not receiving the LIS) and reaches the catastrophic threshold . Total drug spending needed to move through the deductible, the initial coverage limit, and the coverage gap to the catastrophic threshold is estimated at about $8,417.60, with a portion paid by the beneficiary, a portion covered by the plan, and a portion offset by manufacturer discounts for brand-name drugs. (See " The Coverage Gap .") Actual spending per beneficiary will vary depending on plan design (some enhanced plans provide additional subsidies in the coverage gap) and purchases of brand-name vs. generic drugs. After the catastrophic threshold has been reached, plans charge a beneficiary the greater of a nominal set co-payment for drugs or 5% coinsurance. Medicare subsidizes 80% of each plan's costs for this catastrophic coverage. CMS uses a set formula to update annual Part D coverage parameters including the standard deductible, the initial coverage limit, and beneficiary total out-of-pocket amounts. Annual percentage increases are based on average per-capita spending for covered outpatient drugs for Medicare beneficiaries during the 12-month period ending in July of the previous year. Actuarially Equivalent Plans Plan sponsors have a number of options when designing pricing and benefits. Insurers may offer basic plans that provide the same level of coverage as the Part D standard plan, but may modify certain parameters and cost sharing such as reducing the maximum $405 deductible, while also imposing cost-sharing requirements that are higher than 25%. For example, nearly all plans use a tiered cost-sharing structure, where beneficiaries have a lower co-payment for generic drugs, and higher cost sharing for more expensive brand-name drugs. (See " Tiered Formularies .") In 2017, 41% of Part D enrollees in PDPs were in plans offering enhanced benefits, and 59% were in plans that were actuarially equivalent to the standard benefit. No PDP enrollees were in defined standard benefit plans. Enhanced Plans Insurers may also offer enhanced coverage that exceeds the value of defined standard coverage. Enhanced coverage includes basic coverage and supplemental benefits such as reductions in cost sharing, including reductions in cost sharing in the coverage gap. A PDP sponsor may not offer an enhanced plan unless it also offers a standard or actuarially equivalent plan in the same region. The requirement is designed to ensure that Medicare beneficiaries have options for lower-cost plans. The structure of the Part D program, including the large number of plans available in each region, can make it complicated for beneficiaries to compare plans. The ACA required CMS to streamline the number of Part D plans in each region and simplify the enrollment process. Since the 2011 plan year, CMS has required Part D sponsors that offer more than one plan per region to demonstrate meaningful differences between their plans, in terms of premiums, cost sharing, formulary design, or other benefits. Plan sponsors may offer only one basic plan benefit design in a service area and no more than two enhanced alternative plans in each service area. Beginning in 2019, CMS will no longer require Part D sponsors offering two enhanced plans in a region to demonstrate meaningful differences between the enhanced plans. The sponsor still must demonstrate that the enhanced plans have meaningful differences from the basic plan, however. The change is designed to give Part D sponsors more flexibility in plan design. CMS will continue to limit Part D sponsors to offering no more than two enhanced plans in each region. The Coverage Gap One unique feature of the Medicare Part D drug benefit is the coverage gap—the period in which Part D enrollees are required to pay a larger share of total drug costs until they reach the catastrophic coverage level. Congress included the coverage gap in the benefit structure when the MMA was enacted in 2003 because the cost of continuous coverage would have exceeded goals for total spending. As originally enacted, Part D provided a basic level of coverage for all beneficiaries, and extra protection for those with the highest drug costs (above the catastrophic limit). Part D enrollees who did not receive a low-income subsidy generally paid the full cost of drugs while in the coverage gap. (See original Part D in Figure 4 .) The ACA, as amended, included provisions to gradually phase out the coverage gap by 2020, at which point beneficiaries in standard plans would have a 25% cost share from the time they meet a standard plan deductible until they reached the catastrophic threshold, after which cost sharing is reduced. (See " Phaseout of the Coverage Gap .") Congress included provisions in BBA 2018 that phase out the Part D coverage gap for brand-name drugs in 2019, a year earlier than required by the ACA. Beneficiaries may have different levels of actual out-of-pocket spending in the coverage gap depending on how their specific plans are structured and the percentage of brand-name and generic drugs that they use. Spending will also vary depending on whether a beneficiary qualifies for the LIS based on his or her income and assets. For example, dual-eligible beneficiaries who are institutionalized have zero co-payments for drugs listed on a plan formulary, including during the time they are in the coverage gap. Other LIS beneficiaries have set-dollar co-payments while they are in the coverage gap. In 2015, about 26% of Medicare Part D enrollees reached the coverage gap. CMS offers enrollees suggestions for avoiding or delaying the coverage gap and for saving money while in the gap. Strategies for minimizing out-of-pocket spending include switching to generic, over-the-counter, mail-order, or other lower-cost drugs when possible; exploring national and community-based charitable programs or State Pharmacy Assistance Programs (SPAPs) that might offer assistance; and looking into Pharmaceutical Assistance Programs (also called Patient Assistance Programs or PAPs) offered by pharmaceutical manufacturers or independent charities. Additionally, CMS suggests that beneficiaries continue using their Medicare drug plan cards even when in the coverage gap. Using the cards helps to ensure that beneficiaries are charged the drug plan's discounted, negotiated prices and that their out-of-pocket expenses count toward reaching the catastrophic coverage threshold. Phaseout of the Coverage Gap The ACA included provisions to gradually close the coverage gap by 2020 through a combination of manufacturer discounts and government subsidies. Under the ACA, pharmaceutical manufacturers that want to participate in Medicare Part D must sign agreements to take part in the Medicare Coverage Gap Discount Program. The ACA required companies to provide a 50% discount on brand-name drugs for non-LIS Part D participants in the coverage gap. Drug makers began providing the brand-name drug discount in 2011. The ACA also gradually phased in additional federal subsidies for brand-name drugs purchased in the coverage gap, so that by 2020 a beneficiary would have 25% cost sharing in the coverage gap, Medicare would cover 25% of the cost of the drug, and the manufacturer discount would defray 50%. For generic drugs, the ACA phased in a 75% federal subsidy by 2020. The ACA did not impose a manufacturer discount on the less expensive generic drugs. (Those enrollees who reached the coverage gap in 2010 received a $250 discount, in the form of a check.) (See Table 5 .) BBA 2018 included provisions to close the coverage gap for brand-name drugs one year early, in 2019. (See Figure 3 .) Beginning in 2019 and continuing forward, BBA 2018 (1) increases the manufacturer discount for brand-name drugs in the coverage gap to 70% from 50%; (2) expands the manufacturer discount to include biosimilar drugs, (3) sets the federal subsidy for brand-name drugs in the coverage gap at 5%, and (4) sets beneficiary cost sharing at 25%. BBA 2018 did not alter ACA requirements for generic drugs purchased in the coverage gap. For generic drugs, the coverage gap will close in 2020, as scheduled under the ACA. During plan year 2018, non-LIS enrollees pay 35% of the cost of brand-name drugs and 44% of the cost of generic drugs while in the coverage gap. Manufacturers provide a 50% discount for brand-name products, and the federal government subsidizes 15% of the cost of brand-name drugs and 56% of the cost of generics. In 2019, the federal government will subsidize 63% of the cost of generic drugs in the coverage gap, and enrollees will pay 37%. In 2020, the coverage gap will be "closed" for both generic and brand-name drugs. (See Figure 4 .) From 2020 onward, the federal government will subsidize 75% of the cost of generic drugs in the coverage gap and enrollees will pay 25%. Participants in enhanced Part D plans that provide extra assistance in the coverage gap receive the ACA required discounts and government subsidies for any remaining amounts owed, in addition to their enhanced plan benefits. In 2016, more than 4.9 million beneficiaries who were in the coverage gap received the 50% manufacturer discount on brand-name drugs they purchased. Overall 2016 discounts totaled about $5.65 billion, with an average discount per beneficiary of $1,149. True Out-of-Pocket Costs Before catastrophic protection begins, Part D enrollees must incur a certain level of out-of-pocket costs. True o ut-of-pocket costs (TrOOP) are costs that are incurred by a beneficiary or are counted by CMS as incurred by a beneficiary, including a plan deductible, cost sharing up to the initial coverage limit, and the cost of certain drugs while in the doughnut hole, including the manufacturer subsidy. Enrollee spending for Part D covered drugs is treated as a true out-of-pocket cost if it is paid by the enrollee (including through a Medical Savings Account, Health Savings Account or Flexible Spending Account); paid by family members or friends; paid by a Qualified State Pharmacy Assistance Program; covered by a low-income subsidy; paid by most charities; covered by a drug manufacturer discount under the Medicare Coverage Gap Discount Program; covered by the Indian Health Service; or paid by an AIDS Drug Assistance Program. Incurred costs do not include Part D premiums; costs for drugs that are not on the enrollee's plan formulary; coverage by other insurance, including group health plans, workers' compensation, Part D plans' supplemental or enhanced benefits, or other third parties; or Patient Assistance Programs operating outside of Part D. Additionally, while the manufacturer drug discounts count toward the TrOOP, federal subsidies for brand-name or generic drugs in the doughnut hole do not count. In 2015, 3.6 million Part D enrollees (about 9%) exceeded the out-of-pocket threshold and reached the catastrophic phase of the benefit. These enrollees accounted for about 65% of gross Part D spending on basic benefits that year. Medicare picks up a larger share of spending (reinsurance) for individuals who reach the catastrophic threshold. Spending for reinsurance is now the largest share of spending for the Part D program. Of those reaching the catastrophic phase in 2015, around 2.6 million received the low-income subsidy. However, in recent years the number of non-LIS enrollees reaching the coverage gap has been growing more rapidly. This growth is due to several factors, including higher prices for certain Part-D covered drugs, ACA provisions that allow enrollees to count the manufacturer discount on brand-name drugs toward TrOOP, and higher enrollment growth by non-LIS enrollees compared to LIS enrollees over that time. Low-Income Subsidies Medicare Part D provides subsidies to assist low-income beneficiaries with premiums and cost sharing. LIS cost sharing is linked to the standard prescription drug coverage and varies according to a beneficiary's assets and income and, also, whether a beneficiary is institutionalized, or is receiving community-based care. Full-subsidy eligibles have no deductible, minimal cost sharing during the initial coverage period and coverage gap, and no cost sharing above the catastrophic threshold. Additionally, full-benefit dual eligibles who are residents of medical institutions or nursing facilities have no cost sharing. (See " Eligibility for Low-Income Assistance .") Premium Assistance Full-Subsidy-Eligible Individuals Low-income beneficiaries who qualify for a full subsidy do not pay monthly plan premiums if they enroll in certain, lower-cost Part D plans. A PDP qualifies as a lower-cost or "benchmark" plan if it offers basic Part D coverage and charges premiums equal to, or below, a regional low-income premium subsidy amount calculated by CMS each year. (See " Availability of Low-Income Plans .") If a LIS beneficiary selects a plan with a premium that is higher than the regional benchmark, he or she must pay the extra cost. Partial-Subsidy-Eligible Individuals Partial-subsidy-eligible individuals receive premium assistance based on an income sliding scale, as specified in Table 6 . Cost-Sharing Subsidies Cost-sharing subsidies for LIS enrollees are linked to standard prescription drug coverage. Full-subsidy eligibles have no deductible, minimal cost sharing during the initial coverage period and coverage gap, and no cost sharing above the catastrophic threshold. Partial-subsidy individuals have higher cost sharing. (See Table 7 .) Other specific policies for dual eligibles include the following: Full-benefit, dual eligibles who are residents of medical institutions or nursing facilities have no cost sharing, with some exceptions. The ACA expanded the LIS subsidy so that beneficiaries receiving home and community-based services in lieu of institutional care also have no cost sharing. Other full-benefit, dual-eligible individuals with incomes up to or at 100% of FPL pay $1.25 for a generic drug prescription or preferred multiple-source drug prescription and $3.70 for any other drug prescription in 2018 up to the catastrophic threshold. They have no co-payments above the catastrophic limit. Full-subsidy-eligible individuals with incomes above 100% of FPL have cost sharing for all drug costs, up to the catastrophic limit of $3.35 in 2018 for a generic drug or preferred multiple-source drug and $8.35 for any other drug. Partial-subsidy-eligible individuals have an $83 deductible in 2018, 15% coinsurance for all costs up to the catastrophic trigger, and cost sharing above this level of $3.35 for a generic drug prescription or preferred multiple source drug prescription and $8.35 for any other drug prescription. Each year, cost-sharing amounts for full-benefit dual eligibles up to or at 100% of FPL are updated by the annual percentage increase in the Consumer Price Index (CPI). The cost-sharing amounts for all other beneficiaries, and the deductible amount for other subsidy-eligible individuals, are increased by the annual percentage increase in per-capita beneficiary expenditures for Part D-covered drugs. Employer Subsidies The MMA included provisions designed to encourage employers to continue to offer drug benefits to their Medicare-eligible retirees. Employers have a number of options for providing such coverage. Retiree Drug Subsidy Employers and union groups that provide prescription drug insurance to Medicare-eligible, retired workers may apply for federal retiree drug subsidies (RDS). To qualify, an employer or union must offer drug benefits that are actuarially equivalent to, or more generous than, standard Part D prescription drug coverage. Sponsors must submit applications for CMS approval at least 90 days prior to the beginning of a plan year. Medicare provides payments for eligible retirees, defined as individuals who are entitled to Medicare benefits under Part A and/or are enrolled in Part B, and who live in the service area of a Part D plan. An individual must be a retired participant in an employer- or union-qualified group health plan or the Medicare-enrolled spouse or dependent of a retired participant. A retiree health plan cannot receive a subsidy for a current worker or an individual who is enrolled in a Part D plan. (An employer or union does have the option of sponsoring its own Part D plan.) For each retiree enrolled in a qualified plan in 2018, sponsors receive a federal subsidy equal to 28% of gross prescription drug costs between a threshold of $405 and a cost limit of $8,350. The retiree subsidies are designed to encourage employers to maintain drug coverage, and have generally been less expensive for Medicare than enrolling these beneficiaries in a Part D drug plan. In 2018, the average annual RDS is forecast to be about $531 per beneficiary compared to average per beneficiary costs of $2,120 for Part D beneficiaries. Prior to enactment of the ACA, group health plans offering qualified drug coverage were eligible to receive the Medicare retiree health subsidy and, in addition, claim a federal tax deduction for the subsidy, along with the rest of the plan's spending on retiree health benefits. The ACA prohibited companies, beginning in 2013, from claiming a tax deduction for the Medicare drug subsidy. In addition, retiree health plans are not eligible for ACA manufacturer discounts on brand-name drugs through the coverage gap discount program. These changes, which result in higher relative costs for retiree plans, are prompting employers to move away from the retiree drug subsidy program. The Medicare Trustees predict that the share of beneficiaries covered through the retiree drug subsidy will decline from about 20% of Part D enrollment in 2010 to about 2% in 2027. Employer Group Waiver Plans As fewer employers and unions utilize the Part D retiree drug subsidy, a growing number are providing retirees drug benefits through special Part D employer group waiver plans (EGWPs). Under an EGWP, a union or employer provides Part D coverage to its Medicare-eligible retirees and their eligible spouses and dependents. A union or employer may contract with a pharmacy benefits manager (PBM) or insurer that is a Part D sponsor to provide the Part D EGWP or become a direct Part D plan sponsor. Employers and unions may provide supplemental benefits that wrap around an EGWP, such as prescription drugs that are not on the Part D formulary. CMS allows waivers of certain Part D requirements for EGWPS. There are some differences in reimbursement for EGWPs and other Part D plans. The Medicare Trustees forecast that the share of individuals enrolled in EGWPs will rise from about 6% of all Part D enrollees in 2007 to about 15% in 2018. Drug Coverage In order for a drug to be paid by Medicare's prescription drug benefit, it must be a drug that is covered under Part D and included in the formulary of an individual's Part D plan. (See " Formularies .") The MMA defines covered Part D drugs as (1) outpatient prescription drugs approved by the Food and Drug Administration (FDA), and used for a medically accepted indication; (2) biological products that may be dispensed only upon a prescription and that are licensed under the Public Health Service (PHS) Act and produced at a licensed establishment; (3) insulin (including medical supplies associated with the injection of insulin); and (4) vaccines licensed under the PHS Act. Drugs can also be treated as part of a plan's formulary as the result of a beneficiary coverage determination or appeal. Certain drugs are excluded from Part D coverage by law, including drugs specifically excluded from coverage under Medicaid. The exclusion applies to (1) drugs used for anorexia, weight loss, or weight gain; (2) fertility drugs; (3) drugs used for cosmetic purposes or hair growth; (4) drugs for symptomatic relief for coughs and colds; (5) prescription vitamins and minerals; and (6) covered drugs when the manufacturer requires, as a condition of sale, that associated tests be purchased exclusively from the manufacturer. Drugs used for the treatment of sexual or erectile dysfunction are excluded from coverage unless they are used to treat another condition for which the drug has been approved by the FDA. Some previously barred drugs are now covered. Since January 1, 2013, Part D plans have been required to include benzodiazepines in their formularies. Barbiturates must be included in plan formularies for an indication of epilepsy, cancer, or chronic mental health disorders. Effective in January 2014, the ACA removed smoking cessation agents, barbiturates and benzodiazepines from the list of drugs allowed to be excluded from Medicaid coverage. The ACA provisions meant that Part D restrictions on barbiturate coverage (i.e., limiting the drugs to treatment of epilepsy, cancer, or chronic mental health disorders) were ended. If a state covers excluded drugs for Medicaid beneficiaries, it must also cover them for dual eligibles in cases where the drugs are determined to be medically necessary. Dual eligibles may therefore receive coverage from Medicaid for some drugs that are excluded from Medicare. Additionally, a Part D sponsor may elect to include one or more of these drugs in an enhanced Part D plan; however, no federal subsidy is available for the associated costs. Drugs Covered by Other Parts of Medicare Part D drug plans are prohibited from covering drugs covered by other parts of Medicare. This includes prescription medications provided during a stay in a hospital or skilled nursing facility that are paid for by the Part A program, and the limited circumstances when Part B covers prescription drugs. Part B-covered drugs include drugs that are not usually self-administered and are provided incident to a physician's professional services or drugs necessary for the proper functioning of Part B durable medical equipment. These include such things as immunosuppressive drugs for persons who have had a Medicare-covered transplant; erythropoietin (an antianemia drug) for persons with end-stage renal disease; oral anticancer drugs; drugs requiring administration via a nebulizer or infusion pump in the home; and certain vaccines (influenza, pneumococcal, and hepatitis B for intermediate- or high-risk persons). Formularies Prescription drug plans operate formularies, which are lists of drugs that a plan chooses to cover and the terms under which they are covered. This means that plans can choose to cover some, but not all, FDA-approved prescription drugs. A Part D sponsor's formulary must be developed and reviewed by a special CMS-approved Pharmacy and Therapeutics Committee. A majority of the committee members must be practicing physicians or practicing pharmacists and the committees must each include one physician and one pharmacist who are experts in caring for elderly or disabled individuals. Committees are to base decisions on the strength of scientific evidence and standards of practice when developing and reviewing formularies. According to CMS, the committees should also take into account whether including a particular drug in a formulary (or in a particular tier of drugs) has therapeutic value in terms of safety and efficacy. The committees review prior authorization, step therapy, and other methods of limiting or managing access to drugs by Part D plan enrollees. (See " Drug Utilization .") Formulary Categories and Classes Formulary drugs are grouped into categories and classes of products that work in a similar way or are used to treat the same condition. The MMA required CMS to ask the United States Pharmacopeial Convention (USP) to develop a list of categories and classes for plans and to periodically revise such classifications. A plan formulary must include at least two drugs in each category or class used to treat the same medical condition (unless only one drug is available in the category or class, or two drugs are available but one drug is clinically superior). The two-drug requirement must be met by providing two chemically distinct drugs. (Plans cannot meet the requirement by including two dosage forms or strengths of the same drug or a brand-name drug and its generic equivalent.) Six Classes of Clinical Concern In general, Part D drug plans are required to operate formularies that cover at least two drugs in each drug class. However, under CMS guidelines, Part D plans have been required to cover substantially all available drugs in the following six categories: immunosuppressant, antidepressant, antipsychotic, anticonvulsant, antiretroviral, and antineoplastic. Plan sponsors have not been allowed to steer beneficiaries who are already using these drugs toward alternative therapies via policies such as requiring prior authorization or step-therapy mandates (see " Drug Utilization "). This policy was designed to mitigate the risk that drug therapy could be interrupted for vulnerable populations. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA; P.L. 110-275 ) and the ACA both codified the general policy of creating protected classes, while directing the Secretary of Health and Human Services (HHS) to spell out more specific criteria for identifying drug categories or classes of clinical concern. As part of this process, the statutes allow HHS to revamp the current protected classes and categories, including permitting Part D sponsors to exclude certain drugs from their formularies (or limit access to such drugs through utilization management or prior authorization restrictions). Vaccines The Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ) required that Medicare drug plans, beginning in 2008, include all commercially available vaccines in their drug formularies, with the exception of vaccines covered under Medicare Part B. Medicare Part B generally covers vaccinations for influenza, pneumonia, and the Hepatitis B vaccine for intermediate to high-risk cases. Part B will also cover immunizations for patients exposed to an injury or disease, such as tetanus shots. The Tax Relief and Health Care Act of 2006 modified the definition of a Part D drug to require plans to cover the costs for administering Part D-covered vaccines, as well as the vaccine itself. CMS considers the negotiated price for a Part D vaccine to include the vaccine ingredient cost, a dispensing fee (if applicable), sales tax (if applicable), and a vaccine administration fee. CMS policy is that Part D vaccines, including administration costs, are to be billed on one claim. The policy applies to providers both in- and out-of-network. Unlike Part B vaccines, which are billed directly to Medicare, Part D claims are paid by the insurance provider; therefore the Part D entity/individual administering the vaccine may not be able to directly bill the Part D sponsor for the vaccine and administration. In some instances, patients must pay a physician for a vaccination up front, and then submit the bill to their insurance plan. CMS has issued guidance to plans regarding alternative billing options, such as allowing in-network pharmacists to administer vaccinations and to directly bill Part D, or having physicians electronically submit claims to Part D plans. Plan-Year Formulary Changes Part D plans may alter their formularies from year to year. Plans are also allowed, in limited circumstances, to make changes to their formularies within a plan year. Plans generally may not change therapeutic categories and classes of drugs within a plan year, except to account for new therapeutic uses or to add newly approved Part D drugs. If Part D plans remove drugs from their formularies during a plan year (or change cost-sharing or access requirements), they must provide timely notice to CMS, affected enrollees, physicians, pharmacies, and pharmacists. Starting in CY2019, Part D sponsors may immediately remove brand-name drugs from a formulary (or change the cost-sharing tier) during a plan year if they replace the brand-name product with a therapeutically equivalent generic that is placed on the same or lower cost-sharing tier and if the generic is subject to the same or less restrictive utilization criteria than the brand-name drug. To qualify for substitution, the new generic must have been released to the market after the initial formulary was submitted. Plans are not required to give prior notice of the formulary change but (1) must generally advise enrollees in plan documents, such as annual formularies, that such changes may occur without a specific advance notice and (2) must tell affected enrollees about any substitutions that do occur. Other formulary changes may be made in the following circumstances: Plans may immediately remove drugs from their formularies that are deemed unsafe by the FDA or are pulled from the market by their manufacturers. Plans do not have to provide prior notice of such actions, but must provide retrospective notice to CMS and other affected parties. After March 1 each year, Part D sponsors may make maintenance changes to their formulary, such as replacing brand name with new generic drugs or modifying formularies as a result of new information on drug safety or effectiveness. Plans with CMS approval may remove drugs from a formulary, move covered drugs to a less-preferred tier status, or add utilization management requirements in accordance with approved procedures after 30 days advance notice. Transition Policies CMS established transition standards to ensure that enrollees who move to a new plan do not abruptly lose coverage for drugs used in ongoing therapy—for example, in a case where a new plan does not cover a drug a beneficiary has been using. Transition policies also cover cases where enrollees are affected by formulary changes in their current plan from one year to the next. In such cases, a beneficiary can request that his or her physician check to see if the prescription can be switched to a similar drug on the new formulary. If the physician determines that a specific drug is medically necessary, the doctor may request that the plan make an exception to its policy. Plans are required to continue a beneficiary's previous prescription during the first 90 days of the calendar year. Any refill must be for an approved month's supply (unless the prescription is written for a shorter period) for any drug not on the plan's formulary. The requirement also applies to drugs that are on a plan's formulary, but which require prior authorization or step therapy. Transition policies also cover situations where enrollees undergo changes in the level of care, such as moving from a hospital to home. Drug Utilization Management Programs CMS regulations require that each Part D plan have an appropriate drug utilization management program that (1) includes incentives to reduce costs when medically appropriate, and (2) maintains policies and systems to assist in preventing over-utilization and under-utilization of prescribed medications. Since the Part D program began in 2006, the trend among plans has been to impose greater cost-sharing and utilization management. In addition, during the past several years, CMS has imposed more stringent requirements on plans in an effort to identify possible program fraud and abuse involving certain prescription drugs. Tiered Formularies Plan D plan sponsors may assign formulary drugs to tiers that correspond to different levels of cost sharing. In general, this structured pricing encourages use of generic medications by placing these medicines on the plan tier with the lowest out-of-pocket costs, and discourages the use of more expensive drugs by putting them on tiers that require higher out-of-pocket spending. Plans have flexibility in structuring the tiers. Different plans may place the same drug on different tiers, and drugs in parallel tiers may not have the same cost-sharing requirements. To illustrate, a five-tiered formulary may be structured so that Tier 1 includes preferred generics, Tier 2 includes nonpreferred generics, Tier 3 contains preferred brand-name drugs, Tier 4 includes higher-cost, nonpreferred brand names, and Tier 5 (the "specialty tier") has very expensive or rare drugs. In 2018, almost all PDPs had five cost-sharing tiers, though co-payments and coinsurance varied among plans. Part D plans are permitted to institute a specialty tier for expensive products (e.g., unique drugs or biologics). Beneficiaries cannot appeal cost-sharing amounts for drugs placed on a specialty tier. Plans typically charge a percentage of the cost of a drug on the specialty tier (coinsurance), rather than a flat co-payment. To ensure that beneficiaries dependent on specialty drugs are not "unduly discouraged" from enrolling in tiered plans, CMS has instituted the following conditions: (1) a plan may have only one specialty tier; (2) a plan with a standard deductible may impose coinsurance of up to 25% for specialty drugs, while a plan with a reduced or zero deductible may impose coinsurance of up to 33%, and (3) only drugs with negotiated prices exceeding a set threshold may be placed on a specialty tier ($670 for a month's supply for 2018). Although Part D specialty drugs account for less than 1% of Part D prescriptions, they account for nearly 20% of Part D expenditures. The specialty tier is not necessarily the tier with the highest coinsurance. Some Part D plans charge coinsurance greater than 33% for drugs on a nonpreferred brand name formulary tier, up to the initial coverage limit. According to CMS, best practices for developing formularies dictate that drugs are placed in a nonpreferred tier only when drugs that are therapeutically similar (i.e., drugs that provide similar treatment outcomes) are in more preferable positions on the formulary. CMS reviews plan sponsors' drug tier placement to ensure their formulary does not substantially discourage enrollment of certain beneficiaries, such as those with potentially high drug costs. Other Drug Utilization Controls Other utilization restrictions include (1) prior authorization, in which a beneficiary, with assistance of a prescribing physician, must obtain a plan's approval before it will cover a particular drug; (2) step therapy, where a beneficiary must first try a generic or less expensive drug to see if it works as well as the one prescribed; and (3) quantity limits, where the supply of drugs is initially limited to reduce the likelihood of waste (e.g., if a drug was not effective for a beneficiary or had intolerable side effects). A beneficiary who wants his or her plan to waive a utilization control must provide a physician statement indicating that a prescribed drug and dosage is medically necessary and providing a rationale as to why restrictions are not appropriate. Since 2014, PDPs have been required to apply a daily cost-sharing rate to prescriptions for less than a 30-day supply of medication (with some exceptions). The daily cost-sharing rate is defined as the monthly co-payment under the enrollee's Part D plan, divided by 30 or 31 and rounded to the nearest lower dollar amount. The daily cost-sharing requirement gives beneficiaries an incentive to ask physicians for shorter prescriptions when trying a medication for the first time because the Part D sponsor will charge the lower, pro-rated cost sharing when the prescription is dispensed. Shorter prescriptions are seen as a means to reduce Part D beneficiary costs and drug waste in cases where a prescribed drug is ultimately found not to be effective. Part D Opioid Overutilization Monitoring Since 2013, CMS has operated a two-part system to combat inappropriate utilization of opioids in Part D. First, CMS has encouraged Part D plans to enhance their internal formulary and drug utilization review programs to provide opioid safety controls at the point of sale, retrospectively review drug claims to identify beneficiaries at risk of overutilization, and perform case management for beneficiaries deemed at risk of opioid abuse. Second, CMS has operated a program-wide Overutilization Monitoring System (OMS) to verify that Part D sponsors have established effective and appropriate opioid management programs. Under the OMS, CMS performs its own retrospective reviews of Part D prescription data to identify enrollees at risk of opioid overutilization. CMS defines at-risk beneficiaries as those using high dosages of opioids (over a specified period of time) provided by multiple prescribers or pharmacies. Part D plans are to review drug use of beneficiaries identified through the OMS. The Comprehensive Addiction and Recovery Act of 2016 (CARA; P.L. 114-198 ) provides Part D sponsors with authority to limit the number of pharmacies and prescribers that can be used by enrollees identified as at risk of overutilization of frequently abused drugs, beginning in 2019. This "lock-in" provision is designed to reduce fraud and abuse by making it easier to control enrollee opioid use. In April 2018, CMS issued final rules to implement the CARA provisions. The rules use OMS clinical guidelines as the basis for determining whether a Part D beneficiary is at risk for opioid overutilization. Beginning in 2019, Part D plan sponsors will be allowed to limit an at-risk beneficiary's access to frequently abused drugs (defined by CMS as opioids and benzodiazepines) by imposing a prescription safety edit at the point of sale, and/or by requiring an at-risk enrollee to obtain opioids only from select pharmacy(ies) and/or prescriber(s), after case management and appropriate notice. The rules limit the use of SEPs by low-income beneficiaries deemed at risk or potentially at risk for prescription drug abuse. The OMS and lock-in policies will not apply to Part D beneficiaries being treated for active cancer-related pain, receiving palliative or end-of-life care, or in long-term care for drug management programs. In addition, the final rule seeks to reduce opioid fraud and abuse by barring Part D plans from covering prescriptions written by physicians or other health care providers who are on a special CMS preclusion list. The preclusion list requirement will be in addition to CMS's existing authority to revoke Medicare enrollment for physicians or other professionals determined to have a prescribing pattern that is "abusive, represents a threat to the health and safety of Medicare beneficiaries, or otherwise fails to meet Medicare requirements." CMS also may revoke Medicare enrollment if a prescriber's Drug Enforcement Administration (DEA) Certificate of Registration is suspended or revoked, or if his or her ability to prescribe drugs is revoked by any state in which he or she practices. Medication Therapy Management Part D plans (with some exceptions) must include a Medication Therapy Management (MTM) program, which is a system of coordinated pharmacy care for patients with multiple medical conditions who may be seeing a series of practitioners. A MTM program includes medication reviews, patient consultation and education and other services. Each plan's program must be reviewed and approved annually by CMS, and is one of several, required elements that is considered when CMS evaluates a sponsor's bid to participate in the Part D program for an upcoming contract year. Part D sponsors must automatically enroll beneficiaries in a MTM program if they meet the following criteria: (1) they have multiple chronic diseases, with three being the maximum that can be required; (2) they are taking at least two to eight Part D drugs; and (3) they are likely to have annual covered drug costs that exceed $3,967 in 2018. Part D sponsors also may target beneficiaries with any chronic diseases or with specific chronic diseases. If plans target beneficiaries with specific diseases, they must include at least five of the diseases CMS has defined as nine core chronic conditions: Alzheimer's Disease; Chronic Heart Failure; Diabetes; Dyslipidemia; End-Stage Renal Disease (ESRD); Hypertension; Respiratory Disease (such as asthma or chronic lung disorders); Bone Disease-Arthritis; and Mental Health (such as depression, schizophrenia, or bipolar disorder). CMS guidelines state that, once enrolled, beneficiaries should remain in a MTM program for the course of a plan year, even if they no longer meet one or more of the eligibility criteria. The MTM program must include a comprehensive review of a beneficiary's medications, intervention with both beneficiaries and prescribers, and quarterly, targeted medication reviews. In 2015, CMS announced a five-year MTM pilot program, beginning in 2017, to test whether offering Part D sponsors additional payment incentives and more regulatory flexibility will lead to improved outcomes for MTM beneficiaries. CMS says 11 states are eligible to participate in the program. Part D Plans: Payment and Participation Medicare Part D participants must obtain coverage through a private insurer, or other entity, that contracts with Medicare (a plan sponsor). As previously described, beneficiaries may select either a stand-alone prescription drug plan or a Medicare Advantage plan that includes prescription drug coverage along with other Medicare services. PDPs are required to be available region-wide within each of the 34 designated PDP regions. MA-PDs are generally local, operating on a countywide basis; however, region-wide MA-PDs are available in many of the 26 MA regions in the United States. A PDP sponsor may offer a PDP in more than one region, including all PDP regions; however, the sponsor must submit separate coverage bids for each region it serves. Medicare payments to plans are determined through a competitive bidding process, and enrollee premiums are tied to plan bids. Plans bear some risk for their enrollees' drug spending. Approval of PDP Plans Each year, CMS issues a call letter to sponsors planning to offer PDP and/or MA plans in the following year. The 2018 call letter, issued on April 3, 2017, combined updated contracting guidance and payment information for both programs. Potential PDP and MA sponsors are required to submit bids by the first Monday in June of the year prior to the plan benefit year. The following information must be included as part of the bid: (1) coverage to be provided; (2) actuarial value of qualified prescription drug coverage in the region of a beneficiary with a national average risk profile; (3) information on the bid, including the basis for the actuarial value, the portion of the bid attributable to basic coverage and, if applicable, the portion attributable to enhanced coverage, and assumptions regarding the reinsurance subsidy; and (4) service area. The bid also includes costs (including administrative costs and return on investment/profit) for which the plan is responsible. The bid must exclude costs paid by enrollees, payments expected to be made by CMS for reinsurance, and any other costs for which the sponsor is not responsible. CMS reviews the information when negotiating with plan sponsors and in deciding whether to approve their program bids. CMS may approve a drug plan only if certain requirements are met. For example, CMS must determine that the plan and sponsor meet requirements relating to actuarial determinations and beneficiary protections. The plan cannot be designed in a way (including any formulary or tiered formulary structure) that would likely discourage enrollment by certain beneficiaries. If their bids are approved, PDP sponsors enter into 12-month contracts with CMS. A contract may cover more than one Part D plan. Under the terms of a contract, the sponsor agrees to comply with Part D requirements and have satisfactory administrative and management arrangements. Beginning in 2016, CMS imposed a two-year Part D application ban on sponsors that have been approved to offer PDP plans but withdraw their bids after CMS announces the annual LIS benchmark amounts. Noninterference Provision The MMA, which created the Part D program, contains a provision that prohibits the HHS Secretary from interfering in negotiations on drug prices and from setting plan formularies. The provision states that ''(i)n order to promote competition under this part and in carrying out this part, the Secretary: (1) may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors; and (2) may not require a particular formulary or institute a price structure for the reimbursement of covered Part D drugs." Plan Availability For the 2018 plan year, sponsors offered 782 PDPs and 2,003 MA-PDs. The number of PDPs per region in 2018 range from a low of 19 to a high of 26 across the 34 Part D regions, and beneficiaries also typically have about 10 MA-PD options to choose from. Compared to 2017 plan offerings, the number of PDPs has risen by about 5%, while the number of MA-PDs has increased by about 16%. Availability of Low-Income Plans A Part D plan qualifies as a LIS benchmark plan if it offers basic Part D coverage and charges premiums that are equal to, or lower than, the average, regional low-income benchmark premium. Regional LIS benchmark premiums are recalculated annually, based on the weighted average of all premiums in each of the 34 PDP regions. The formula for determining the benchmark is based on premiums for basic prescription drug coverage, or the actuarial value of basic prescription drug coverage for plans that offer enhanced coverage. For MA-PD plans, the formula uses the portion of the premium attributable to basic prescription drug benefits. In 2018, there are 216 LIS benchmark PDPs—the lowest number since Part D began. Florida has two benchmark plans, while the number of such plans ranges from 3 to 10 in other Part D regions. LIS beneficiaries enrolled in a plan that loses its benchmark status for a coming plan year either are enrolled automatically in a new plan by CMS or must select a new plan to avoid paying premiums and other cost-sharing requirements. (See " LIS Enrollment .") As is the case for non-LIS enrollees, enrollment for LIS enrollees has become concentrated over time. In 2017, CVS Health had 2.4 million, or 20% of all LIS enrollees, in its Part D plans. Plan Payments Medicare provides a subsidy for each non-LIS Medicare enrollee in a Part D plan that is equal to 74.5% of average, standard coverage. The average subsidy takes two forms: direct subsidy payments and reinsurance payments . Medicare also establishes risk corridors to limit a plan's overall losses or profits. In addition, Medicare pays most of the cost sharing and premiums for LIS beneficiaries enrolled in PDP or MA-PD plans. Direct Subsidies Medicare makes monthly prospective payments (direct subsidies) to plans for each Part D enrollee. The payments are based on the nationwide average of plan bids for providing basic drug coverage, weighted by the plans' share of total enrollment. (The national average monthly bid is $57.93 for plan year 2018.) The subsidy amount is risk-adjusted to account for the health status of the beneficiaries expected to enroll; plans with sicker enrollees receive a higher subsidy. The subsidy is further adjusted to cover expected, additional costs associated with LIS enrollees. Lastly, the payment is reduced by the base beneficiary premium for the plan. (See " Premiums .") Reinsurance Subsidies As previously noted, in a standard drug plan, the Part D sponsor pays nearly all drug costs above a catastrophic threshold, except for nominal beneficiary cost sharing. Medicare subsidizes 80% of each plan's costs for this catastrophic coverage—the reinsurance subsidy. (See " Part D Benefit Structure .") Payments are made on a monthly basis during the year, based on either estimated or incurred costs, with final reconciliation made after the close of the year when plans have data on their actual costs. Medicare subsidies for reinsurance are now the largest component of Part D, and are also the fastest-growing portion of the program. Risk Corridor Payments The MMA also established risk corridors for Part D plans. Under the risk corridors, Medicare limits plan sponsors' potential losses, or gains, by financing some higher-than-expected costs, or recouping some excessive profits, relative to the amount the plan originally bid to offer Part D. Risk corridors are based on a plan's allowable costs (spending) relative to a percentage of its target amount (revenues), as defined below: Allowable costs are defined as costs (excluding administrative costs, but including costs directly related to drug dispensing) incurred by a plan sponsor or organization that are actually paid (net of discounts, chargebacks, and average percentage rebates from drug manufacturers) by the sponsor or organization. Plans may not include costs for benefits beyond the Part D basic benefit amount. The costs are reduced by the sum of reinsurance payments and low-income subsidy payments. The target amount is defined as total payments to a plan (including amounts paid by both Medicare and enrollees) based on a plan's standardized bid for offering the Part D drug benefit, as risk adjusted. The target amount does not include administrative expenses assumed in the plan's standardized bid. At the end of each year, CMS compares a Part D plan's allowable costs to its target amount and shares in any gains or losses within a predetermined range, or corridor. For plan year 2018, a plan that has higher-than-expected costs must cover all benefit spending up to 105% of its standardized bid. A plan with costs above 105% and up to 110% of its bid must cover 50% of the costs within this range and CMS will pay the other 50%. A plan with costs above 110% of the bid must pay 20% of this additional amount, with CMS covering the other 80%. Likewise, a plan that spends less than its standardized bid may keep all savings between 100% and 95% of the bid. A plan that has spending below 95% to 90% of its bid may keep 50% of the savings within this range, while rebating 50% to CMS. A plan with savings below 90% of the bid may keep 20% of the savings within this range and must rebate 80% to CMS. As CMS has gained more experience with Part D, the risk corridors have widened, increasing the share of insurance risk borne by the plans. From 2008 to 2011, drug plans bore all gains and losses that fell within 5% of expected costs, compared with a smaller range of 2.5% of expected costs in 2006 and 2007. Since 2012, CMS has had the authority under the MMA to either leave the corridors unchanged or to widen them. CMS has moved to keep the corridors at 2011 levels through the 2018 program year. CMS does not have the authority to narrow the risk corridors. Reconciliation Following the close of a calendar year, CMS makes retroactive adjustments to the direct subsidy payments made to plans to reflect actual plan experience. The direct subsidy payments are adjusted based on updated data about actual beneficiary health status and enrollment. Additionally, prospective payments for reinsurance and low-income subsidy payments are compared to actual incurred costs, net of any direct or indirect remuneration (including discounts, chargebacks, or rebates from drug manufacturers), and other related data, and appropriate adjustments are made to the plan payments. Finally, any necessary adjustments are made to reflect risk sharing under the risk corridor provisions. In general, Part D plans have tended to overestimate their costs for operating Part D plans in the aggregate. For example, Part D plans each year have made net risk corridor payments to CMS. (See Table 9 .) CMS data on individual plans continue to show considerable variation in terms of risk-sharing, with some plans making significant risk corridor payments to CMS, and others requiring government payments. MedPAC has raised questions about whether Part D plans are adequately assessing risk in their annual plan bids, but suggested that keeping Part D risk corridors in place, at least temporarily, would help to limit excess plan profits. Reduction of Part D Plan Payments Under Sequestration Due to provisions in the Budget Control Act of 2011 (BCA; P.L. 112-25 ), most Medicare benefit related payments are being reduced through sequestration by 2%. Under Part D, Medicare payments to plans for the direct subsidies and retiree drug subsidies are being reduced by this amount. Payments for reinsurance, risk-sharing, and the low-income subsidy are exempt from these reductions. Part D plans are not permitted to increase beneficiary premiums or cost sharing, or reduce benefits in order to make up for their lower payments under sequestration. The sequestration of Medicare benefit spending is scheduled to continue through FY2027. Pharmacy Access and Payment Part D sponsors are required to establish a pharmacy network sufficient to ensure access to covered Part D drugs for all enrollees. Sponsors must demonstrate that they provide (1) convenient access to retail pharmacies for all enrollees, (2) adequate access to home infusion pharmacies for all enrollees, (3) convenient access to long-term care (LTC) pharmacies for residents of LTC facilities, and (4) access to Indian Health Service, Tribes, or Urban Indian Programs pharmacies operating in the sponsor's service area. Any Willing Pharmacy Part D sponsors are required to permit any pharmacy that is willing to accept the sponsor's standard contracting terms and conditions to participate in the plan's network, including mail-order pharmacies. A sponsor's standard terms and conditions, particularly reimbursement terms, may vary to accommodate geographic areas or types of pharmacies, so long as all similarly situated pharmacies are offered the same standard terms and conditions. A Part D sponsor may not require a network pharmacy to accept insurance risk as a condition of participation in its pharmacy network. Beginning in 2019, Part D plans will be required to (1) make standard pharmacy contract terms and conditions available by September 15 of each year for contracts effective on January 1 of the following year, and (2) provide a copy of a standard contract to a requesting pharmacy within seven business days after receiving such a request from the pharmacy. Preferred Pharmacy While any qualified pharmacy can participate in a plan network, Part D plans, with the exception of plans offering defined, standard coverage, may contract with a smaller subset of pharmacies, or pharmacy chains, to serve as preferred pharmacies. Preferred pharmacies generally are marketed as having lower beneficiary cost sharing than other pharmacies in the plan network. Beneficiaries who sign up for a preferred pharmacy plan still have the option of going to any one of a number of network pharmacies in their plan region, but may face a higher cost share to fill a prescription at a nonpreferred pharmacy. The creation of a preferred pharmacy network must not increase overall CMS payments to a Part D plan. In addition, the cost differential between preferred and nonpreferred pharmacies cannot be set at a level that discourages enrollees in certain locations, such as inner cities or rural areas, from enrolling in a Part D plan. Retail Pharmacy Access To ensure that enrollees have convenient access to covered drugs, Part D networks must include a sufficient number of pharmacies that dispense drugs directly to patients (other than by mail order). CMS defines convenient access as follows: In urban areas, at least 90% of Medicare beneficiaries in a Part D sponsor's service area, on average, live within 2 miles of a retail pharmacy participating in the sponsor's network. In suburban areas, at least 90% of Medicare beneficiaries in the sponsor's service area, on average, live within 5 miles of a retail pharmacy participating in the sponsor's network. In rural areas, at least 70% of Medicare beneficiaries in the sponsor's service area, on average, live within 15 miles of a retail pharmacy participating in the sponsor's network. CMS has issued a definition of retail pharmacy, to take effect in 2019, to provide better guidance for Part D plans in determining which contracted pharmacies count toward meeting the convenient access standards. The definition of retail pharmacy will be ''any licensed pharmacy that is open to dispense prescription drugs to the walk-in general public from which Part D enrollees could purchase a covered Part D drug without being required to receive medical services from a provider or institution affiliated with that pharmacy.'' Mail-Order Pharmacy Access Part D plans have the option of including mail order pharmacies in their networks, though they cannot count such pharmacies in meeting retail pharmacy access requirements. Plan sponsors may offer a subset of formulary drugs (such as a particular tier of drugs or maintenance drugs) through mail-order pharmacies. If a Part D plan offers a mail-order pharmacy benefit (such as a 90-day supply of a maintenance drug) it must ensure that enrollees have reasonable access to the same benefit at retail network pharmacies. However, enrollees may be charged more by Part D sponsors for filling certain prescriptions at a retail pharmacy, rather than a mail-order pharmacy, within limits set by CMS. Specialty Pharmacy Access Part D plans may designate certain pharmacies as specialty pharmacies for the distribution of drugs where the FDA has restricted distribution of the drug to certain facilities or physicians or appropriate dispensing requires extraordinary special handling, provider coordination, or patient education that cannot be met by a network pharmacy. Part D plans may not require enrollees to use a specialty pharmacy to fill a prescription solely because a drug has been placed on a Part D plan's specialty drug tier. Specialty drug tier designation is based on cost ($670 per month in 2018), not on other special handling requirements. CMS does not have a regulatory definition of specialty pharmacy. Plans may set their own definition and fee structure for specialty pharmacies and specialty networks, including preferred specialty networks. However, Part D pharmacy contracting conditions must be reasonable and relevant and must be applied consistently. Long-Term Care Pharmacy Access Part D sponsors must offer LTC pharmacy access to beneficiaries in LTC facilities. In meeting this requirement, plan sponsors must offer standard long-term care (LTC) pharmacy network contracts to all LTC pharmacies operating in their service area that request such contracts. The pharmacies must be able to meet performance and service criteria specified by CMS, as well as any standard terms and conditions established by the Part D sponsor for its network LTC pharmacies. Part D sponsors may not rely on out-of-network pharmacies to meet the LTC convenient access standards. Home Infusion Pharmacy Access Part D covers certain home-infusion drugs, which are prescription drugs that are given intravenously in a home setting. Administration of the drugs may require supplies and equipment such as tubing and catheters or special pumps. Part D plan sponsors must be able to deliver home-infusion drugs to plan enrollees within 24 hours after the enrollees are released from an acute care setting, unless the next dose of the medication is not due to be taken for more than 24 hours. (An acute care setting is a hospital, ambulatory care unit, or similar facility where a patient receives treatment for a serious but brief illness.) Part D plans are not expected to pay for supplies, equipment, or professional services needed for home infusion therapy. They are expected to stock drugs in a form that can be easily used, to deliver products when needed, and to ensure that enrollees have the necessary supplies and professional assistance before dispensing home infusion drugs. Out-of-Network Access In general, a beneficiary must go to a pharmacy in his or her Part D network. However, in cases where enrollees cannot reasonably be expected to obtain covered drugs at a network pharmacy, and when such cases are not routine, a Part D plan must ensure that enrollees have adequate access to out-of-network pharmacies. One example would be if a Part D enrollee were traveling in the United States, came down with an illness, and needed to have a prescription filled. Another possible scenario would be a federal disaster declaration in the case of major storm or other event, where a beneficiary was not able to use an in-network provider. Part D plans must craft reasonable guidelines for out-of-network usage, and can set conditions such as requiring enrollees to order maintenance-type drugs from a mail-order pharmacy if they are going to be traveling for an extended period of time. In general, plans may not routinely allow more than a month's worth of medication to be dispensed at an out-of-network pharmacy. Enrollees will likely be required to pay more for a covered Part D drug purchased out of the plan network than one purchased at a network pharmacy. Payments to Pharmacies Plan sponsors negotiate with pharmacies to include a sufficient number and geographic distribution of pharmacies in their networks. A plan reimburses a pharmacy for the cost of a drug, plus a dispensing fee. Pharmacies set their own rates for dispensing drugs but may give a plan a discount from their usual rate. The law requires Part D sponsors to make payment for "clean claims," within 14 calendar days of the date when an electronic claim is received, and within 30 calendar days of the date that non-electronically submitted claims are received. A clean claim is a claim that does not require further development or investigation (for example, has all required documentation) or other special treatment that would prevent the claim from being paid in a timely manner. If payment is not issued, mailed, or otherwise transmitted within the applicable number of calendar days after a clean claim is received, the PDP sponsor or MA-PD plan will be required to pay interest to the pharmacy that submitted the claim. Coverage Determinations, Appeals, and Grievances Part D enrollees have the right to request or appeal coverage determinations, file grievances against plan sponsors, and file complaints regarding quality of care. PDPs and MA-PDs are required to provide enrollees with written information about their rights, and to institute both standard and expedited procedures for addressing coverage issues. An enrollee may appoint a representative to act on his or her behalf during the grievance and appeals process such as a friend, relative, attorney, physician, or an employee of a pharmacy or a charity. To appoint a representative, an enrollee must submit a written statement to the drug plan sponsor. Alternatively, a surrogate or representative may be appointed by a court or authorized under a state or other applicable law to act on behalf of an enrollee. A prescribing physician or other prescriber may request a standard or expedited coverage determination, redetermination, or independent review entity (IRE) reconsideration on behalf of an enrollee without being named a representative. (Physicians or prescribers do not have all the rights of a designated representative, however, unless they have gone through the formal appointment process.) Coverage Determination A coverage determination is any decision (whether an approval or denial) made by a plan sponsor with regard to covered benefits. Examples of coverage determinations include (1) a decision about whether to provide or pay for a Part D drug that an enrollee believes may be covered; (2) a decision concerning a request about a specific drug payment tier; (3) a decision concerning a request to cover a drug that is not included on a plan formulary; (4) a decision regarding cost-sharing levels; or (5) a decision regarding whether an enrollee has satisfied a prior authorization or other utilization management requirement. An enrollee, an enrollee's appointed representative, or his or her physician may file a request for a coverage determination. An enrollee may also request an expedited decision regarding a drug that has not already been furnished. The plan is to make a decision within 24 hours in cases where using the standard timeframe may seriously jeopardize the life or health of the enrollee or the enrollee's ability to regain maximum function. A Part D sponsor that approves a request for expedited determination must make its determination and notification, whether adverse or favorable, as expeditiously as the enrollee's health condition requires, but no later than within 24 hours. If a Part D plan sponsor denies a request for an expedited determination, it must make the determination within the 72-hour timeframe established for a standard determination; and give the enrollee and prescribing physician or other prescriber prompt oral notice of the denial. If a sponsor fails to notify the beneficiary of its decision within the established time frames, the decision is deemed an automatic denial, at which point the sponsor must forward the case to the independent review entity, the second level of appeal. Appeals If a plan sponsor's coverage determination is unfavorable, it must provide the affected enrollee with a written denial notice that includes information on appeals rights. An appeal is a request for a further review of a coverage determination. There are five levels of appeals. Redetermination The first level of appeal is a redetermination by the plan. An enrollee, enrollee's representative or enrollee's prescribing physician or other prescriber may request a standard or expedited redetermination by filing a written request with the plan sponsor. The request generally must be filed within 60 calendar days from the date printed or written on the written coverage determination denial notice. If a physician asks for, or supports, an expedited appeal on the grounds that waiting seven days could seriously harm an enrollee's health, the appeal is to automatically be expedited. Plan sponsors must provide immediate access to the redetermination process through their websites. CMS strongly encourages plans to establish interactive, web-based systems to meet this requirement. A plan sponsor must also provide an enrollee or prescribing physician with a reasonable opportunity to present evidence, and the redetermination must be made by a person not involved in the original coverage decision. Enrollees are to be notified of the results within 7 days in the case of standard redetermination or within 72 hours for an expedited request. Beginning in 2019, plans will have 14 days to respond to a standard redetermination. The timeline for an expedited request will remain the same. Reconsideration by an Independent Review Entity At the second level of appeal, an enrollee dissatisfied with a redetermination has a right to reconsideration by an independent review entity (IRE) working under contract with CMS, also known as a Qualified Independent Contractor (QIC). An enrollee or an enrollee's appointed representative may request a standard or expedited reconsideration. The request must be made within 60 days of a redetermination. The IRE is required to make a decision within 7 days for a standard reconsideration and 72 hours for an expedited reconsideration. Beginning in 2019, plans will have 14 days to respond to a standard reconsideration. The timeline for an expedited redetermination will remain the same. According to CMS, Medicare received 35,414 reconsideration cases in CY2016. In about 30% of the cases, the plan sponsor's decision was overturned. Additional Levels of Appeal If the above appeals result in decisions unfavorable to the enrollee, several additional levels of review may be pursued. At the third level of appeal, an enrollee or the appointed representative may request a hearing with an administrative law judge (ALJ). A request must be made within 60 days of the IRE decision letter. To qualify for an ALJ hearing, the projected value of denied coverage must meet a minimum dollar amount ($160 for 2018). An enrollee cannot request an expedited hearing if the only issue at question involves a request for payment of Part D drugs that have already been furnished. There is a 90-day limit for a regular decision and a 10-day limit for an expedited decision. The fourth level of appeal is the Medicare Appeals Council (MAC) . A beneficiary or the appointed representative may request a review by the MAC within 60 days of the ALJ decision. The MAC may grant or deny the request for review. If it grants the request, it may issue a final decision or dismissal, or remand the case to the ALJ with instructions on how to proceed with the case. The review is to be completed within 90 days for a regular review and 10 days for an expedited review. Standard Hearing The final appeal level is a federal district court . A beneficiary or the appointed representative may request a review by a federal court within 60 days of the MAC decision notice. To receive a review by the court, the projected value of denied coverage must be greater than or equal to a minimum dollar amount ($1,600 for 2018). Grievances Grievances are complaints or disputes other than those involving coverage determinations. Grievances may include such things as complaints about a plan's customer service hours of operation, the time it takes to get a prescription filled, or a plan's benefit design. A grievance may also include a complaint that a Part D plan refused to expedite a coverage determination or redetermination. A beneficiary with a grievance may file a complaint within 60 days of the event. Although CMS regulations do not require a Part D plan sponsor to consider a grievance that is filed after the 60-day deadline, the regulations do not prevent a plan sponsor from doing so on a case-by-case basis. Plan sponsors are to respond in a timely manner. A Part D plan sponsor must respond to an enrollee grievance within 24 hours if it involves a refusal by the Part D plan to grant an enrollee's request for an expedited coverage determination or an expedited redetermination and the enrollee has not yet purchased or received the drug in dispute. (Sometimes a complaint may involve both a grievance and a coverage determination.) Quality of Care Complaints Complaints regarding quality of care received by Part D enrollees may be resolved by the plan sponsor, but also may be handled through a separate process: the Quality Improvement Organization (QIO) process. The QIO program is implemented by a network of contractors throughout the United States that work with providers and beneficiaries to improve the quality of health care delivered to Medicare beneficiaries. When a Part D plan responds to an enrollee's grievance in writing, it must include a description of the enrollee's right to file a QIO grievance. Quality of care grievances filed with a QIO may be filed and investigated beyond the 60-day time frame. Program Oversight The size, nature, and complexity of the Medicare Part D program put it at particular risk for fraud, waste, and abuse. Some examples of program vulnerabilities that have been identified include drug diversion (redirecting prescription drugs, such as opioids, for illegal purposes); billing for drugs that are not dispensed; and inappropriate plan denials of covered drugs. A variety of entities are involved in oversight activities to ensure program compliance and identify potentially fraudulent activities. CMS Oversight CMS is responsible for preventing and detecting fraud and abuse in Medicare Part D and ensuring sponsors' compliance with applicable requirements. CMS conducts a wide variety of oversight activities, such as bid reviews, marketing reviews, financial and accounting reviews, program audits, and LIS-readiness audits. Some of the management controls used in the routine operation of Medicare Part D play a primary role in the administration of the benefit and a secondary role in fraud prevention and detection. For each plan sponsor, CMS establishes a point of contact (account manager) for all communications with the plan. The account managers are to work with plans to resolve any problems, including compliance issues. As part of its oversight strategy, CMS conducts routine program audits to ensure compliance with various program requirements, including such things as enrollment and disenrollment, marketing and beneficiary information, pharmacy access, coordination of benefits, claims processing and payment, and grievances and coverage determinations. CMS can also conduct separate, focused audits to confirm that a previously identified deficiency has been corrected or to check into an indication of noncompliance. These audits include a combination of desk and on-site activities. In financial audits , CMS looks at the accuracy and validity of data reported by the plans. These audits, normally conducted after payment reconciliation, may examine things such as possible overpayments to plans, misrepresentation of bids, underreporting of rebates, and inaccurate prescription drug event data. If financial audits identify problems, CMS would recalculate payment reconciliation for that sponsor and target the sponsor for a future audit. If egregious problems are identified, CMS actions can range from warning letters to civil monetary penalties or removal from the program, depending on the extent to which plans have violated Part D program requirements. Oversight Responsibilities of Part D Sponsors CMS requires plan sponsors to monitor and correct their own behavior, as well as the behavior of those they contract with. Part D sponsors are required by law to implement a comprehensive fraud and abuse program to detect, correct, and prevent fraud, waste, and abuse. Chapter 9 of CMS's Prescription Drug Benefit Manual provides both interpretive rules and guidelines for sponsors to follow in developing this program. Part D sponsors are required to have, and to implement, an effective compliance plan as a condition of participation in the Medicare program. Elements of an effective plan include written policies and procedures; a designated compliance officer and committee; training and education, effective lines of communication, well-publicized disciplinary guidelines, and internal monitoring and auditing; and prompt response to detected offences and development of corrective actions. Part D sponsors are also required to provide fraud, waste, and abuse training and education to first-tier, downstream, and related entities. This includes pharmacists, pharmacy clerks, and others who are employed by entities that plans contract with to provide the Medicare drug benefit. Medicare Part D Oversight Contractors Medicare Drug Integrity Contractor: National Benefit Integrity CMS contracts with a private firm, Health Integrity Inc., to act as the National Benefit Integrity Medicare Drug Integrity Contractor (NBI MEDIC) for Part D plans. The NBI MEDIC's responsibilities include conducting complaint investigations; performing data analysis; developing and referring cases to law enforcement, as well as supporting ongoing investigations; conducting audits; and reviewing PDP and MA-PD fraud and abuse compliance programs. The NBI MEDIC is also responsible for working with other entities to coordinate fraud prevention and detection efforts, including the Part D sponsors, other Medicare contractors, the HHS Office of Inspector General (OIG), the Department of Justice, and state agencies. Medicare Drug Integrity Contractor: Outreach and Education CMS also has contracted with Rainmakers Strategic Solutions LLC to act as the Outreach and Education Medicare Drug Integrity Contractor (O&E MEDIC). The O&E MEDIC provides education on waste, fraud, and abuse for plan sponsors, pharmacists, law enforcement, as well as for Medicare advocates and enrollees. The O&E MEDIC maintains a website containing fraud and abuse related regulations and guidance, professional education materials, and relevant state and federal agency contact information. Part D Recovery Audit Contractor The ACA required CMS to expand its Recovery Audit Contractor (RAC) program to Medicare Part C and Part D. CMS has contracted with ACLR Strategic Business Solutions to perform the Part D RAC audit functions. The Part D RAC reviews Medicare payments made to plan sponsors and pharmacies to identify any over- or underpayments, provides information to CMS to help prevent future improper payments, and refers potential fraud findings to the NBI MEDIC. Program Spending and Financing207 Medicare's financial operations are accounted for through two trust funds maintained by the Department of the Treasury—the Hospital Insurance (HI) trust fund for Part A and the Supplementary Medical Insurance (SMI) trust fund, which contains separate accounts for Parts B and Part D. Unlike the HI program, SMI was not intended to be fully supported through dedicated sources of income. Instead, it relies primarily on general tax revenues and beneficiary premiums as revenue sources. Expenditures According to the 2018 Medicare Trustees Report, during CY2017, total Part D expenditures were approximately $100.0 billion. (See Table 10 . ) This amount included the combined costs of prescription drugs provided by Part D plans to enrollees and Medicare payments to employer-sponsored retiree health plans and federal administrative expenses, including expenses incurred by HHS, SSA, and the Department of the Treasury in administering Part D. Such duties include making payments to Part D plans and implementing fraud and abuse control activities. (See the Appendix for historical and projected Part D expenditures.) Revenues The major sources of revenue for the Part D account include general revenues, beneficiary premiums, and state contributions. In CY2017, of the $100.2 billion in total Part D income, general revenues accounted for $73.2 billion, premiums accounted for $15.5 billion, and transfers from states for $11.4 billion. The appropriation language adopted for the Part D account provides resources for benefit payments without the need for congressional approval. This allows substantial flexibility in the amount of general revenues available to the account, and eliminates the need for a contingency reserve. As a result, assets in the Part D account are generally low and only need to be held for a short time until they are used to meet immediate expenditures. As premium and general revenue income for Part D is reset each year to match expected costs, the Medicare Trustees consider the Part D account to be in satisfactory financial condition under current law. Beneficiary Premiums Beneficiary premiums are based on the participating plans' national average bid amounts and are defined prior to each year's operations, with the average premium amounting to 25.5% of the expected per capita plan costs for basic coverage. (See " Premiums .") In 2018, the base monthly premium is $35.02; however, beneficiaries pay different premiums depending on the plan they selected (and whether they are entitled to low-income premium subsidies). Beneficiaries may have their premiums deducted from their Social Security or other federal benefit payments; these are then forwarded to Part D plans on their behalf. Alternatively, they may pay their premiums directly to the Part D plans. As required by the ACA, since 2011, beneficiaries with higher incomes pay income-related monthly premium adjustments in addition to the premiums charged by the plans in which they have enrolled. (See " Premium Surcharge for Higher-Income Enrollees .") These extra amounts are credited to the Part D trust fund account and reduce the amount of general revenue funding needed. Because individual plan premiums vary, the additional amount paid is calculated as a percentage of the base beneficiary premium, not the individual's actual premium amount. This extra amount is usually deducted from an individual's monthly Social Security payments regardless of how that person ordinarily pays the monthly prescription plan premiums. If the amount is greater than the monthly payment from Social Security, or an individual does not receive Social Security payments (e.g., the individual has not yet signed up for Social Security benefits), then CMS may directly bill the individual for this amount. In CY2017, $5.0 billion in premium amounts were withheld from Social Security benefit checks or other federal benefit payments. (See Table 10 .) Another $10.5 billion in premiums were paid directly to the plans by beneficiaries. As noted, premiums for the Part D program are generally set at an amount equal to 25.5% of standard benefit costs; however, as recipients of the Part D low-income subsidies are not required to pay premiums and premiums are based only on standard benefits (i.e., the premium calculation does not include such things as costs associated with the low-income subsidy and risk-corridor payments), premiums made up about 15.5% of total Part D program revenues in 2017. General Revenues General revenues are transferred from the Treasury to the Part D Account on an as-needed basis to cover the portion of program expenditures funded by federal subsidies. These transfers are based on expected costs of the direct subsidy, reinsurance payments, employer subsidies, low-income subsidies, net risk-sharing payments, administrative expenses, and advanced discount payments. In CY2017, contributions received from the general fund of the Treasury amounted to $73.2 billion, or about 73% of total Part D revenue. State Contributions Subsequent to the availability of Part D drug coverage and low-income subsidies in 2006, Medicaid is no longer the primary payer of drug costs for full-benefit dual-eligible beneficiaries. However, MMA contained a provision (labeled by some as the "clawback provision") that requires states to pay the Part D account in the SMI trust fund a portion of the costs that they would have incurred for this population if they were still the primary payer. These amounts are based on the product of the estimated annual per capita full dual-eligible drug payment amount and the monthly State enrollment of full dual eligibles. Starting in 2006, states paid 90% of these estimated costs. This percentage phased down over a 10-year period to 75% starting in 2015. In CY2017, state payments amounted to $11.4 billion, or about 11.3% of Part D revenues. Historical Program Spending Actual spending for the Medicare prescription drug benefit has been lower than estimated at the beginning of the program. The 2004 Medicare Trustees Report, the first of such reports issued subsequent to the enactment of MMA, projected that total program spending would be $85 billion in CY2006 (the first year of the program) and would grow to about $162 billion by CY2013. Actual Medicare expenditures for the Part D drug benefit were approximately $47 billion in CY2006 and close to $70 billion in CY2013. The difference between projected and actual spending has been due to both lower than expected enrollment and per capita spending. (See Table 11 .) Original CBO estimates of Part D spending were also higher than actual spending for FY2004-FY2013. (See Table 12 .) While aggregate Part D expenditures have increased by an average annual rate of 7.4% over the past 10 years (2008-2017), most of this growth reflects the growth in enrollment during the initial years of the program. Per capita expenditures during this time increased at a much slower annual rate of 3.8%. Both the Medicare Trustees and CBO attribute the slower per capita growth rate to a high proportion of prescriptions filled with low-cost generic drugs, as well as to patent expirations of major drugs during this period. In their 2018 report, the Medicare Trustees noted that 2017 Part D per capita benefit expenditures were lower than in 2016, and attributed this decrease to an increase in plan rebates and a reduction in hepatitis C drug spending. The Trustees expect this decline to continue in 2018, for similar reasons. ( S ee Table 13 .) Estimated Future Part D Expenditures Over the next 10 years (2018-2027), the Medicare Trustees project more rapid growth in Part D costs, with aggregate benefits increasing on average at 6.9% annually, and per capita expenditures increasing on average by 3.9% each year. This projected growth is due to expectations of further increases in the number of enrollees, changes in the distribution of enrollees among coverage categories (e.g., a movement from subsidized retiree plans to regular Part D plans and growth in the number of people reaching the catastrophic coverage level), a slowing of the trend toward greater generic drug utilization, and an increase in the use and the prices of specialty drugs. (See Table 13 and Table 14 .) The Medicare Trustees project that total Part D expenditures will more than double during the next 10 years, from $94.5 billion in 2018 to $195.3 billion in 2027. (See Table A-1 .) Annual per capita Part D benefit expenditures are also projected to increase—from $2,057 in 2018 to $3,293 in 2027. Over the longer term, the Trustees project that total Part D spending will grow from 0.48% of GDP in 2017, to 0.64% in 2027 and to 1.16% of GDP in 2092. Appendix. Historical and Projected Part D Operations

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173) established a voluntary, outpatient prescription drug benefit under Medicare Part D, effective January 1, 2006. Medicare Part D provides coverage through private prescription drug plans (PDPs) that offer only drug coverage, or through Medicare Advantage (MA) prescription drug plans (MA-PDs) that offer coverage as part of broader, managed care plans. Private drug plans participating in Part D bear some financial risk, although federal subsidies cover most program costs in an effort to encourage participation and keep benefits affordable. At a minimum, Medicare drug plans must offer a "standard coverage" package of benefits or alternative coverage that is actuarially equivalent to a standard plan. Plans also may offer enhanced benefits. Although all plans must meet certain minimum requirements, there can be significant differences among offerings in terms of benefit design, specific drugs included in formularies (i.e., lists of covered drugs), cost sharing for particular drugs, or the level of monthly premiums. In general, beneficiaries can enroll in a plan, or change plan enrollment, when they first become eligible for Medicare or during open enrollment periods each October 15 through December 7. For plan year 2018, there are between 19 and 26 PDPs in the nation's 34 PDP regions, in addition to Medicare Advantage plans. Because sponsors are allowed to change plan offerings from year to year, beneficiaries annually face the need for careful review of their choices to select the plans that best meet their needs. A key element of the Part D program is enhanced coverage for low-income individuals. Persons with incomes up to 150% of the federal poverty level (FPL) and assets below set limits are eligible for extra assistance with Medicare Part D premiums and cost sharing. Individuals enrolled in both Medicare and Medicaid (so-called dual eligibles) and certain other low-income beneficiaries are automatically enrolled in no-premium plans, which are Part D plans that have premiums at or below specified levels. In 2017, about 42.5 million out of a total of 58.6 million Medicare beneficiaries received prescription drug benefits through a PDP or an MA-PD, with almost one-third receiving a low-income subsidy. Another 1.6 million received drug assistance through a Part D-subsidized retiree health plan. Of the remaining 25% of Medicare beneficiaries not enrolled in Part D, about half had coverage through health care plans that was at least as generous as Part D; the other half had no coverage or coverage less generous than Part D. Overall, about 88% of Medicare beneficiaries had drug coverage through either PDP or MA-PD plans, retiree coverage, or private insurance of comparable scope. Total Part D expenditures were approximately $100.0 billion in calendar year 2017. Medicare Part D has cost less than originally forecasted, due in part to lower-than-predicted enrollment and increased use of less expensive generic drugs. However, the Medicare Trustees project that spending on Part D benefits will accelerate over the next 10 years due to the expectation of further increases in the number of enrollees, costs associated with the gradual elimination of the out-of-pocket cost coverage gap, changes in the distribution of enrollees among coverage categories, a slowing of the trend toward greater generic drug utilization, and an increase in the use and the prices of specialty drugs.

Introduction For decades, executive permission in the form of a Presidential Permit has been required for the construction, connection, operation, and maintenance of certain facilities that cross the United States' borders with Canada and Mexico. The constitutional basis for the President's cross-border permitting authority was examined in a prior CRS report. However, questions remain about the manner in which this authority is exercised among the agencies to which it has been delegated. In particular, some Members of Congress and affected stakeholders seek greater clarity about how Presidential Permit applications are reviewed for various kinds of cross-border energy projects, including the degree to which there may be differences or similarities among the various agency approaches to evaluating environmental impacts of proposed projects and in determining whether they serve the national or public interest. With few exceptions, requests for Presidential Permits for cross-border pipelines or electric transmission lines have involved projects extending a relatively short distance into a U.S. border state before connecting to some existing facility (e.g., a refinery in Texas or a power plant in Arizona). However, in the last decade, two long cross-border pipeline projects have been approved—TransCanada's Keystone and Enbridge Energy's Alberta Clipper. In operation since 2010, both projects transport oil sands crude from Alberta, Canada, deep into the United States via pipelines that are hundreds of miles long and cross multiple states. The size and scope of these projects led to increased national attention on the Presidential Permit process for subsequent proposals. In particular, there has been significant national attention on the Department of State's process for considering TransCanada's permit application for its proposed Keystone XL pipeline. The Trump Administration issued a Presidential Permit for that project on March 23, 2017. In response to perceived delays in the review of the Keystone XL permit application, several legislative proposals in the 114 th Congress sought to change some specific or general aspects of the Presidential Permit process. Most notable was the Keystone XL Pipeline Approval Act ( S. 1 ), which was passed in Congress but vetoed by President Obama. Other legislative proposals in the 114 th Congress included the American Energy Renaissance Act of 2015 ( S. 791 and H.R. 1487 ) and the North American Energy Infrastructure Act ( S. 1228 ). Given the issues that arose in the wake of TransCanada's application for the Keystone XL pipeline, Congress may again propose legislation intended to expedite approval of future applications for Presidential Permits. This report focusses on the Presidential Permit review processes for cross-border energy infrastructure as implemented by these agencies: The Department of State for pipelines and similar facilities that transport liquids such as petroleum, petroleum products, and other hazardous liquids; The Federal Energy Regulatory Commission (FERC) for natural gas pipelines and associated facilities; and The Department of Energy (DOE) for electricity transmission lines and associated facilities. This report compares practices among these three agencies with respect to how they define a proposed project's scope (which dictates the array of associated impacts they will review), conduct environmental reviews, and make final decisions on permit applications. It also includes a discussion of recent efforts by Congress to change those permitting processes. Overview of Presidential Permitting Processes The State Department, FERC, and DOE each make their decisions regarding Presidential Permit applications largely within the context of their own interpretation of directives in a series of executive orders. The State Department makes its permitting decisions primarily in accordance with directives in Executive Order (E.O.) 11423, as amended by E.O. 13337. FERC and DOE make permitting decisions in accordance with E.O. 10485, as amended by E.O. 12038. Broadly speaking, each executive order requires the respective agency to do the following: gather necessary project-specific information from the applicant; seek input from specific outside federal agencies; and decide whether to seek input from additional local, state, tribal, or federal agencies or from members of the public. Under the applicable executive order, each agency is required to issue a Presidential Permit if, after evaluating all relevant project information, the agency determines that the project would "serve the national interest" (pursuant to E.O. 13337) or be "consistent with the public interest" (pursuant to E.O. 10485). A permit must include any conditions that the permitting agency identifies as necessary to ensure that the project would, in fact, meet the public or national interest standard. (For the sake of brevity, the phrase public or national interest , as it is used later in this report, refers to the standard that is applied or procedures that are implemented by the authorized agency under the applicable executive order to determine whether a proposal will be "consistent with the public interest" or "serve the national interest." It does not mean to suggest that such standards or procedures are the same for each agency.) Depending on the type of project- and site-specific impacts of the project, additional federal requirements may apply to the proposal. For example, natural gas pipelines are subject to requirements established by or pursuant to the Natural Gas Act. Each agency authorized to issue Presidential Permits informs its decisionmaking regarding such permits using information gathered in accordance with its procedures implementing the National Environmental Policy Act of 1969 (NEPA). In part, NEPA requires federal agencies to ensure that the environmental impacts of an action are identified and taken into consideration before making a final agency decision about the action. Permit conditions, such as mitigation measures and additional compliance requirements, are also generally identified during the NEPA review. For example, during the NEPA review, an agency may identify construction procedures or mitigation measures that the applicant must implement to ensure compliance with other applicable federal law, such as the Endangered Species Act or Clean Water Act. Since each agency is required to identify conditions under which a proposal must be implemented, it is rare that an agency denies a permit application. Instead, the permitting process is generally used to determine how a project must be implemented to comply with federal law (and meet the national or public interest standard) rather than whether it can be implemented. In 2015, the State Department under the Obama Administration did deny TransCanada's application for a Presidential Permit, finding that the pipeline would not meet the national interest. However, such a decision was a rare exception, not the rule. Agency Implementation of the Executive Orders Each agency's permitting process involves the identification and analysis of project-specific impacts of a proposal. That information is gathered in accordance with executive order directives, the agency's NEPA implementation process, and any other applicable federal requirements. Once a Presidential Permit is issued, the applicant (then permittee) must site, construct, operate, and maintain the border-crossing facilities in accordance with conditions specified in the permit. As a result, subsequent modifications to the facility related to its siting, construction, operation, or maintenance may require additional authorization from the permitting agency. Key Elements of the NEPA Review Process As stated above, each permitting agency identifies the impacts of a proposed project and conditions necessary to ensure it will meet the required public or national interest standards, largely within the context of identifying environmental impacts pursuant to NEPA. In 1978, the Council on Environmental Quality (CEQ) promulgated regulations implementing NEPA that are broadly applicable to all federal agencies. In those regulations, each federal agency was required to adopt the CEQ regulations, supplement them as necessary to include procedures relevant to that agency's authority, and ensure that those procedures implementing NEPA are integrated into the agency's broader decisionmaking procedures. FERC, DOE, and the State Department subsequently did so. The resulting agency-specific NEPA review process is used to identify any potentially relevant issues or impacts that must be considered during the decisionmaking process. Procedures for determining the scope of the environmental review and the type of impacts analyzed during that review are delineated in both the CEQ and the individual agency NEPA regulations. NEPA requires federal agencies to provide a detailed environmental impact statement (EIS) for "major federal actions significantly affecting the quality of the human environment." If the agency is uncertain whether a proposal would have significant impacts, it may prepare an environmental assessment (EA) to determine if an EIS is necessary, or a finding of no significant impact (FONSI) may be issued. Federal agencies may also identify categories of actions they are authorized to undertake that have been found to have no significant effect on the environment. Such actions are categorically excluded from the need to prepare an EIS or EA and are, hence, broadly referred to as "categorical exclusions" (CEs or CATEXs). Given the various potential types of review required under NEPA (i.e., preparation of an EIS or EA or approval as a CE), the scope of project-specific information that will be used to inform an agency's public or national interest determination depends on whether the proposal will "significantly" affect the environment. That determination must be based upon each agency's evaluation of these effects of the proposal: Direct effects that are caused by the project and occur at the same time and place (e.g., impacts directly associated with the construction and operation of the cross-border facilities). Indirect effects that are caused by the action and are later in time or farther removed in distance but still reasonably foreseeable. Cumulative impacts on the environment that result from the incremental impacts of the action when added to other past, present, or reasonably foreseeable future actions regardless of what agency (federal or nonfederal) or person undertakes that other action. The definitions of these categories of impacts mean that, although a Presidential Permit may be for cross-border facilities, the scope of environmental review of domestic impacts is not limited to the evaluation of impacts that occur only at the border. With few exceptions, each agency has determined that it must evaluate the impacts of an entire project within the United States—from the border to its eventual connection in U.S. territory. For most projects, the consideration of direct and indirect impacts involves an evaluation of all new facilities that will be built as a result of the cross-border facilities, including other facilities constructed in the United States (such as a new power plant being fueled by, and built in conjunction with, a new cross-border natural gas pipeline). Although the permitting agency may have no authority to control those impacts—other than denying or conditioning the permit—NEPA obligates each agency to be aware of them and demonstrate that those impacts were fully considered in its decisionmaking process. For any given Presidential Permit application, interested stakeholders may disagree with the permitting agency's decision regarding exactly what constitutes direct, indirect, or cumulative impacts. Such disagreements may relate to how far "upstream" or "downstream" from the project the agency must evaluate impacts. For example, some may argue that approving a cross-border pipeline may induce incremental production of oil or natural gas and that, hence, environmental impacts associated with the development and production of that oil or gas should be evaluated (e.g., the potential for incremental water use or greenhouse gas emissions, among other impacts). Others argue that such impacts are outside the control and responsibility of the permitting agency and should not have to be reviewed. Each agency evaluates project-specific impacts that are reasonably foreseeable. A host of complex factors may be relevant to an agency's determination of the impacts it will consider. As noted above, NEPA requires an agency to review a proposal's potential to affect the quality of the human environment. The CEQ regulations define the "human environment" to include the natural and physical environment and the relationship of people with that environment, which may include economic or social effects. As DOE, FERC, and the State Department implement NEPA for their Presidential Permit processes, project impacts assessed include impacts to cultural or historical resources and those associated with project safety and security (i.e., impacts potentially subject to requirements established under laws other than NEPA). That is, each agency uses the NEPA process to evaluate potential project impacts beyond those that may be identified as "environmental." Economic or social effects are not intended by themselves to require preparation of an EIS. However, when an EIS is prepared, and economic or social and natural or physical environmental effects are interrelated, then the NEPA document must discuss all of these effects on the human environment. For pipelines and electric transmission lines, this generally means a review of construction and operational issues related to construction methods, safety, and reliability. It also includes the proposal's direct and indirect impacts on geology, soils, water resources, wetlands, vegetation, fisheries, wildlife, threatened and endangered species, land use, recreation, visual resources, cultural resources, air quality (including potential greenhouse gas emissions), noise, safety, and socioeconomics. For oil or natural gas pipelines, these analyses are prepared in cooperation with the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration. Depending on the location of the project and the resources affected, a given project may have wide-ranging impacts that are also subject to an array of local, tribal, state, and federal law. The identification of such requirements may be useful to the permitting agency to ensure that the cross-border project would result in the construction and operation of facilities in the United States that comply with applicable state and federal environmental and safety requirements. Generally, the final EIS or FONSI for a cross-border pipeline or electric transmission line would identify other requirements the applicant must meet to obtain a Presidential Permit (e.g., pipeline safety regulations), as well as any other state or federal approvals required for other segments of the project (e.g., those established under the Clean Water Act, Endangered Species Act, or National Historic Preservation Act). Overall, this process may result in federal approvals being processed more quickly but may blur the distinction between procedures that must be completed to ensure compliance with NEPA and actions that must be taken to ensure compliance with other laws related to the construction and operation of the entire project. Once all project impacts are identified, each agency then determines what, if any, conditions must be included in the permit to ensure that the entire project is constructed, operated, connected, and maintained in a way that meets the agency's public or national interest standard. As a result, FERC, DOE, and the State Department have rarely denied permits based on project-specific impacts identified during the NEPA review process. Instead, each agency has generally specified conditions under which the proposal could be approved (i.e., the permit could be issued). Agency-Specific Procedures Each agency authorized to issue Presidential Permits for cross-border energy facilities has discretion to determine whether the construction and operation of those facilities will meet its respective public or national interest standard, subject to judicial review. Each agency considers policy issues and other factors unique to the commodity of import or export (e.g., environmental or economic issues related to oil versus electricity imports). With respect to the construction and operation of the facilities themselves, the scope of each agency's review generally depends on the size and scope of the proposed project (e.g., the extent to which the construction of the cross-border facilities will result in the construction of any new pipelines, transmission lines, or related facilities in the United States). State Department (Petroleum Products and Hazardous Liquids) Executive Orders 11423 and 13337 direct the State Department to issue Presidential Permits for projects that "serve the national interest." The orders do not define the phrase "national interest," nor do they direct the State Department to evaluate specific factors before issuing a Presidential Permit. However, E.O. 13337 does require the State Department to refer the application and pertinent project information to and request the views of the Attorney General; Administrator of the Environmental Protection Agency; the Secretaries of Defense, the Interior, Commerce, Transportation, Energy, and Homeland Security, or the heads of those departments or agencies with relevant authority or responsibility over relevant elements of the proposed project; and, for applications concerning the border with Mexico, the U.S. Commissioner of the International Boundary and Water Commission. In its interpretation of the executive order's directive, the State Department has asserted that, consistent with the President's broad discretion in the conduct of foreign affairs, it has significant discretion in deciding the factors it will examine when making a national interest determination. In the past, the State Department stated that the purpose of its permitting process is to consider the application in terms of how a proposed project would serve the national interest, taking into account the proposal's potential effect on energy security, environmental and cultural resources, the economy, and foreign policy. More specifically, apart from environmental considerations identified during the NEPA process, the State Department has identified the following as issues it has considered in past decisions: the impacts the proposal would have on the diversity of supply and security of transport pathways for crude oil imported to the United States; the impact of a cross-border facility on the relations with the country to which it connects; the stability of various foreign suppliers of crude oil and the ability of the United States to work with those countries to meet overall environmental and energy security goals; the impact of the proposal on broader foreign policy objectives, including a comprehensive strategy to address climate change, bilateral relations with neighboring countries, and energy security; the potential economic benefits to the United States of constructing and operating the proposed project; and the relationship between the proposed project and goals to reduce reliance on fossil fuels and to increase use of alternative and renewable energy sources. While the State Department has identified these economic and strategic issues as potentially relevant to its national interest determination, project-specific issues identified during the NEPA process (e.g., the size of the project and types of resources potentially affected by it) are likely to affect the scope of issues the State Department will evaluate and the time it takes it to make that evaluation. State Department regulations implementing NEPA identify issuance of a permit for pipeline construction under E.O. 11423 as an action that normally requires an EA. Its NEPA regulations do not explicitly list actions that may require an EIS or be processed as a CE. Most cross-border oil pipeline facilities authorized by the State Department have involved projects that extend a relatively short distance into a border state. Most Presidential Permits for such projects have involved the preparation of an EA resulting in a FONSI. It was not until 2006 that the State Department determined that a proposed cross-border oil pipeline project would require an EIS. Since then, two additional pipeline proposals have involved the preparation of an EIS. The three cross-border pipelines that have required preparation of an EIS are TransCanada's Keystone and Keystone XL pipelines and Enbridge Energy's Alberta Clipper. All three transport (or propose to transport) oil sands crude from Alberta, Canada, into the United States and extend across multiple states. As the footprint of such pipeline systems grows, so does the list of potential direct, indirect, and cumulative impacts and the public attention to the project, both in favor and opposed. Whereas past Presidential Permits were for pipeline systems that may have totaled less than a few hundred miles, the Keystone and Keystone XL (as it is currently proposed) total approximately 1,086 and 875 miles, respectively. These recent applications have raised issues that other Presidential Permits did not, such as issues related to the production of the oil in Canada, concern regarding potential spills far removed from the border, and life-cycle greenhouse gas emissions associated with the production and use of oil sands crude. Broadly speaking, the State Department has considerable discretion with respect to making national interest determinations, so its conclusions for one project within its jurisdiction may not apply to another due to differences in project configuration, energy market conditions, technology, environmental conditions, and other important factors. Thus, Presidential Permit applications even for projects that appear similar are evaluated on a case-by-case basis by the agency and may realize different permit outcomes. Federal Energy Regulatory Commission (Natural Gas) Pursuant to E.O. 10485, FERC makes decisions regarding permit applications for natural gas pipelines that will cross the U.S. border with Mexico or Canada. The agency is required to issue a Presidential Permit if it determines that the project is consistent with the public interest and obtains the favorable recommendations of the Secretaries of State and Defense. FERC is authorized to establish permit conditions that, in its judgment, the public interest may require. Pursuant to Section 3 of the Natural Gas Act (NGA), FERC is also directed to approve the siting, construction, and operation of natural gas import/export facilities. FERC often integrates implementation of the Presidential Permit process, required under E.O. 10485, with its implementation of requirements established under Section 3 of the NGA. For example, for cross-border natural gas pipelines, FERC has generally issued a joint "Order Issuing Presidential Permit and Granting Authorization Under Section 3 of the Natural Gas Act." Under a separate directive in Section 3 of the NGA, any person seeking to import or export natural gas to or from the United States is required to obtain federal authorization to do so. Currently, DOE's Office of Fossil Energy is authorized to issue such approvals. Section 3 further provides that the export or import of natural gas to a nation that is a party to a free trade agreement requiring national treatment for trade in natural gas shall be deemed to be consistent with the public interest and that applications for such importation and exportation be granted without modification or delay. This provision applies to natural gas trade among the United States, Mexico, and Canada as all three nations are signatories to North American Free Trade Agreement (NAFTA). Still, FERC has drawn from the goals of NAFTA and its interpretation of Section 3 of the NGA when identifying the required scope of its public interest determination in evaluating applications for Presidential Permits. For example, in past approvals, FERC has noted that project construction was necessary to meet the expanding fuel demand for power generation and industrial activity in Mexico or Canada. Also, FERC has stated that it authorized the construction of facilities that will "promote national economic policy by reducing barriers to foreign trade and stimulating the flow of goods and services between the United States and [Mexico or Canada] by facilitating the transportation of natural gas imports and exports authorized by DOE. " FERC may also review potential impacts to private landowners. Section 7(c) of the NGA also authorizes FERC to issue a certificate of public convenience and necessity if the project will involve the construction and operation of a new interstate natural gas pipeline. When a border-crossing facility connects to or involves the construction of interstate pipelines, FERC has chosen to integrate its Presidential Permitting/Section 3 authorization process with its Section 7(c) authorization process. FERC's potential to have jurisdiction over both the cross-border facilities and its associated interstate pipeline—but not a strictly intra state pipeline—may lead to some confusion among stakeholders when identifying the various factors that FERC must assess in its NEPA review. A FERC order granting a Presidential Permit, issued jointly under Sections 3 and 7, may refer to jurisdictional versus nonjurisdictional facilities, meaning those project facilities over which FERC has siting jurisdiction versus those that are potentially relevant to the NEPA review but over which FERC has no siting jurisdiction—namely intrastate pipelines. Depending on the context, the identification of nonjurisdictional facilities may also be necessary to determine elements of the project that have some environmental or safety impacts that are subject to additional state or federal law. FERC may be obligated to evaluate the impacts of the construction and operation of such facilities even if it is not authorized to approve them. Identifying nonjurisdictional facilities may also be necessary to identify a start and end point for the project. For example, in FERC's final order authorizing Bakken Hunter, LLC, to build cross-border facilities, the identification of certain nonjurisdictional facilities was necessary to define the beginning and end point of the project. FERC regulations implementing NEPA include new gas import/export facilities among the projects it has identified as generally requiring the preparation of an EA, but they identify no cross-border projects that would generally require an EIS or CE. It appears that most Presidential Permits from FERC have involved the preparation of an EA resulting in a FONSI. Those projects have generally involved cross-border facilities that result in the construction of related facilities that extend a relatively short distance into a border state. Therefore, the scope of environmental review has been limited by the footprint of the projects. Consistent with the CEQ regulations implementing NEPA, the scope of FERC's review generally extends beyond the border-crossing facilities. For example, in 2013, FERC issued a Presidential Permit to NET Mexico Pipeline Partners that involved the construction of a 120-mile intrastate gas pipeline from Mexico into Texas. The preparation of FERC's EA and resulting FONSI involved analysis of the entire U.S. segment of the project. In addition to the size of its footprint, other site-specific issues will affect a proposal's potential to have significant impacts. For example, in March 2014, FERC determined that an EIS was warranted for the Sierrita Pipeline Project, which involved the construction of 61 miles of new natural gas pipeline in Arizona. The project also required an authorization under Section 7 of the NGA. The environmental review process identified several adverse impacts associated with the project, including potential adverse impacts on certain cultural and natural resources in the state. The EIS also identified actions that could be taken to minimize those impacts. These actions would later be included as conditions of permit approval. Department of Energy (Electricity) Like FERC, DOE is responsible for issuing Presidential Permits for certain projects pursuant to E.O. 10485. Pursuant to the Federal Power Act (FPA), DOE's Office of Electricity Delivery and Energy Reliability—specifically the Permitting, Siting and Analysis Division—is responsible for authorizing electricity exports and issuing Presidential Permits for cross-border electric transmission lines. Also like FERC, the agency is required to issue a Presidential Permit if it determines that the project is consistent with the public interest and obtains the favorable recommendations of the Secretaries of State and Defense. The agency is also authorized to establish permit conditions that, in its judgment, the public interest may require. Presidential Permits issued by DOE in the past 10 years appear to be for facilities that import electricity into the United States or connect to existing facilities previously authorized to export electricity. Both actions are not subject to separate approval under the FPA. Still, in past Presidential Permits, DOE noted that it has consistently expressed its expectation that owners of international transmission facilities provide access across the border in accordance with the principles of comparable open access and nondiscrimination contained in the FPA. According to DOE, the two criteria used by the agency to determine if a project is consistent with the public interest, and thus warrants issuance of a Presidential Permit, are (1) environmental impact, identified pursuant to NEPA; and (2) impact on electric reliability, obtained by ascertaining whether the proposal would adversely affect the operation of the U.S. electric power supply system under normal and contingency conditions. With regard to a project's potential impact on electric reliability, it appears that DOE relies on information provided by the applicant to make that determination. DOE regulations implementing NEPA classify decisions regarding cross-border electric transmission projects as actions that normally require a CE or an EA resulting in a FONSI. Such projects have been found to have no significant impacts (under NEPA) because they involve minor or no new construction, involve the construction or reconstruction of power lines that extended a relatively short distance (i.e., into a single border state before connecting to existing facilities), or were built in a previously developed facility area. For example, in 2007, DOE issued a Presidential Permit to AEP Texas Central Company for a project that was processed as a CE. DOE determined the project did not require an EA or EIS because it met criteria applicable to projects that normally have no significant impact on the environment. In this instance, the project originated at a power company in Laredo, Texas, crossing 0.3 miles through the state before reaching and extending an additional 3.79 miles into Mexico. DOE has determined that an EIS was required for some proposals after the agency identified conditions unique to that project that would result in significant impacts. When that occurred, the project involved the construction of new power lines that crossed a significant distance within the United States or required additional authorizations under other federal or state law. One example is DOE's Presidential Permit issued to Montana Alberta Tie Ltd. for new transmission facilities at the U.S.-Canada border. The project also required authorizations from the Montana Department of Environmental Quality (MDEQ) under state law related to facility siting (a state action subject to the Montana Environmental Policy Act [MEPA]) and from the U.S. Bureau of Land Management (BLM) because the project would require a right-of-way grant for Transportation and Utility Systems and Facilities on Federal Land (also a federal action subject to NEPA). DOE planned to prepare an EA for the project. However, since MDEQ decided to prepare a more detailed assessment of the project under MEPA, DOE determined that it would prepare an EIS. DOE worked with MDEQ and BLM to issue a joint EIS that integrated each agency's NEPA/MEPA process. Another example is the Champlain Hudson Power Express Project, which received a Presidential Permit from DOE in 2014. The proposed transmission lines would cross the U.S.-Canada border at Champlain, NY, and extend 336 miles through the state to the New York City metropolitan area. In its Federal Register notice regarding the environmental review of the project, DOE stated that "after due consideration of the nature and extent of the proposed project, including evaluation of the 'Information Regarding Potential Environmental Impacts' section of the Presidential permit application, DOE has determined that the appropriate level of NEPA review for this project is an EIS." According to DOE, the time it takes to process a Presidential Permit application usually depends on the extent of the environmental analysis. A decision on a permit that involves the preparation of an EA resulting in a FONSI can usually be reached in six months. If an EIS is required to adequately address the full environmental consequences of the proposed action, processing the permit application could take 18 months or longer. Facility Modifications and Permit Amendments As noted above, a Presidential Permit authorizes the siting, construction, operation, and maintenance of cross-border infrastructure projects. A permit is issued to a specific applicant and includes conditions that must be met for that specific project. Any subsequent modification to the permitted facility may require separate authorization from the permitting agency before it can proceed. That is, any changes to an authorized project before it is complete (i.e., issues related to siting and construction) or once it begins to operate (i.e., issues related to operation and maintenance) may require a new permit or, more often, an amendment to the existing permit. A new or amended permit is generally required if the permittee proposes a substantial modification to the authorized cross-border facility. What constitutes a "substantial modification" will vary in accordance with agency procedures and project-specific issues. The State Department has identified specific types of modifications that would generally require an amended Presidential Permit. The modifications are largely similar to those that have required a new or amended Presidential Permit from DOE or FERC. They include the following: A change in ownership or operation/maintenance responsibility. Presidential Permits are not transferable. A permittee must submit an application to the permitting agency explicitly requesting authorization to transfer the facility to a new owner/operator. A permanent change in the authorized conveyance. This includes changes to the permitted facilities that would be inconsistent with what is described in the permit. With respect to pipelines and transmission lines, such changes involve changes in the physical capacity of the conveyance (i.e., action that could change the amount of oil or gas imported/exported or changes that could affect U.S. electric reliability). Any other modification that would render inaccurate the definition of covered U.S. facilities described in the permit. This may involve a potentially wide array of changes. FERC explicitly requires a permittee to submit a new application before making any modifications to an existing facility that would involve significant state and local safety considerations that have not been previously addressed. A review of permits approved and applications pending between 2010 and 2015 before FERC, DOE, and the State Department indicates that a sizable percentage of the Presidential Permit applications involved requests to amend a permit for an already authorized cross-border facility. For example, as of August 2015, nine companies had 13 permit applications pending before the State Department for cross-border pipelines that transport liquid petroleum and petroleum products (see Table 1 ). Among those, three projects involved a request to approve new construction. The remaining involved new permits or modifications to existing permits for previously approved pipelines. Most of those pending applications involved a name change related to a change in ownership. Depending on the nature of the modification, an agency may amend an existing permit or require a new permit. A decision on whether a facility modification will require a new or amended Presidential Permit is made on a project-by-project basis in accordance with agency-specific requirements. To determine whether a new or amended permit is needed, the permittee will have to provide information to the respective agency regarding the modification. The State Department identifies actions related to cross-border facilities as falling into one of three categories. A permittee may be required to provide the State Department with certain information about the facility modification depending on which of the following categories the action fell: 1. "Red" actions : a new border crossing or a change to an existing border crossing that is known to involve substantial modifications. These actions require the permittee to submit to the State Department both a notification of the change and an application to amend its permit. 2. "Yellow" actions : modifications that may have a material effect on Canadian or Mexican government operations but do not clearly involve substantial modifications to a border crossing. These actions require the permittee to submit project notification information to the State Department. The department will then determine if an amended Presidential Permit is required. 3. "Green" actions : regular maintenance and repair work to existing structures that requires no notification to the State Department and no new permit. A permittee would generally be aware of the permit conditions within which it must operate and the need to notify the permitting agency of any potential facility modifications—such restrictions are explicitly stated in the permit itself. For example, a Presidential Permit issued by the State Department in 2013 for the NOVA Chemicals natural gas liquids pipeline states that "the permittee shall make no substantial change in the United States facilities, the location of the United States facilities, or in the operation authorized by this permit until such changes have been approved by the Secretary of State or the Secretary's delegate." The potential for an amendment may also be acknowledged in a Presidential Permit. For example, in August 2012, DOE issued a Presidential Permit to Energia Sierra Juarez that provided in part that the permit should be amended if subsequent phases of a related wind generation project necessitate changes to the facility, including higher capacity transmission lines or other changes that could impact the reliability of the U.S. power grid. For any given project, however, the need for a new permit versus an amended permit may not be immediately clear. For example, in February 2012, DOE issued a new Presidential Permit to ITC Transmission to authorize the replacement of failed transformers at an authorized facility. DOE initially began processing that authorization as an amendment to an existing permit. However, because of the complexity of issues raised during that process, DOE determined that a new permit was needed. Action Related to the Keystone XL Permit Application In recent years, largely within the context of the Obama Administration's consideration of the Presidential Permit application for the Keystone XL pipeline project, Congress has acted on numerous occasions to influence the State Department permitting process or to assert direct congressional authority over permit approval through new legislation. Summary of Presidential Decisions on the Keystone XL Pipeline TransCanada applied for a Presidential Permit for the Keystone XL pipeline project several times—initially in 2008 and again, with a reconfigured pipeline route, in 2012. The Obama Administration denied both applications. On January 24, 2017, the Trump Administration invited TransCanada to resubmit its permit application for the pipeline and directed the relevant federal agencies to expedite their review of the application if resubmitted. Shortly thereafter, TransCanada submitted a new permit application to the State Department. On March 23, 2017, the State Department issued a final Record of Decision and National Interest Determination (ROD/NID) documenting the State Department's determination that the project would serve the national interest. The ROD/NID authorized the issuance of a Presidential Permit, which was also issued on March 23. Congressional Action Related to the Keystone XL Project In the 112 th Congress, the Temporary Payroll Tax Cut Continuation Act of 2011 ( P.L. 112-78 ) included provisions requiring the Secretary of State to issue a Presidential Permit for the Keystone XL project within 60 days, unless the President determined the project not to be in the national interest. Subsequently, the State Department denied TransCanada's initial application for a Presidential Permit stating that it did not have time to complete the national interest determination within the 60-day deadline established in P.L. 112-78 . Other legislative proposals would also have imposed deadlines on a national interest determination for the Keystone XL project. All of these proposals were mooted by the State Department's initial denial of the permit following the enactment of P.L. 112-78 . Additional legislative proposals related to the Presidential Permit process followed TransCanada's second permit application. In the 113 th Congress, several legislative proposals from the prior Congress were reintroduced. The Energy Production and Project Delivery Act of 2013 ( S. 17 ) would have eliminated the Presidential Permit requirement for the Keystone XL project. The Keystone for a Secure Tomorrow Act ( H.R. 334 ) and a Senate bill to approve Keystone XL ( S. 582 ) would have directly approved Keystone XL under the authority of Congress to regulate foreign commerce. The Northern Route Approval Act ( H.R. 3 ) would have eliminated the Presidential Permit requirement for Keystone XL. On March 22, 2013, the Senate passed an amendment to the FY2014 Senate Budget Resolution ( S.Con.Res. 8 ) that would have provided for the approval and construction of Keystone XL ( S.Amdt. 494 ). The North American Energy Infrastructure Act ( H.R. 3301 ) would have transferred permit authority for oil pipelines from the State Department to the Department of Commerce, required agencies to approve applications within 120 days of submission unless they determined the project to be not in the U.S. national security interest (as opposed to "national interest" more generally), and eliminated the need for new or revised Presidential Permits for pipeline modifications (e.g., reversal of flow direction), among other provisions. The Keystone XL Pipeline Approval Act ( S. 2554 ), another Senate bill ( S. 2280 ), and a House bill to approve the Keystone XL pipeline ( H.R. 5682 ) would have granted final federal approval to the pipeline. None of these bills was enacted into law. After the November 2014 congressional elections, with greater majorities in both the House and Senate, Republican leaders stated their intention to again seek congressional authorization of the Keystone XL pipeline as a legislative priority in the 114 th Congress. Accordingly, several bills were introduced or reintroduced to support the approval of the pipeline. For example, the Keystone XL Pipeline Act ( S. 1 and H.R. 3 ) and the Keystone XL Pipeline Approval Act ( S. 147 ) would have explicitly authorized TransCanada to construct and operate the pipeline and cross-border facilities related to the Keystone XL pipeline proposal and specified that the final EIS prepared for the project would fully satisfy all NEPA requirements and any other federal laws that require federal agency consultation or review of the pipeline (including the Endangered Species Act). The Strategic Petroleum Supplies Act ( S. 82 ) would have suspended sales of petroleum products from the Strategic Petroleum Reserve until permits for the Keystone XL pipeline were issued. One legislative proposal ( S. 188 ) would have required that crude oil that entered the United States via the Keystone XL pipeline be used as a fuel or to manufacture another product in the United States but specified conditions under which the President could waive that requirement. On January 29, 2015, the Senate passed the renamed Keystone XL Pipeline Approval Act ( S. 1 ), as amended, by a vote of 62-36. The bill was passed in the House on February 11 by a vote of 270-152. S. 1 was sent to President Obama on February 24 and vetoed by the President the same day. President Obama stated that he vetoed S. 1 because it attempted "to circumvent longstanding and proven processes for determining whether or not building and operating a cross-border pipeline serves the national interest." The Senate attempted to override the President's veto on March 4, but the override measure failed by a vote of 62-37. No further action on S. 1 was taken in the House. Some legislative proposals in the 114 th Congress would have modified the Presidential Permit process more broadly. For example, among other provisions, the American Energy Renaissance Act of 2015 ( S. 791 and H.R. 1487 ) would have eliminated the Presidential Permit requirement for all cross-border energy infrastructure (§2006). Instead, the bill would have required developers of cross-border oil pipelines or electric transmission lines to obtain a "certificate of crossing" for the cross-border segment of a proposed project from the Secretary of Energy (§2003(a)). The certificate would have to be issued within 120 days after final action under NEPA unless the project was found to be not in the "national security interest" of the United States (§2003(b)(1)). Permitting requirements for natural gas pipelines under Sections 3 and 7 of the NGA would have remained unchanged. The bill would also have eliminated the Presidential Permit requirement for the existing Keystone XL pipeline proposal, deeming its NEPA review to be satisfied (§2012). The North American Energy Infrastructure Act ( S. 1228 ), like S. 791 and H.R. 1487 , would have eliminated the Presidential Permit requirement for cross-border energy infrastructure (§7). It also contained similar provisions with respect to certificates of crossing, but it would have maintained the State Department as the permitting agency for oil pipelines and would have maintained a "public interest" standard for approval (§4(b)). The bill did not seek approval of Keystone XL. Concluding Observations Now that a Presidential Permit has been issued for the Keystone XL pipeline, Congress may continue to consider legislation addressing agency decisions regarding future Presidential Permit applications. Such options could include some that, arguably, would have been vetoed in the past—specifically, legislation that may alter or narrow authorities delegated to federal agencies by the President. For example, Congress could choose to consider legislation that would explicitly define the scope of federal agency reviews for some projects, change the agency responsible for authorizing such projects, or explicitly define the criteria that can or must be evaluated to determine whether a proposal is in the national or public interest.

Executive permission in the form of a Presidential Permit has long been required for the construction, connection, operation, and maintenance of certain facilities that cross the United States borders with Canada and Mexico. The constitutional basis for the President's cross-border permitting authority has been addressed by the courts, but questions remain about the manner in which this authority is exercised among the agencies to which it has been delegated. In particular, some Members of Congress and affected stakeholders seek greater clarity about how Presidential Permit applications are reviewed for various kinds of cross-border energy projects. Agency Authorities and Decisionmaking Congress has shown particular interest in the Presidential Permit review processes for cross-border energy infrastructure as implemented by The Department of State for pipelines that transport petroleum, petroleum products, and other hazardous liquids; The Federal Energy Regulatory Commission (FERC) for natural gas pipelines; and The Department of Energy (DOE) for electricity transmission lines. The State Department makes its permitting decisions primarily in accordance with directives in Executive Order 11423 (E.O.), as amended by E.O. 13337. FERC and DOE make permitting decisions in accordance with E.O. 10485, as amended by E.O. 12038. Broadly speaking, each executive order requires the respective agency to gather necessary project-specific information from the applicant; seek input from specific outside federal agencies; and decide whether to seek input from additional local, state, tribal, or federal agencies or from members of the public. Under the applicable executive order, each agency is required to issue a Presidential Permit if, after evaluating all relevant project information, the agency determines that the project would "serve the national interest" (pursuant to E.O. 13337) or be "consistent with the public interest" (pursuant to E.O. 10485). For the most part, agencies gather, evaluate, and consider project-related information within the framework of conducting an environmental review. Such reviews are generally conducted in accordance with each agency's process for complying with the National Environmental Policy Act (NEPA). In documenting compliance with NEPA, each agency evaluates the direct and indirect effects, including any cumulative impacts, of issuing the permit. To do so, each agency generally looks at the effect of constructing the entire project, not just the portions that would cross the border (i.e., the action for which the Presidential Permit is required). Historically, evaluating impacts of the entire project would not necessarily involve a complex or particularly time-consuming review. With few exceptions, past applications for Presidential Permits have been for pipelines or transmission lines that extend a relatively short distance into a U.S. border state. Recently, however, several pipeline projects—Enbridge Energy's Alberta Clipper and TransCanada's Keystone and Keystone XL pipeline—have involved projects that are hundreds of miles long and cross multiple states. It was the larger scope of such projects that, in part, resulted in increased national attention to the most recent proposal, the Keystone XL pipeline. In 2015, the State Department under President Obama denied TransCanada's application for a Presidential Permit for the project, finding that it did not serve the national interest. However, a new permit application was approved on March 23, 2017, when the State Department, under the Trump Administration, found that the project did serve the national interest. Issues for Congress From 2011 through 2015, as the State Department considered permit applications for the Keystone XL pipeline project, Congress proposed a number of bills intended to affect the State Department's decisionmaking process. Although a permit has been issued for that project, Congress may again consider legislative options to expedite agency decisions on future permit applications. Congress may choose to address issues that arose during the Keystone XL permitting process. For example, during the review, some stakeholders questioned the scope of the NEPA review—some were concerned that it was too broad, others that it was too narrow. Some also argued there was uncertainty over criteria the State Department used to determine whether the project would serve the national interest. Congress could potentially clarify these issues through legislation aimed at defining federal agency roles in authorizing cross-border projects.

Current Context This report discusses a category of congressionally chartered nonprofit organizations that have as their purpose the promotion of patriotic, charitable, educational, and other eleemosynary activities. Title 36 of the United States Code, where such corporate organizations are listed with their charters, was recodified by law in 1998 ( P.L. 105-225 ; 112 Stat. 1253). Title 36 is comprised of three subtitles: Subtitle I: Patriotic and National Observances and Ceremonies; Subtitle II: Patriotic and National Organizations; and Subtitle III: Treaty Obligation Organizations. This report addresses Subtitle II, which includes 92 congressionally chartered corporations. These chartered organizations have been collectively referred to under any of three terms: "Congressionally chartered organizations;" "Title 36 corporations;" and "patriotic societies." In this report, the term "Title 36 corporation" will be used, although it should be noted that even within this category of organizations, there are variations. The United States Constitution, although not providing express power to Congress to charter corporations, is generally cited as the authority, under Article I, Section 8, Clause 18, by which Congress can pass all laws "necessary and proper" to implement the assigned expressed powers. Congress has authority to establish organizations within both the governmental and private sectors. In the governmental sector, the authority and responsibility to establish all agencies and all offices to be filled by appointed officers of the United States is clear. The permissible actions of all agencies and officers of the United States are determined by public law. Congress also has authority to establish new for-profit and nonprofit organizations in the private sector. Congress, for instance, established the fully private, stockholder-owned Communications Satellite Corporation (ComSat) in 1962 (47 U.S.C. 701; 76 Stat. 419). Congressional authority with respect to organizations functioning essentially under state law, however, has not been free of controversy. The basis of the controversy often comes down to fundamental issues of managerial accountability, fiduciary responsibility, and rights that inhere to governmental organizations, but not to private organizations, such as the right to the full faith and credit of the U.S. Treasury. Title 36 corporations constitute one of the categories of corporate organizations chartered by Congress. It should be noted at the outset, however, that since 1989 the House Judiciary Committee's subcommittee of jurisdiction has placed a moratorium on the chartering of additional nonprofit corporate organizations. This moratorium has been reaffirmed at the beginning of each new Congress, most recently by the Subcommittee on Immigration, Citizenship, Refugees, Border Security, and International Law on March 5, 2009. The current moratorium reads, The Subcommittee [has re-adopted] the policy of not granting new federal charters to private, not-for-profit organizations. This policy has been adopted by the Subcommittee of jurisdiction since the 101st Congress [1989-1990], and it reflects the Subcommittee's belief that charters are unnecessary for the operations of any charitable organization and falsely imply to the public that an organization and its activities carry a Congressional seal of approval. This policy also reflects the Subcommittee's belief that the significant resources required to properly investigate prospective chartered organizations and monitor them could and should be spent instead on the Subcommittee's large range of policy matters. Historical and Legal Context There is no general law of incorporation at the federal level as there is in the states and the District of Columbia. If Congress wishes to establish or charter a corporation, it does so by enacting a law, and it is this specific legislation that provides for the mission, authorities, and restrictions that will apply to the chartered corporation. The general practice has been for each state and the District of Columbia to exercise jurisdictional authority over the incorporation of for profit and nonprofit organizations within their boundaries. This exercise of authority by states devolved from the concept that states had authority at common law to create artificial bodies for the purpose of engaging in various enterprises and carrying on certain activities. Historically, state legislatures chartered each organization seeking corporate status on a situation-specific basis, in much the same way as the federal government does today. As time passed, states moved to provide for the creation of corporations pursuant to statutory procedures. Today, states have general incorporation laws, and often separate laws for profit and nonprofit entities, which stipulate procedures, information, and standards to be met for the issuance of a charter ("articles of incorporation"). A fee is typically associated with the process. Corporations operating in the District of Columbia are subject to the constitutional delegation of authority over the District of Columbia as provided in Article I, Section 8 of the United States Constitution. It was the practice of Congress in the early years of the republic to grant franchises to District of Columbia corporations on a case-by-case basis. For example, Congress incorporated the Trustees of the Presbyterian Congregation in Georgetown in 1806 (2 Stat. 356). In 1901, Congress enacted a general statutory procedure allowing incorporation in the District of Columbia by means of filing paperwork rather than by special action of Congress. This procedure, analogous to that now used by the states, is found in Title 29 of the District of Columbia Code. Given that Congress has never passed a general body of law applicable to the operation and powers of the for-profit and nonprofit corporations it charters, it is necessary for Congress to include such provisions in each act granting a charter. There is considerable similarity between powers granted to federal corporations and those granted by states to their corporations. Among the powers typically provided are (1) to sue and be sued; (2) to contract and be contracted with; (3) to acquire, hold and convey property; (4) to enact by-laws; (5) to have a seal; (6) to appoint officers; and (7) to borrow money for the purposes of the corporation. There are also differences between a federal charter and a typical state charter. One feature peculiar to federal charters is that, in most instances, statutes granting federal charters require the submission of periodic financial statements to Congress on certain activities of the corporation. On the other hand, states often permit actions that are not permitted federally chartered corporations. For instance, under the District of Columbia Nonprofit Act, a corporation is permitted "to lend money to and otherwise assist its employees other than its officers and directors." (D.C. Code, 29-301.05(6)). Title 36 corporations can, and generally do, function simultaneously under both federal and state charters. Indeed, in most instances, organizations were chartered and functioned under state law before, often long before, receiving federal charters. Patriotic and National Organizations: Subtitle II The chartering by Congress of organizations with a patriotic, charitable, historical, educational, or other eleemosynary purpose is essentially a 20 th century practice. Title 36 of the U.S. Code, where such corporate organizations are listed with their charters, was revised in 1998 ( P.L. 105-225 ;112 Stat. 1253), and in the process three subtitles of nonprofit corporate organizations were listed: Subtitle I: Patriotic and National Observances and Ceremonies. Part A, Observances and Ceremonies , includes (1) the Benjamin Franklin Tercentenary Commission ( P.L. 107-202 ; 116 Stat. 739), (2) the Brown v. Board of Education 50 th Anniversary Commission ( P.L. 107-41 ; 115 Stat. 226), (3) the James Madison Commemoration Commission ( P.L. 106-550 ; 114 Stat. 2745), and (4) the Abraham Lincoln Bicentennial Commission ( P.L. 106-173 ; 114 Stat. 14). Part B, United States Government Organizations Involved with Observances and Ceremonies , has three entries: (1) the American Battlefield Monuments Commission, (2) the U.S. Holocaust Memorial Council, and (3) the President's Commission on Employment of People With Disabilities. Subtitle II: Patriotic and National Organizations. The 92 corporate entries included under Subtitle II range from the Agricultural Hall of Fame to Big Brothers—Big Sisters of America to the Women's Army Corps Veterans' Association. Subtitle III: Treaty Obligation Organizations. This is an organizational category with one entry, the American National Red Cross (ANRC), which was first chartered in 1900 and then re-chartered in 1905. The ANRC is an unusual organization because the federal government has charged it with fulfilling U.S. treaty obligations under the Geneva Conventions and aiding in disaster response. The attraction of Title 36 status for national organizations is that it tends to provide an "official" imprimatur to their activities and, to that extent, it may provide them prestige and indirect financial benefit. Congress, in chartering patriotic, charitable, professional, and educational organizations under Subtitle II, such as the Fleet Reserve Association (36 U.S.C. 701), does not make these organizations "agencies of the United States" or confer any powers of a governmental character or assign any benefits. These organization generally do not receive direct appropriations, they exercise no federal powers, their debts are not covered by the full faith and credit of the United States, and they do not enjoy original jurisdiction in the federal courts. In effect, the federal chartering process is honorific in character. This honorific character may be misleading to the public, however, when such organizations feature statements or display logos that they are "chartered by Congress," thus implying a direct relationship to the federal government that does not in fact exist. In addition, there may be an implication that Congress approves of the organizations and is somehow overseeing its activities, which is not the case. As with nearly all generalizations about congressionally chartered nonprofit organizations, there are exceptions. At least one of these nonprofits, the U.S. Olympic Committee (USOC; 36 U.S.C. 2005), receives much congressional attention due to its high profile responsibilities. For example, in early 2003, the Senate Commerce Committee held hearings on reorganizing the USOC. Governmental or Private? While it is correct to state that the congressionally chartered nonprofit organizations in Title 36 are not agencies of the United States, there are instances when the boundary between the private and governmental sectors is blurred at best. It is possible to argue that at least in a few instances the private character of the Title 36 corporation is reasonably in question. For many years the Department of Defense administered the Civilian Marksmanship Program. The program came under political pressures for various reasons and the department decided to request Congress to "privatize" the program, which Congress agreed to in creating a federally chartered corporation titled Corporation for the Promotion of Rifle Practice and Firearms Safety (36 U.S.C. 40701). This "privatization" exercise raises questions about the limits, if any, to Congress's authority to assign a "private" label to functions of a governmental character. While the corporation has some admittedly governmental attributes (e.g., upon dissolution of the corporation, its assets are to be sold and revert to the U.S. Treasury), Congress has declared in its enabling statute that "the corporation is a private corporation, not a department, agency, or instrumentality of the U.S. Government." Furthermore, the law provides that "an officer or employee of the corporation is not an officer or employee of the Government." Whether Congress has the constitutional authority to assign an entity "private" status when in fact it has substantial "governmental" attributes has been subject to debate and judicial opinion. In the 106 th Congress, a new entry was included in Part B of subtitle II of Title 36, the National Recording Preservation Foundation (Foundation). The background for this Foundation requires some explanation. A National Recording Registry (established under P.L. 106-474 ; 2 U.S.C. 1701) is to be housed in the Library of Congress and managed by the Librarian of Congress through an adjunct organization of the Library titled the National Recording Preservation Board (Board). This Board consists of 17 members, selected by the Librarian from the organizations listed in the statute. Personnel working for the Board are appointed by the Librarian and are employees of the United States. Additionally, the statute provided for the establishment of a National Recording Preservation Foundation (Foundation) as a Title 36 nonprofit corporation (chapter 1524), not to be considered as an agency or establishment of the United States. The purpose of the Foundation is to accept and administer private gifts to the Board. The board of the Foundation consists of nine members, selected by the Librarian with the latter serving in an ex-officio capacity. The Foundation is governed by its own by-laws. The Librarian appoints a Secretary of the Board who serves as the executive director. Officers of the Foundation are appointed and removed by the board of directors while the Secretary appoints and removes employees. The Foundation has "the usual powers of a corporation acting as a trustee in the District of Columbia." The U.S. government "is not liable for any debts, defaults, acts, or omissions of the corporation," yet the Foundation is authorized to directly receive appropriated funds. The Foundation and its relationship to the Board and to the Librarian of Congress may raise questions as to how "private" the Foundation actually is. At a minimum, the Foundation represents something of a departure from the usual Title 36 nonprofit corporation. Another departure from the usual Title 36 nonprofit corporation model was forthcoming in the 107 th Congress with its approval of the National Help America Vote Foundation. The foundation is "a charitable and nonprofit corporation and is not an agency or establishment of the U.S. Government." (36 U.S.C. 1526; 116 Stat. 1717). The foundation, which carries out its statutory mandate in consultation with the chief election officials of the several states, receives its funding through direct appropriations. Although it must follow provisions of a number of federal laws, it is nonetheless to act as a trustee under District of Columbia law which permits it, among other things, "to borrow money and issue instruments of indebtedness." All of which suggests questions regarding who is ultimately responsible for the indebtedness. Is the National Help America Vote Foundation really private with the right to declare bankruptcy? Those private, nonprofit organizations seeking federal charters under Title 36 presumably perceive value behind such charters, and indeed, such may be the case. Less recognizable, however, are the risks to private, nonprofit organizations of having a charter. A chartered private organization may lose some of its private rights and be made subject to management laws and regulations generally applicable only to agencies of the United States. Such a situation came about in 1997 when Congress amended the Federal Advisory Committee Act (5 U.S.C. Appendix; 86 Stat. 700) so as to include two Title 36 corporations, the National Academy of Public Administration and the National Academy of Sciences, under specific provisions involving the appointment, permissible activities, and reports of corporation committees doing work for executive agencies ( P.L. 105-153 ; 111 Stat. 2689). This is the first instance in which Congress has made Title 36, Subtitle II corporations subject to the provisions of a general management law, and while the action may be supportable on public policy grounds, it does, to the extent of the applicable provisions, diminish the private character of the affected organizations. As such, it constitutes a precedent with implications. Congressional Procedures Corporate charters are granted in law by act of Congress. The procedure for the grant begins like any other act of Congress, with the introduction of a bill by a Member of either the House of Representatives or the Senate. Bills proposing Title 36 corporate bodies are generally referred to the judiciary committees of each house. If the measure is reported out of committee and approved by that house, it is sent to the other house for approval, and then on to the President for signature, whereupon it becomes law. Prior to 1965, requests for congressional charters were considered on a case-by-case basis without standards or criteria for incorporation. That year President Lyndon Johnson vetoed H.R. 339 (89 th Congress), a bill that would have granted a corporate charter to the Youth Councils on Civil Affairs. In his veto message President Johnson raised several questions about the wisdom of continuing to grant charters on a case-by-case basis "without the benefit of clearly established criteria as to eligibility." In the President's veto message to Congress, he noted: For some time I have been concerned with the question of whether we are granting Federal charters to private organizations on a case-by-case basis without the benefit of clearly established standards and criteria as to eligibility. Worthy civic, patriotic, and philanthropic organizations can and do incorporate their activities under state law. It seems obvious that Federal charters should be granted, if at all, only on a selective basis and that they should meet some national interest standard. The President requested in his veto message that the two judiciary committees conduct a comprehensive study on the entire matter. Various proposals had been made over the years to adopt federal statutory procedures for chartering nonprofit organizations, but Congress has not enacted any of them. In 1969, in response to the President's request, subcommittees of both the House and Senate Judiciary Committees jointly agreed to a statement of policy, "Standards for Granting of Federal Charters." This statement set forth five "minimum standards" to be met by a private organization seeking a federal charter from Congress: Any private organization petitioning Congress for the purpose of obtaining the status of a Federal corporation shall be required to demonstrate to the satisfaction of Congress that it is an organization which is— (1) operating under a charter granted by a State or the District of Columbia and that it has so operated for a sufficient period of time to demonstrate its permanence and that its activities are clearly in the public interest; (2) of such unique character that chartering by the Congress as a Federal corporation is the only appropriate form of incorporation; (3) organized and operated solely for charitable, literary, educational, scientific, patriotic, and civil improvement purposes; (4) organized and operated as a nonpartisan and nonprofit organization; and (5) organized and operated for the primary purpose of conducting activities which are of national scope and responsive to a national need, which need cannot be met except upon the issuance of a Federal charter. The status of a private, nonprofit organization receiving a federal charter does not appear to be substantially different from that of a similar organization incorporated under state law. Under the congressional standards agreed to in 1969, it became a "minimum requirement" that organizations seeking a federal charter demonstrate that they have been functioning properly under a state charter and that their activities are clearly in the public interest. However, there are two elements of a federal charter that appear to create some legal differences between federally chartered corporations and similar corporate bodies functioning solely under state charters. First, there is a matter of the "citizenship" of the corporation. Generally, corporations chartered by states are deemed to have "citizenship" in the state of establishment. A corporate body created by Congress, however, may be designated as a citizen of the United states for judicial purposes. The latter rule has been supported in at least one instance involving a Title 36 corporation. In that case the American Legion was held not to be a citizen of any state for the purposes of invoking diversity of citizenship jurisdiction under 28 U.S.C. 1332(a)(1). Further, Congress can itself provide for federal judicial jurisdiction in the charter. Second, because federal charters are laws of the United States, they may only be amended by another law of the United States. If an organization seeks to alter its primary purpose or change a provision in its charter, even a minor provision, it must return to Congress and subject its request to the full legislative process. While the process is generally routine, there are occasions when making even minor legislative changes in the charter may open the organizations to challenge from the outside. Oversight of Chartered Corporations At present, federal supervision of congressionally chartered nonprofit organizations is very limited. All "private corporations established under federal law," as defined and listed in Subtitle II, are required to have independent audits annually, and to have the reports of the audits submitted to Congress (36 U.S.C. 10101). In practice, the Subcommittee on Citizenship, Refugees, Border Security, and International Law receives the audit reports of Title 36 corporations and, where corporations have not submitted reports in a timely manner, attempts to communicate with said organizations and remind them of their legal responsibility. The House Judiciary Committee refers all received audits to the Government Accountability Office (GAO) for review. The committee's current role is strictly ministerial. A GAO official testified on its review procedures in 1975: Our reviews of the reports are generally restricted to desk review unless serious questions or problems arise. When this occurs, we contact the independent public accountant or the organization for clarification. The purpose of our review is to determine whether in our professional judgment, the reports meet the standards for reporting set forth in law. The major problems noted by us to date have been: (1) lack of timely submission of reports; (2) lack of sufficient explanations in the report; (3) financial statements which do not meet the stipulated requirements of law; (4) audits not conducted by independent certified public accountants; and (5) in some few cases failure to follow generally accepted auditing standards. In addition, corporate bodies are required to make annual reports of their activities to the Congress. Public access to the records and reports of Title 36 corporations varies. For example, the charter of the National Ski Patrol System (36 U.S.C 1527) requires that its annual report be submitted each year to Congress but prohibits the public printing of it. Traditionally, the Senate Judiciary Committee has deferred to the House committee on these matters. It is not the intention of the Judiciary committees of Congress or the Government Accountability Office to "look over the shoulder" of these organizations, or to conduct audits on their own authority. Congress is understandably ambivalent with respect to these chartered organizations; on the one hand it attempts to protect the public interest against abuse by those corporate bodies while simultaneously seeking to limit its involvement in the internal affairs of these private organizations. Thus far, in no instance has the charter of a Title 36 corporations been revoked although there have been several controversies in recent years involving chartered organizations and the chartering process generally. In the 106 th Congress, there was a controversy involving the Boy Scouts of America (36 U.S.C. 309) with legislation introduced to revoke its congressional charter. The Supreme Court in Boy Scouts of America v. Dale (120 S.Ct. 2446 (2000)) ruled that the Boy Scouts of America were within their First Amendment rights as a private organization to exclude from a leadership position a person who was in fundamental disagreement with its purposes as an organization. In this case, the facts were that the Boy Scouts of America removed from an assistant scout master position a young man who professed and practiced a homosexual lifestyle. The national organization argued that this individual, whatever his personal merits, had no "right" to hold a leadership position in an organization which disavowed that lifestyle. The individual involved, James Dale, and some supporting organizations, argued that as assistant scout master, Dale had performed his assigned responsibilities well and that his lifestyle, irrespective of being contrary to one of the purposes of the organization, was not a legitimate grounds to deny him a position of leadership. To do so denied Dale his rights under New Jersey's public accommodations law. The issue, Dale's attorneys argued, was not a constitutional, First Amendment question. Several Members of Congress introduced legislation ( H.R. 4892 ) to repeal the federal charter of the Boy Scouts. Against the wishes of its sponsors, however, a motion was brought to suspend the rules, an action that would pave the way for a vote in the House. The tactic intended to put Members on record as favoring or opposing the bill without having to vote directly. The motion failed; 12 to 362, thereby supporting the Supreme Court decision and, presumably, the chartering of the Boy Scouts of America. During this debate the character and utility of the chartering process was discussed. More recently, in 2005, American Gold Star Mothers (36 U.S.C. 211) reportedly refused to admit to membership a woman whose son was killed while serving in Iraq in 2004 because she is not a citizen of the United States, as the corporation's constitution—not charter—required. Congressional concern over exclusionary membership practices grew when Members learned that the congressional charters of three Title 36 corporations explicitly limit membership to U.S. citizens. In 2006, another Title 36 organization drew media criticism. The National Education Association of the United States (36 U.S.C. 1511) was chartered by Congress in 1906, and its purposes are "(1) to elevate the character and advance the interests of the profession of teaching; and (2) to promote the cause of education in the United States." (36 U.S.C. 151102) Reportedly the organization has been using the dues of members to make contributions to political organizations (e.g., Rainbow PUSH Coalition) and organizations with agendas that would not appear to be readily connected with teaching and schooling (e.g., the Gay and Lesbian Alliance Against Defamation). Ending Charters—Maybe In some cases, Title 36 corporations have ceased to exist without congressional action. The Grand Army of the Republic (43 Stat. 458) and the United Spanish War Veterans (54 Stat. 152) ceased to exist once their last members died. A similar fate awaits the Veterans of World War I (36 U.S.C. 2303) of the United States, whose membership has dwindled from over 800,000 to less than a dozen. Hearings held by subcommittees of the respective judiciary committees of the House and Senate in the early 1970s indicated an increasing level of dissatisfaction by Members of Congress respecting the intent and practice of congressional chartering of private, nonprofit organizations. More organizations, through sympathetic Members of Congress, were requesting charters, and the requesting organizations were often extending the definition of congressionally chartered corporations beyond that typically associated with patriotic and service organizations. In 1989, the chairman of the House Subcommittee on Administrative Law and Government Relations, Barney Frank, and the ranking minority Member, Craig James, announced that the subcommittee had approved "a motion for a moratorium on the granting of federal charters." In 1992, Chairman Frank called charters "a nuisance," a meaningless act; granting charters implied that Congress was exercising some sort of supervision over the groups and it was not. "When I first raised the issue, 'What is a federal charter?' The answer was, a federal charter is a federal charter is a federal charter.... You could make up an organization for the preservation of Albert DeSalvo, the Boston Strangler. We'd have no way of checking into it." Moreover, the subcommittee understood that the committee could be drawn into public disputes touched off by any controversial activities or statements by a Title 36 corporation or employees or members thereof. Continuing to review applications on the basis of merit with the possibility of rejection, it was asserted, was subjecting the subcommittee to pressures and the potential for embarrassment to both the requester and Congress. By indicating an end altogether of the practice of chartering, it was hoped the subcommittee also would be "leveling the playing field" among worthy organizations. This view was formalized in the 104 th Congress when the subcommittee decided that it would no longer consider any legislation to grant new federal charters because such charters were unnecessary for the operations of any charitable, nonprofit organization and falsely implied to the public that a chartered organization and its activities somehow carried a congressional "seal of approval." This moratorium has been reaffirmed at the beginning of each new Congress, most recently by the Subcommittee on Immigration, Citizenship, Refugees, Border Security, and International Law on March 5, 2009. It is unclear whether the moratorium has been or will be renewed in the 112 th Congress. This subcommittee moratorium did not, however, stop all requests for, or consideration of, charter requests. Notably, it remains possible for another committee, or for the full Congress in its plenary capacity, to "charter" nonprofit organizations and have them listed in Title 36. Indeed, this has been the case in several instances in recent years. In 1996, the Fleet Reserve Association was chartered (36 U.S.C 701) without the legislation being referred to the Judiciary committees of the respective chambers. The charter was included in the National Defense Authorization Act for Fiscal Year 1997 ( P.L. 104-201 , Title XVIII; 110 Stat. 2760). Also in recent years, corporate bodies (e.g., Corporation for Promotion of Rifle Practice and Firearms Safety, 36 U.S.C. 40701; National Recording Preservation Foundation, 36 U.S.C. 152401) have been created by Congress and listed by the House Office of Law Revision Counsel under Title 36. In the 105 th Congress, the moratorium notwithstanding, two additional nonprofit organizations were chartered. Each case represented a specific and unusual set of circumstances. In the first session, the Senate Committee on Armed Forces approved a defense authorization bill that included a charter for the Air Force Sergeants Association (AFSA). This charter proposal had not been referred to the judiciary committees for their review and approval. When the bill reached conference, the jurisdictional issues were raised and a settlement negotiated. The AFSA received its charter ( P.L. 105-85 , Title XV; 111 Stat 1963; 36 U.S.C. 20201), but the jurisdictional authority of the judiciary committees, and thus the moratorium, was reaffirmed. In the second session of the 105 th Congress, a bill to award a charter to the American GI Forum was approved, this time with the approval of the judiciary committees. In this instance, the circumstances involved an act of discouragement by the committee toward a would-be charter applicant under the rules followed prior to 1989. The organization believed that it had been improperly informed and unfairly evaluated during its earlier application and deserved to be reconsidered for chartering. The committee permitted the organization to make its case and concluded that due to exceptional circumstances, an exemption from the moratorium was warranted in this instance and thus a charter was granted ( P.L. 105-231 ; 112 Stat. 1530; 36 U.S.C. 21001). Despite the moratorium, Congress chartered the Korean War Veterans Association, Incorporated in 2008 ( P.L. 110-254 ; 122 Stat. 2419). H.R. 2852 was introduced by Representative Steny Hoyer on June 25, 2007. The bill was referred to the House Subcommittee on Immigration, Citizenship, Refugees, Border Security, and International Law, which took no action on it. Senator Benjamin L. Cardin introduced S. 1692 on the same date. S. 1692 was referred to the Senate Committee on the Judiciary, which reported it favorably on September 7, 2007. Five days later, the Senate passed S. 1692 by unanimous consent. S. 1692 was received in the House of Representatives on September 14, 2007, and held at the desk. On June 17, 2008, S. 1692 was passed by a voice vote under a suspension of rules. President George W. Bush signed it on June 30, 2008. Conclusion The congressional practice of chartering selected private, nonprofit organizations that engage in patriotic, charitable, historical, and educational activities was a 20 th century phenomenon. The chartering process itself tends to send mixed signals to the public. Although the charter does not award any material governmental status to the nonprofit corporation (e.g., right of eminent domain) there is an understandable assumption on the part of the public that somehow the charter signifies U.S. government approval of the corporation's activities and that the corporation is being supervised. Neither assumption is merited. The House Judiciary Committee's subcommittee of jurisdiction concluded that the chartering process served no useful public purpose and issued a moratorium on bills to issue new charters in 1989. It remains possible, however, for another committee or the full Congress to bypass the judiciary committees and initiate on its own the approval process for chartering a nonprofit organization. This bypass strategy for chartering Title 36 corporations has been successfully pursued (concluding with a presidential public law signature) on several occasions in recent years. Partly in response to these actions, with each new Congress the House subcommittee of jurisdiction has reaffirmed its moratorium on approval of charters. It remains to be seen, however, how effective this moratorium will be against the many attractions of the chartering practice. Appendix. Title 36, Subtitle II: Patriotic and National Organizations

The chartering by Congress of organizations with a patriotic, charitable, historical, or educational purpose is essentially a 20th century practice. There are currently some 92 nonprofit corporations listed in Title 36, Subtitle II, of the U.S. Code. These so-called "Title 36 corporations," such as the Girl Scouts of America and the National Academy of Public Administration, are typically incorporated first under state law, then request that Congress grant them a congressional or federal charter. Chartered corporations listed in Title 36 are not agencies of the United States, and their charters only rarely assign the corporate bodies any governmental attributes. For instance, the corporation's debt is not guaranteed, explicitly or implicitly, by the full faith and credit of the United States. The attraction of Title 36 status for national organizations is that it tends to provide an "official" imprimatur to their activities, and to that extent it may provide them prestige and indirect financial benefit. In recent years, some in Congress have expressed concern that the public may be misled by its chartering process into believing that somehow the U.S. government approves and supervises the corporations, when in fact this is not the case. As a consequence, the House Judiciary Committee's subcommittee of jurisdiction instituted a moratorium on granting new charters in 1989. (The Senate generally defers to the House on chartering matters.) On several recent occasions, however, Congress has established Title 36 corporations despite the moratorium. This report will be updated in the event of a significant development.

Introduction Senate Rule XXVI establishes specific requirements for Senate committee procedures. In addition, each Senate committee is required to adopt rules, which may "not be inconsistent with the Rules of the Senate." Senate committees also operate according to additional established practices that are not necessarily reflected in their adopted rules. Committee Rules and Practices The requirement that each committee must adopt its own set of rules dates to the 1970 Legislative Reorganization Act (P.L. 91-510). That law built on the 1946 Legislative Reorganization Act (P.L. 79-601), which set out some requirements to which most Senate committees must adhere. Under the provisions of the 1970 law (now incorporated into Senate Rule XXVI, paragraph 2), Senate committees must adopt their rules and generally have them printed in the Congressional Record not later than March 1 of the first year of a Congress. Typically, the Senate also publishes a compilation of the rules of all the committees each Congress, and some individual committees also publish their rules as committee prints. Committee rules govern actions taken in committee proceedings only, and they are enforced in relation thereto by the committee's members in a similar way that rules enforcement occurs on the Senate floor. There is generally no means by which the Senate can enforce committee rules at a later point on the floor. So long as the committee met the requirement of Senate Rule XXVI that a physical majority be present for reporting a measure or matter, no point of order lies against the measure or matter on the floor on the grounds that the committee earlier acted in violation of other procedural requirements. Beyond the requirements of Senate rules and a committee's own formal rules, many committees have traditions or practices they follow that can affect their procedures. (One committee, for example, does not allow Senators to offer second-degree amendments during committee markups, though this restriction is not contained in either the Senate or the committee's rules.) An accounting of any such informal practices that committees might observe is not provided below. This report first provides a brief overview of Senate rules as they pertain to committees. The report then provides four tables that summarize each committee's rules in regard to meeting day, hearing and meeting notice requirements, and scheduling of witnesses ( Table 1 ); hearing quorum, business quorum, and amendment filing requirements ( Table 2 ); proxy voting, polling, and nominations ( Table 3 ); and investigations and subpoenas ( Table 4 ). Table 4 also identifies selected unique provisions some committees have included in their rules. The tables, however, represent only a portion of each committee's rules. Provisions of the rules that are substantially similar to or essentially restatements of the Senate's standing rules are not included. Senate Standing Rules Affecting Committees Although there is some latitude for committees to set their own rules, the standing rules of the Senate set out specific requirements that each committee must follow. The provisions listed below are taken from Rule XXVI of the Standing Rules of the Senate. (Some committees reiterate these rules in their own rules, but even for those committees that do not, these restrictions apply.) This is not an exhaustive explanation of Senate rules and their impact on committees. Rather, this summary is intended to provide a background against which to understand each committee's individual rules that govern key committee activities. Rules. Each committee must adopt rules; those rules must generally be published in the Congressional Record not later than March 1 of the first year of each Congress. If a committee adopts an amendment to its rules later in the Congress, that change becomes effective only when it is published in the Record (Rule XXVI, paragraph 2). Meetings. Committees and subcommittees are authorized to meet and hold hearings when the Senate is in session and when it has recessed or adjourned. A committee may not meet on any day (1) after the Senate has been in session for two hours, or (2) after 2 p.m. when the Senate is in session. Each committee must designate a regular day on which to meet weekly, biweekly, or monthly. (This requirement does not apply to the Appropriations Committee.) A committee is to announce the date, place, and subject of each hearing at least one week in advance, though any committee may waive this requirement for "good cause" (Rule XXVI, paragraph 5(a); Rule XXVI, paragraph 3). Special meeting. Three members of a committee may make a written request to the chair to call a special meeting. The chair then has three calendar days in which to schedule the meeting, which is to take place within the next seven calendar days. If the chair fails to do so, a majority of the committee members can file a written motion to hold the meeting at a certain date and hour (Rule XXVI, paragraph 3). Open meetings. Unless closed for reasons specified in Senate rules (such as a need to protect national security information), committee and subcommittee meetings, including hearings, are open to the public. When a committee or subcommittee schedules or cancels a meeting, it is required to provide that information—including the time, place, and purpose of the meeting—for inclusion in the Senate's computerized schedule information system. Any hearing that is open to the public may also be open to radio and television broadcasting at the committee's discretion. Committees and subcommittees may adopt rules to govern how the media may broadcast the event. A vote by the committee in open session is required to close a meeting (Rule XXVI, paragraph 5(b)). Quorums. Committees may set a quorum for doing business so long as it is not less than one-third of the membership. A majority of a committee must be physically present when the committee votes to order the reporting of any measure, matter, or recommendation. Agreeing to a motion to order a measure or matter reported requires the support of a majority of the members who are present. Proxies cannot be used to constitute a quorum (Rule XXVI paragraph 7(a)(1)). Meeting r ecord . All committees must make public a video, transcript, or audio recording of each open hearing of the committee within 21 days of the hearing. These shall be made available to the public "through the Internet" (Rule XXVI, paragraph 5(2)(A)). Proxy voting. A committee may adopt rules permitting proxy voting. A committee may not permit a proxy vote to be cast unless the absent Senator has been notified about the question to be decided and has requested that his or her vote be cast by proxy. A committee may prohibit the use of proxy votes on votes to report. However, even if a committee allows proxies to be cast on a motion to report, proxies cannot make the difference in ordering a measure reported, though they can prevent it (Rule XXVI, paragraph 7(a)(3)). Investigations and subpoenas. Each standing committee (and its subcommittees) is empowered to investigate matters within its jurisdiction and issue subpoenas for persons and papers (Rule XXVI, paragraph 1). Witnesses selected by the minority. During hearings on any measure or matter, the minority shall be allowed to select witnesses to testify on at least one day when the chair receives such a request from a majority of the minority party members. This provision does not apply to the Appropriations Committee (Rule XXVI, paragraph 4(d)). Reporting. A Senate committee may report original bills and resolutions in addition to those that have been referred to it. As stated above in the quorum requirement, a majority of the committee must be physically present for a measure or matter to be reported, and a majority of those present is required to order a measure or matter favorably reported. A Senate committee is not required to issue a written report to accompany a measure or matter it reports. If the committee does write such a report, Senate rules specify a series of required elements that must be included in the report (Rule XXVI, paragraph 7(a)(3); Rule XXVI, paragraph 10(c)). Selected Committee Rules in the 115th Congress13 Meeting Day, Notice Requirements, Witness Selection Table 1 summarizes each's committee's rules in three areas: meeting day(s), notice requirements for meetings and hearings, and witness selection provisions. Many committees repeat or otherwise incorporate the provisions of Senate Rule XXVI, paragraph 4(a), which, as noted above, requires a week's notice of any hearing (except for the Appropriations and Budget committees) "unless the committee determines that there is good cause to begin such hearing at an earlier date." Provisions in committee rules are identified and explained in this column only to the extent that they provide additional hearing notice requirements, specifically provide the "good cause" authority to certain members (e.g., chair or ranking minority member), or apply the one week notice to meetings other than hearings (such as markups). Similarly, as noted in the report, Senate Rule XXVI, paragraph 4(d) (sometimes referred to as the "minority witness rule"), provides for the calling of additional witnesses in some circumstances (except for the Appropriations Committee). Some committees restate this rule in their own rules. Only committee rule provisions that go further in specifically addressing the selection of witnesses or a right to testify are identified in this column. Business and Hearing Quorums; Filing of Amendments Table 2 focuses on each's committee's rules on hearing quorums, business quorums, and requirements to file amendments prior to a committee markup. In regard to a business quorum, committees generally consider "conduct of business" to include actions (such as debating and voting on amendments) that allow the committee to proceed on measures up to the point of reporting. Some committees require that a member of the minority party be present for the conduct of business; such provisions are noted below. As noted earlier, Senate Rule XXVI, paragraph 7(a), requires a majority of the committee to be physically present (and a majority of those present to agree) to report out a measure or matter; this is often referred to as a "reporting quorum." The rule allows Senate committees to set lower quorum requirements, though not less than a third of membership for other business besides hearings. Some committees restate the Senate requirement in their own committee rules, but even those committees that do not are bound by the reporting quorum requirement. Table 2 does not identify committee rules that simply restate the reporting quorum requirement unless the committee has added additional requirements to its provisions (e.g., that a reporting quorum must include a member of each party). Though no Senate rules govern the practice, several committees require, in their committee rules, that Senators file with the committee any first-degree amendments they may offer during a committee markup before the committee meets. Such a provision allows the chair and ranking member of the committee to see what kinds of issues may come up at the markup and may also allow them to negotiate agreements with amendment sponsors before the formal markup session begins. Some committees distribute such filed amendments in advance of the markup to allow committee members a chance to examine them. It also provides an opportunity to Senators to draft second-degree amendments to possible first-degree amendments before the markup begins. Proxy Voting, Committee Polling, Nominations Table 3 summarizes each's committee's rules on proxy voting, committee polling, and nominations. Since Senate rules require a majority of a committee to be physically present for a vote to report a measure or matter, a committee vote to report an item of business may not rely on the votes cast on behalf of absent Senators (that is, votes by proxy). Some committees effectively restate this requirement in their committee rules by either stating that proxies do not count toward reporting or referencing the proxy provisions of Senate Rule XXVI. However, committees may still allow (or preclude) proxy votes on a motion to report (as well as on other questions so long as members are informed of the issue and request a proxy vote). Table 3 identifies committees that explicitly allow or disallow proxy votes on a motion to report (even though such votes cannot, under Senate rules, count toward the presence of a "reporting quorum" or make the difference in successfully reporting a measure or matter). "Polling" is a method of assessing the position of the committee on a matter without the committee physically coming together. As such, it cannot be used to report out measures or matters, because Senate rules require a physical majority to be present to report a measure or matter. Polling may be used, however, by committees that allow it for internal housekeeping matters before the committee, such as questions concerning staffing or how the committee ought to proceed on a measure or matter. Senate Rule XXVI does not contain provisions specific to committee consideration of presidential nominations. Some committees, however, set out timetables in their rules for action or have other provisions specific to action on nominations. Some committees also provide in their rules that nominees must provide certain information to the committee. Such provisions are not detailed in this table except to the extent that the committee establishes a timetable for action that is connected to such submissions. This column of the table also identifies any committee provisions on whether nominees testify under oath. Investigations, Subpoenas,21 and Selected Miscellaneous Provisions Table 4 describes selected key committee rules in relation to investigations and subpoenas. Note that some Senate committees do not have specific rules providing processes for committee investigations, and many also do not set out procedures for issuing subpoenas. The lack of any investigation or subpoena provisions does not mean the committees cannot conduct investigations or issue subpoenas; rather, the process for doing so is not specified in the committee's written rules. Some committees have provisions that are generally not included in other committee rules. Selected notable examples (that do not fit into other categories in other tables) are summarized in the last column of Table 4 .

Senate Rule XXVI establishes specific requirements for certain Senate committee procedures. In addition, each Senate committee is required to adopt rules to govern its own proceedings. These rules may "not be inconsistent with the Rules of the Senate." Senate committees may also operate according to additional established practices that are not necessarily reflected in their adopted rules but are not specifically addressed by Senate rules. In sum, Senate committees are allowed some latitude to establish tailored procedures to govern certain activities, which can result in significant variation in the way different committees operate. This report first provides a brief overview of Senate rules as they pertain to committee actions. The report then provides tables that summarize selected, key features of each committee's rules in regard to meeting day, hearing and meeting notice requirements, scheduling of witnesses, hearing quorum, business quorum, amendment filing requirements, proxy voting, polling, nominations, investigations, and subpoenas. In addition, the report looks at selected unique provisions some committees have included in their rules in the miscellaneous category. The tables represent only a portion of each committee's rules, and provisions of the rules that are substantially similar to or essentially restatements of the Senate's Standing Rules are not included. This report will be not be updated further during the 115th Congress.

Congressional Proposals Concerning NID Position There have been a variety of proposals concerning the NID (4) position. Following the creationof the intelligence oversight committees in the Senate (1976) and in the House (1977), Congressconsidered charter legislation that included, among other proposals, one that would have created theposition of an NID to manage the IC. A presidentially selected deputy would have managed the CIA. Confronted by strong opposition to the overall legislation, which also included language governingcovert actions, the Committees did not report the respective bills. In 1992, Senator David Boren and Representative David McCurdy, respective chairmen of the Senate Select Committee on Intelligence (SSCI) and House Permanent Select Committee onIntelligence (HPSCI), introduced legislation creating the NID position and giving the position theauthority to program and reprogram funds. Their legislation also would have created a separatedirector of CIA. Boren and McCurdy failed to win adoption of their legislation in the face ofopposition by the Department of Defense (DOD) and the congressional Armed Services Committees. In December 2002, the Congressional Joint Inquiry Into Intelligence Community Activities Before and After the Terrorist Attacks of September 11, 2001 (5) , recommended that a new cabinetlevel Senate-confirmed NID position be established, and that a separate director be named to managethe CIA. The Joint Inquiry also recommended that the NID be granted the full range ofmanagement, budgetary and personnel responsibilities needed to make the entire IC operate as acoherent whole. (6) DCI Budget-Related Responsibilities and Authorities Under the National Security Actof 1947 Are Seen by Some as Limited Proponents of establishing the NID position contend the current IC management structure is characterized by an incoherence they attribute to two flaws. First, because the DCI is dual-hatted,heading both the IC and the CIA, they maintain he is too busy to do either job well. Second, theyargue that the DCI's hiring, firing and budget authorities are limited. From their perspective, theresult is an IC management structure that lacks direction and focus. Any discussion of the NID concept invariably leads to a debate over whether the two jobs should be split, and whether current DCI budget authorities are strong enough to permit effectivemanagement of the IC. With regard to budget authority, the National Security Act of 1947 authorizes the DCI to facilitate the development of an annual intelligence budget [1947 National Security Act, seeSec.103.(c)(1)(A) [50 U.S.C. 403-3(c)(1)(A)]. The act also stipulates that the DCI prepare andapprove all budgets for each of the IC agencies comprising the National Foreign IntelligenceProgram (NFIP) (7) [1947 National Security Act, seeSec.104.[50 U.S.C. 403-4] (b)]. More than 85% of the intelligence budget, however, is executed by agencies not under the DCI's control. (8) Although the DCI has the authorityto approve all budgets for each of the ICagencies comprising the NFIP, he or she cannot transfer funds and personnel during the year ofbudget execution without the agreement of the agency head of the IC element that would be affectedby such a transfer. Moreover, the appropriation for the NFIP agencies, including the CIA, is givendirectly to the Secretary of Defense, who then disburses the funds to the various agencies, including the NFIP's three largest agencies -- the National Security Agency (NSA), the NationalReconnaissance Office (NRO) and the National Geospatial-Intelligence Agency (NGA). (9) Each ofthose agencies, among other tasks, supports Department of Defense (DoD) combat operations, andeach answers to the Secretary of Defense. The DCI is left with exclusive budget execution authorityonly over the CIA. (10) Some have asserted that,in part because of the DCI's relatively weak positionwith respect to the IC, DCIs historically have devoted the bulk of their time to managing the CIA andserving as the President's intelligence advisor, rather than overseeing the IC. (11) Collins/Lieberman (S. 2845) and Hastert (H.R. 10) Would Establish an NID Senators Susan Collins and Joe Lieberman, and Speaker of the House of Representatives Dennis Hastert, have separately introduced legislation that would establish the NID position. Bothbills would establish a presidentially-nominated, Senate-confirmed position of NID, who wouldserve as the head of the IC's 15 separate intelligence agencies, including the CIA. Both bills alsowould establish a separate Senate-confirmed Director of Central Intelligence, who would managethe CIA, and would be prohibited from serving simultaneously as the NID. See Appendix 1 for aside-by-side comparison of NID authorities in both bills. Arguments Offered In Favor of Establishing an NID Supporters of the NID concept argue that the DCI, who manages the IC and the CIA, and servesas the principal intelligence advisor to the President, has too many jobs, and that an NID, unburdenedby the need to manage the CIA, must be established if the IC is to be effectively managed. (12) They also argue that an NID must be empowered with two authorities the DCI now lacks: the authority to hire and remove IC agency heads in consultation with the Defense Secretary (currently,the Secretary of Defense selects principal IC agency heads for the three combat support agencies --NSA, NRO, and NGA -- with the concurrence of the DCI); and the authority to move funding andpersonnel within or across IC agencies at any time during the year of execution with congressionalapproval. (13) Some proponents add what theycharacterize as a third essential authority -- the powerto set standards for the IC's information infrastructure and personnel. (14) From the prospective of proponents, failure to establish an empowered NID with hiring, firing and budget authority will leave the IC with divided management of intelligence capabilities; lack ofcommon standards and practices across the foreign-domestic intelligence divide; structural barriersthat undermine the performance of joint intelligence work; and a weak capacity to set priorities andmove resources. They cite DCI George Tenet's 1998 "declaration of war" (15) on Osama Bin Laden and thecorresponding lack of an integrated IC response as a clear indication of the need for an NID. (16) Senator Bob Graham, a co-chairman of the 9/11 congressional joint inquiry, stated, "The intelligencecommunity needs a leader with the clout to set common goals, establish priorities, knock heads andensure that the American people are protected." (17) To accomplish that goal, NID supporters argue,requires an empowered NID with clear statutory end-to-end IC budget and personnel authorities,including authority over those large portions of the NFIP budget now controlled by the Secretary ofDefense. Arguments Offered in Opposition to Establishing an NID Some opponents counter that although perhaps a good idea, establishing the position of NIDwill have only a marginal impact, and assert that had this change been made prior to the September11 attacks, it would not have significantly altered the way the U.S. dealt with Al Qaeda, and certainlywould not have prevented the 9/11 attacks. They suggest that a more important step would be to hiremore capable people throughout the IC. (18) Other opponents contend that rather than strengthening control over the IC, the establishment of an NDI would actually weaken IC management. They assert an NID would lose day-to-daycontrol over the CIA, a natural power base. Without it, the NID will lose influence, according toopponents. Admiral Bobby Inman, Former Deputy DCI and NSA director, said that DCIs rely onthe CIA for their effectiveness and that an NID "would be like the Drug Czar," (19) a position thatcritics have argued has little management control over U.S. government agencies engaged incounternarcotics. Other skeptics assert that establishing the position of NID will only add another layer of bureaucracy, and risks disruption at a time when terrorists continue to threaten to attack the UnitedStates. Critics are likely to also assert that centralized management control will be further weakenedif the NID is not granted meaningful hiring, firing and budget authority. They may argue that theDCI's relatively robust authorities to approve IC budgets and control budget reprogramminghistorically have gone largely unused in the face of DOD opposition. In other words, critics say, theDCIs have had the authority, but simply have chosen not to exercise it. Some critics have voiced concern about the 9/11 Commission's recommendations to locate the office of the NID in the executive office of the President. They contend that doing so risks thepoliticization of intelligence, would give the White House more direct control over covert operations,and would blur the line between foreign and domestic covert operations. (20) They also expressconcern that Congress will experience greater difficulty in conducting oversight of the IC becausethe proximity of the NID to the White House will more frequently raise the issue of executiveprivilege. Some critics contend that the 9/11 Commission's concept of the NDI would shift too much influence over the IC to the Defense Department, because DOD would retain most of its roles underthe commission's proposal and, they say, stand to gain influence. In contrast, other critics of the NIDconcept oppose it because they believe NID authorities could be so strengthened that DOD interestsmight suffer, if an empowered NID were to favor providing more intelligence to policy makersrather than the warfighter. They argue the IC's three largest agencies -- NSA, NRO and NGA --are combat support agencies that collect and disseminate intelligence affecting tactical militaryoperations. It, therefore, is entirely appropriate, they argue, that the Secretary of Defense, rather thanthe DCI, control these agencies and the dollars that fund them, given that the needs of militarycommanders often differ from those of policymakers who generally are more interested in strategicintelligence. (21) History of Recommendations to Centralize and Strengthen IC Leadership The issue of centralized IC leadership was first addressed by the Second Hoover Commissionin 1955. The following lists those Commissions, reports, individuals, executive orders andlegislation that have addressed the issue of centralizing and strengthening IC leadership. (22) Second Hoover Commission, 1955 The Commission on Organization of the Executive Branch of the Government, also known as the second Hoover Commission and chaired by former President Herbert Hoover, recommended thatmanagement of the CIA be turned over to an "executive officer," so that the DCI could focusattention on the IC. The Schlesinger Report, 1971 President Nixon tasked the Office of Budget and Management to recommend changes in the IC's organization. Deputy OMB Director James R. Schlesinger, a future DCI, headed the effort andin his report considered the creation of an NID, but in the end recommended that "a strong DCI whocould bring intelligence costs under control and intelligence production to an adequate level ofquality and responsiveness." Schlesinger criticized the IC's failure to coordinate resources, blamingthe deficiency on the lack of a strong, central IC leadership that could "consider the relationshipbetween cost and substantive output from a national perspective." Murphy Commission, 1975 The Commission on the Organization of the Government for the Conduct of Foreign Policy, chaired by former Deputy Secretary of State Robert D. Murphy, noted that the DCI exercised directcontrol over the CIA but had only limited influence over the IC as a whole. But rather thanrecommending a structural change, the Commission said it was neither possible nor desirable toextend the DCI's control to the large part of the intelligence community that lies outside the CIA. Church Committee, 1976 The Senate Select Committee to Study Governmental Operations with Respect to Intelligence Activities, known as the Church Committee and headed by Senator Frank Church, did notrecommend establishing an NID but urged that DCI authorities be strengthened by appropriatingintelligence dollars directly to the DCI and by defining in statute DCI reprogramming authorities. The Committee also recommended that consideration be given to enhancing the DCI's managementof the IC by relieving him of day-to-day management of the CIA. Pike Committee, 1976 The House Select Committee on Intelligence, chaired by Congressman Otis G. Pike, recommended that the DCI should manage the IC as a whole and not exclusively the CIA. TheCommission said the DCI should receive budget proposals from intelligence agencies comprisingthe community but did not indicate whether the DCI should have budget authority. Clifford/Cline Proposals, 1976 Clark Clifford, a former Secretary of Defense under President Lyndon B. Johnson who had earlier participated in drafting legislation establishing the CIA, recommended that a new positionof Director of General Intelligence be established and that a separate CIA director be responsible formanaging the CIA. Ray Cline, a former Deputy Director of the CIA, recommended that the DCI be given cabinet rank and broad supervisory authorities over the IC. Charter Legislation, 1978 Following the establishment of the intelligence oversight committees in the Senate (1976) and in the House (1977), Congress considered charter legislation that, among other things, would havecreated an NID to manage the IC. A presidentially selected deputy would manage CIA. In the faceof strong opposition to the overall legislation, which also included language governing covertactions, the Committees did not report the respective bills. Executive Branch Orders, 1976-1981 In an effort to head off further congressional action, President Gerald Ford in 1976 issued Executive Order (E.O.) 11905 naming the DCI as the President's primary intelligence advisorresponsible for developing the NFIP. President Jimmy Carter in 1978 issued E.O. 12036 (superseding E.O. 11905) more clearly defining the DCI's community-wide authority in areas relating to the budget, tasking, intelligencereview, coordination, intelligence dissemination and foreign liaison. President Ronald Reagan in 1981 continued the expansion of the DCI's community responsibilities and authorities, issuing E.O. 12333 (superseding E.O. 12036), which detailed theroles, responsibilities, missions, and activities of the IC. Executive Order 12333, which remainsin effect today, granted the DCI more explicit authority over the development, implementation, andevaluation of the NFIP. Turner Proposal, 1985 Admiral Stansfield Turner, former DCI under President Carter, recommended establishing an NID to oversee the IC, and leaving responsibility for CIA day-to-day operations to a separate directorof CIA. Boren-McCurdy, 1992 Senator David Boren and Congressman David McCurdy, respective chairmen of the Senate Select Committee on Intelligence (SSCI) and House Permanent Select on Intelligence (HPSCI),introduced legislation creating the position of an NID with authority to program and reprogramfunds, and creating a separate director of CIA. Boren and McCurdy failed to win adoption of theirlegislation in the face of opposition from DOD and the congressional Armed Services Committees. Aspin-Brown Commission, 1996 The Commission on the Roles and Capabilities of the United States Intelligence Community (known as the Aspin-Brown Commission, after its respective chairmen Les Aspin and HaroldBrown) concluded that the relationship between the DCI and Secretary of Defense should not bealtered, but that the DCI should be given more time to manage the IC. The Commissionrecommended the creation of two deputies, one to help manage the IC and the other to manage theCIA. (23) Specter/Combest, 1996 In the wake of the Aspin-Brown Commission report, Senator Arlen Specter and Congressman Larry Combest, respective chairmen of the SSCI and the HPSCI, sought to increase the clout of theDCI by giving him more control over the appointments of chiefs of defense-related agencies and thebudgets of those agencies. But faced with intense opposition from the Pentagon and itscongressional allies, they settled for more modest reform, agreeing to establish a new position ofdeputy DCI for community management and three assistant directors to oversee collection, analysis,and administration. (24) Although each were to beSenate confirmed, only the deputy intelligencedirector for community management and the assistant director for administration have beenconfirmed. Neither the Clinton nor George W. Bush Administration has chosen to submit to theSenate for confirmation the names of individuals now serving as assistant directors for collection andanalysis and production respectively. Scowcroft Commission, 2001 A presidential commission chaired by retired Lt. Gen. Brent Scowcroft, the Chairman of President George W. Bush's Foreign Intelligence Advisory Board, reportedly recommended that thePentagon should cede to the DCI control over DOD's three largest intelligence operations -- NSA,NRO, and NGA. Although never made public, the report, according to media reports, was stronglyopposed by Secretary of Defense Donald Rumsfeld. (25) The report never was formally presented tothe President. The Joint Inquiry Into September 11 Terrorist Attacks The Congressional Joint Inquiry Into Intelligence Community Activities Before and After the Terrorist Attacks of September 11, 2001, recommended that a new cabinet level Senate-confirmedNID position be established and that a separate director be named to manage the CIA. The JointInquiry further recommended that the NID be granted full IC budget execution and personnelprogramming authorities. (26) The 9/11 Commission The 9/11 Commission, in a report issued in July, 2004, recommended the establishment of a presidentially appointed, Senate-confirmed National Intelligence Director who would overseenational intelligence centers on specific subjects of interest across the U.S. government, manage thenational intelligence program, oversee the agencies that contribute to it, and have hiring, firing andbudgetary authority over the IC's 15 agencies. The Commission recommended that the director belocated in the Executive Office of the President and that a deputy NID be established to oversee theday-to-day operations of the Central Intelligence Agency (CIA). Appendix 1. Selected NID Legislation Compared to Current Law Comparison of S. 2845, H.R. 10, and CurrentLaw

The 9/11 Commission, in its recent report on the attacks of September 11, 2001, criticized the U.S. Intelligence Community's (IC) fragmented management structure and questioned whether theU.S. government, and the IC, in particular, is organized adequately to direct resources and build theintelligence capabilities that the United States will need to counter terrorism, and to address thebroader range of national security challenges in the decades ahead. The Commission made a number of recommendations, one of which was to replace the current position of Director of Central Intelligence (DCI) with a National Intelligence Director (NID) whowould oversee national intelligence centers on specific subjects of interest -- including a NationalCounterterrorism Center (NCTC) -- across the U.S. government, manage the national intelligence program; oversee the agencies that contribute to it; and have hiring, firing, and budgetary authorityover the IC's 15 agencies. Although the Commission recommended that the director be located inthe Executive Office of the President, the Commission Vice Chairman in testimony before Congresson September 7, 2004, withdrew that portion of the recommendation in light of concerns that theNID would be subject to undue influence. The Commission further recommended that a deputy NIDbe established to oversee the day-to-day operations of the Central Intelligence Agency (CIA). TheCommission's recommendation to strengthen management authority over the IC is the latestcontribution to an IC structural reform debate that dates at least to 1955, when arguments forstronger IC authority began to surface. OMB deputy director James Schlesinger in 1971 firstbroached the NID concept. Congress currently is considering two principal bills, S. 2845 , introduced by Senators Collins and Lieberman, and H.R. 10 , introduced by Representative Hastert,that would establish the NID position. [For a comprehensive comparison of all recent NIDlegislative proposals, see CRS Report RL32600(pdf) and CRS Report RL32601(pdf) ]. Reactions to the concept of an NID have been mixed since its inception. Supporters argue that the DCI cannot manage the IC, the CIA and serve as the President's chief intelligence advisor, anddo justice to any of the jobs. Other than at the CIA, the DCI also lacks hiring, firing and budgetauthority. They argue that the absence of strong, centralized leadership has resulted in dividedmanagement of intelligence capabilities; lack of common standards and practices across theforeign-domestic intelligence divide; structural barriers that undermine the performance of jointintelligence work; and a weak capacity to set priorities and move resources. Opponents counter that an NID would lose day-to-day control over the CIA, a natural power base and, as a result, influence. They also contend that an NID will shift the balance of control awayfrom DOD, risking intelligence support to the warfighter. The congressional role includes decidingwhether to establish the position of the NID and its authority. This report will be updated as eventswarrant.

Introduction This report presents background information and potential issues for Congress on the question of whether to increase the Navy's force-level goal (i.e., the planned size of the Navy) to something more than the current goal of 308 ships. Some observers have advocated adopting a new a force-level goal of about 350 ships. The issue for Congress is whether to increase the planned size of the Navy to something more than 308 ships, and if so, what the new force-level goal should be. Congress's decisions on this issue could substantially affect Navy capabilities and funding requirements and the shipbuilding industrial base. There have also been proposals in recent years for future Navy fleets of less than 308 ships. Several of these proposals are summarized in another CRS report that provides an overview discussion of Navy force structure and shipbuilding plans. This other CRS report also summarizes current legislative activity relating to Navy force structure and shipbuilding. Several additional CRS reports discuss individual Navy shipbuilding programs. Background The Navy's Current 308-Ship Force-Level Goal The Navy's current force-level goal is to achieve and maintain in coming years a 308-ship fleet of the types numbers and numbers shown in Table 1 . The goal for a 308-ship fleet is the result of a 2014 update to a force structure assessment (FSA) that the Navy completed in 2012. The Navy's force-structure goal is adjusted every few years, and has been in the range of 306 to 328 ships since 2006. The Navy is currently conducting a new FSA, and some observers anticipate that this FSA will lead to a new Navy force-level goal for a fleet of more than 308 ships, although not necessarily 350 ships. The Navy projects that if its current 30-year shipbuilding plan is fully implemented, the Navy would attain a fleet of 308 ships (though not with the exact mix of ships called for in the current 308-ship force-structure goal) in FY2021. The Navy's actual size in recent years has generally been in the range of 270 to 290 ships. Why Are Some Observers Advocating a Bigger Navy? Those who advocate increasing the planned size of the Navy to something more than 308 ships generally point to China's naval modernization effort; resurgent Russian naval activity, particularly in the Mediterranean Sea and the North Atlantic Ocean; and challenges that the Navy has sometimes faced, given the current total number of ships in the Navy, in meeting requests from the various regional U.S. military commanders for day-to-day in-region presence of forward-deployed Navy ships. To help meet requests for forward-deployed Navy ships, Navy officials in recent years have sometimes extended deployments of ships beyond (sometimes well beyond) the standard length of seven months, leading to concerns about the burden being placed on Navy ship crews and wear and tear on Navy ships. Navy officials have testified that fully satisfying requests from regional U.S. military commanders for forward-deployed Navy ships would require a fleet of substantially more than 308 ships. For example, Navy officials testified in March 2014 that fully meeting such requests would require a Navy of 450 ships. Proposals for future fleets of more than 308 ships sometimes form part of broader proposals for increasing U.S. defense spending or the size of the U.S. military generally. During the Cold War, the Navy maintained substantial numbers of forward-deployed forces in three primary overseas operating areas, or "hubs"—the Western Pacific, the Indian Ocean/Persian Gulf region, and the Mediterranean. Following the end of the Cold War in the late 1980s/early 1990s, the Navy continued to maintain substantial numbers of forward-deployed ships in the Western Pacific and Indian Ocean/Persian Gulf region, but substantially reduced the number of ships forward deployed to the Mediterranean. In effect, the Navy shifted from three-hub operations to two-hub operations, with the substantially reduced levels of presence in the Mediterranean being provided in part via transit presence, meaning the temporary presence of Navy ships in the Mediterranean as they transit to or from the Indian Ocean/Persian Gulf region via the Suez Canal. Navy force-level goals were adjusted downward to reflect the shift from three-hub operations to two-hub operations. A key potential reason for increasing the planned size of the Navy to something more than 308 ships would be to reestablish a larger U.S. Navy forward-deployed presence in the European theater, and particularly the Mediterranean, so as to respond to resurgent Russian naval activity in that area and increase U.S. capacity for responding to events in North Africa and the Middle East. Since the Navy's current 308-ship force-level goal is designed to support the current two-hub concept, reestablishing a larger number of forward-deployed Navy ships in the Mediterranean without reducing numbers of forward-deployed ships in the other two hubs could, other things held equal, require a potentially significant increase in the planned size of the Navy. For example, increasing by 8 the number of Navy ships that are continuously forward deployed in the Mediterranean and sourcing that additional deployment from ships that are homeported on the U.S. East Coast could increase the Navy's force structure requirement (other things held equal) from 308 ships to about 350 ships—an addition of about 42 ships. Where Did the Figure of 350 Ships Come From? The figure of 350 ships that some observers advocate appears to be a rounded-off version of a recommendation for a fleet of up to (and possibly more than) 346 ships that was included in the 2014 report of the National Defense Panel (NDP), a panel that provided an independent review of DOD's report on its 2014 Quadrennial Defense Review (QDR). Four years before that, a fleet of 346 ships was recommended in the 2010 report of the independent panel that reviewed DOD's report on its 2010 QDR. The 2010 independent panel report further specified that the figure of 346 ships included 11 aircraft carriers, 55 attack submarines (SSNs), and 4 guided missile submarines (SSGNs). Seventeen years earlier, a fleet of 346 ships was recommended in DOD's 1993 report on its Bottom-Up Review (BUR), a major review of U.S. defense strategy, plans, and programs that was prompted by the end of the Cold War. The 2014 NDP report cited above referred explicitly to the BUR in making its recommendation for future fleet size: We believe the fleet-size requirement to be somewhere between the 2012 Future Year Defense Program (FYDP) goal of 323 ships and the 346 ships enumerated in the [1993] BUR, depending on the desired "high-low mix [of ships]," and an even larger fleet may be necessary if the risk of conflict in the Western Pacific increases. Is a Fleet of About 350 Ships the Only Option for a Fleet of More Than 308 Ships? The figure of 350 ships is by no means the only possibility for a Navy of more than 308 ships; fleets of more than 350 ships, or of fewer than 350 ships (but still more than 308), are also possible. For example, as discussed in the CRS overview report on Navy force structure and shipbuilding plans, the Navy in 2002-2004 had a force-structure goal of 375 ships, and in early 2005 presented a pair of force structure plans, the larger of which called for a fleet of 325 ships. Are There Proposals for Fleets of Less Than 308 Ships? In addition to proposals for a fleet of about 350 ships (or some other number higher than 308), there have also been proposals in recent years from other observers for fleets of less than 308 ships. Several of these proposals are summarized in the CRS overview report on Navy force structure and shipbuilding plans. For example, a November 2012 report from the Project on Defense Alternatives recommended a future fleet of 230 ships. Proposals for future fleets of less than 308 ships sometimes form part of broader proposals for reducing U.S. defense spending or the size of the U.S. military generally. What Might a 350-Ship Fleet Look Like? Table 2 below presents a notional force structure for a Navy of about 350 ships. (It happens to total 349 ships.) It shows the Navy's current 308-ship force structure goal, the 346-ship fleet recommended in the report on the 1993 BUR, and the 346-ship fleet recommended in the 2010 report of the independent panel on the 2010 QDR. The table also shows, as an additional reference, numbers of ships (other than ballistic missile submarines [SSBNs]) that have been included in Navy force structure plans since 1993 for fleets of 300 to 400 ships. The notional plan for a fleet of about 350 ships was created by scaling up the 308-ship plan (other than the figure for SSBNs, which was held constant at 12), and then adjusting some of the resulting numbers as described in Appendix A . The 349-ship fleet shown in Table 2 is a notional fleet for purposes of illustration. It is not based on a new analysis of future Navy mission needs. Some of the figures for specific ship types are taken from past Navy force structure plans, but the analyses of future Navy mission needs on which those earlier plans were based may no longer be appropriate. The 349-ship fleet shown in Table 2 may be of value as one possible point of departure for discussing Navy force structure plans for fleets of more than 308 ships, and for understanding how proposals for future fleets of about 350 ships might depart from a proportional scaling up of the current 308-ship force-structure goal. Many combinations of about 350 ships other than the notional one shown in Table 2 are possible. Such alternative combinations could place greater or lesser emphasis on ship categories such as attack submarines (SSNs), aircraft carriers, cruisers and destroyers, frigates and Littoral Combat Ships (LCSs), or amphibious ships, or could use new types of ships not present in the current fleet architecture. Regarding the possibility of a new fleet architecture, Section 1067 of the FY2016 National Defense Authorization Act ( S. 1356 / P.L. 114-92 of November 25, 2015) requires the Secretary of Defense to provide for three independent studies of alternative future fleet platform architectures for the Navy in the 2030 timeframe, and to submit the results of each study to the congressional defense committees by April 1, 2016. How Might a 350-Ship Navy Affect the Navy's 30-Year Shipbuilding Plan? As shown in Table 2 , the notional Navy of about 350 ships, compared to the current 308-ship plan, includes 41 additional ships, including 1 aircraft carrier, 11 SSNs, 12 cruisers and destroyers, 4 frigates and LCSs, 4 amphibious ships, 4 CLF ships, and 5 support ships. The number of ships that would need to be added to the Navy's 30-year shipbuilding plan to achieve and maintain the notional fleet of about 350 ships, however, would be different from 41, because the current 30-year shipbuilding plan does not fully support all elements of the 308-ship goal across the entire 30-year period, and because additional ships are in some cases needed to offset the retirements of existing ships that will reach the ends of their service lives during the 30-year period. Table 3 summarizes the resulting potential impact of the notional 350-ship fleet on the Navy's 30-year shipbuilding plan. As shown in the table, although the notional fleet of 349 ships includes 41 more ships than the current 308-ship force-structure goal, achieving this notional 349-ship fleet might require adding a total of 45 to 58 ships to the Navy's 30-year shipbuilding plan, or an average of about 1.5 to 1.9 additional ships per year over the 30-year period. For additional discussion of these notional additions to the 30-year shipbuilding plan, see Appendix B . Would a Bigger Navy Be Affordable? Given current constraints on defense spending under the Budget Control Act of 2011 ( S. 365 / P.L. 112-25 of August 2, 2011) as amended, as well as the Navy's current share of the defense budget, the Navy faces challenges in achieving its currently planned 308-ship fleet, let alone a fleet of more than 308 ships. As discussed in the CRS report that provides an overview of Navy force structure and shipbuilding plans, the Congressional Budget Office (CBO) estimates that fully implementing the Navy's current 30-year shipbuilding plan would require, on average, an additional $4.5 billion in shipbuilding funds per year. The 30-year shipbuilding plan, moreover, does not fully support all parts of the planned 308-ship force structure throughout the entire 30-year period—more ships would need to be included in the 30-year plan to do that. As suggested in Table 3 , still more ships would need to be included to achieve and maintain a fleet of more than 308 ships. Using current procurement costs for Navy ships, procuring the additional 45 to 58 ships shown in Table 3 might require an average of roughly $3.5 billion to $4.0 billion per year in additional shipbuilding funding over the 30-year period. Additional shipbuilding funding, moreover, is only a fraction of the additional funding that would be needed to support a larger force structure—there would be additional expenditures, for example, for additional ship weapons, for operating and maintaining the additional ships, for additional ship crews, and possibly for additional basing and support facilities. If current constraints on defense spending are not lifted or relaxed, achieving and maintaining a fleet of more than 308 ships could require reducing funding for other defense programs. How Might Forward Homeporting in the Mediterranean Affect Required Fleet Size? Forward homeporting additional Navy ships in the Mediterranean could substantially reduce the number of additional ships the Navy would need to support a larger forward-deployed presence there. The Navy already uses forward homeporting to reduce force levels needed to support its forward-deployed presence in various operating areas: The Navy forward homeports an aircraft carrier strike group, an Amphibious Ready Group (ARG), and mine warfare ships in Japan, and additional Navy ships are forward homeported elsewhere in the Pacific theater, at Bahrain in the Persian Gulf, and in the European theater in Spain and Italy. As discussed earlier, increasing by 8 the number of Navy ships that are continuously forward deployed in the Mediterranean and sourcing that additional deployment with rotationally deployed ships that are homeported on the U.S. East Coast could increase the Navy's force structure requirement (other things held equal) from 308 to about 350—an addition of about 42 ships. Alternatively, forward homeporting 7 surface ships in the Mediterranean (and accounting for the fact that those 7 ships would require periodic maintenance) could reduce the additional number of ships that would be needed to support this additional forward-deployed presence from about 42 to about 14, which would result in a force structure requirement (other things held equal) of about 322 ships rather than about 350. The forward homeporting of a carrier group in Japan began in the early 1970s. The Navy at that time was also pursuing a plan for homeporting a carrier group in Greece, at the port of Piraeus, near Athens. Following a military coup in Greece, the United States canceled the plan to homeport a carrier group in Greece. If the coup had not occurred, the United States today might have a carrier group homeported in Greece, as it does in Japan. Potential locations for homeporting additional Navy ships in the Mediterranean in coming years, at least in theory, include Spain (which homeports four U.S. Navy destroyers at Rota), Italy (which homeports a Navy command ship at Gaeta), France, and Greece. Some observers have also suggested Haifa, Israel, as a possible homeporting location. Forward homeporting is an option that has been discussed in previous CRS reports and in reports from the Congressional Budget Office (CBO). Aside from substantially reducing the number of ships needed to support a given level of forward-deployed presence, forward homeporting offers other potential benefits, including the following: Signal of commitment to homeporting r egion. Forward homeporting can send a strong signal of U.S. commitment to the region in which the ships are homeported, which can enhance deterrence of potential regional aggressors and reassurance of regional allies and partners. Familiarization with homeporting region . Forward homeporting can permit the crews of the forward-homeported ships to become very familiar with the operational conditions of the region in which the ships are homeported, which can enhance their operational effectiveness when operating in the region. Engagement and interoperability in homeporting region . If forward homeporting leads to a larger or more continuous U.S. Navy presence in a region, it can enhance opportunities for Navy ships to conduct engagement and training activities with allied and partner forces in the region, which can strengthen U.S. political bonds with those allies and partners and improve interoperability between U.S. Navy forces and allied and partner forces, potentially enhancing deterrence of potential regional aggressors. Although it can substantially reduce the number of ships needed to support a given level of forward-deployed presence, forward homeporting does not substantially change the number of ships needed for warfighting. In addition, forward homeporting also poses certain challenges, costs, and risks, including the following: Host nation access. The United States must gain permission from a foreign government to be the host nation for the forward-homeported Navy ships. Facilities construction. Building the facilities needed to support the forward-homeported ships would cost millions or, potentially, billions of dollars, depending on the number and types of ships to be forward homeported and amount of suitable and available existing facilities at the home port location. Host-nation limits on use. The host nation might impose limits on how the forward-homeported Navy ships can be used. Such limits would reduce a key potential attribute of U.S. naval forces—their ability, when operating in international waters, to be used as U.S. leaders may wish, without having to ask permission from foreign governments. Regional lock-in. The host nation and other nations in the region might get used to having the forward-homeported Navy ships operate in that region, and might interpret a U.S. decision to send those ships to another region as a diminution in the U.S. commitment to the homeporting region. Association with host nation policies. The presence of homeported Navy ships in the host nation could be viewed by observers as an expression of U.S. support for the various policies of the host nation, even if the United States does not in fact support some of those policies. Sudden eviction. The homeported ships face a risk of sudden eviction from the home port due to a change in the host nation's government or host nation policies, upsetting force-structure calculations that assumed a continuation of the homeporting arrangement. Issues for Congress Potential oversight issues for Congress concerning the possibility of increasing the planned size of the Navy to something more than 308 ships include the following: How large a Navy, consisting of what mix of ships, will be needed in coming years to adequately perform Navy missions, including responding to China's naval modernization, responding to resurgent Russian naval operations, and meeting U.S. regional combatant commander requests for forward-deployed Navy ships? How might the answer to the preceding question be affected by developments such as greater use of unmanned vehicles, potential new fleet architectures, or expanded use of forward homeporting? To what degree can contributions from U.S. allies and partners offset a need for additional U.S. Navy ships? What are the potential operational risks of relying on U.S. allies and partners to reduce requirements for U.S. Navy ships? What would be the additional cost for achieving and maintaining a fleet of more than 308 ships? In a situation of constraints on defense spending, what impact would this additional cost have on funding available for other defense programs? If funding for other defense programs would need to be reduced to help pay for a fleet of more than 308 ships, what would be the net effect on U.S. military capabilities and operational risks? Legislative Activity for FY2017 For legislative activity for FY2017 relating to Navy ship force structure and shipbuilding, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by [author name scrubbed]. Appendix A. Adjustments Leading to Notional 349-Ship Plan This appendix discusses the adjustments that were made to the force-level goals for certain ship types in converting the proportional 350-ship fleet shown in the fifth column of Table 2 to the notional 349-ship fleet shown in the sixth column of Table 2 . The adjustments were as follows: SSBNs. The number of SSBNs was left unchanged from the figure of 12 in the Navy's 308-ship plan because discussions about the possibility of a bigger Navy have centered on changing demands for general-purpose ships rather than on changing demands for strategic nuclear deterrent ships. SSGNs. The figure of 0 SSGNs derived from scaling up the 308-ship plan was left unchanged. As under the 308-ship plan, today's 4 Ohio-class cruise missile submarines (SSGNs) would eventually retire without being replaced in kind. Discussions about compensating for the eventual retirement of the SSGNs' strike capability have centered more on building Virginia-class submarines equipped with the Virginia Payload Module (VPM) than on building replacement SSGNs. See also the next bullet. SSNs. The scaled-up figure of 55 SSNs, which happens to equal a figure shown in certain Navy force structure plans prior to 2005, was increased to 59 in the notional plan to create a figure equal to the combined total of 4 SSGNs and 55 SSNs shown in the Navy's 2002-2004 plan for a fleet of 375 ships. Aircraft carriers. The scaled-up figure of 13 carriers was reduced to 12 because Navy force structure plans for fleets of between 300 and 400 ships since 1993 have not shown more than 12 carriers. Cruisers and destroyers. The scaled-up figure of 100 cruisers and destroyers (i.e., large surface combatants) was left unchanged. Frigates and LCSs. The scaled-up figure of 59 frigates and LCSs (i.e., small surface combatants) was reduced to 56, which is the number of LCSs in the Navy's 2002-2004 plan for a 375-ship fleet. In addition, Navy plans for crewing and operating LCSs call for organizing LCSs into four-ship divisions, and 56 is evenly divisible by four. Navy force structure plans from 2006 through 2012 included a total of 55 LCSs. Amphibious ships. The scaled-up figure of 39 ships was reduced to 38, a number that Navy and Marine Corps officials have testified would be able to meet the requirement for having enough amphibious lift for the assault echelons of 2.0 Marine Expeditionary Brigades (MEBs) with less risk than the currently planned 34-ship amphibious force. Mine warfare ships. The scaled up figure of 0 mine warfare ships was left unchanged. As under the current 308-ship plan, missions now carried out by mine warfare ships would in the future be performed instead by LCSs equipped with the LCS mine warfare mission package. Combat Logistics Force (CLF) ships and support ships (including Expeditionary Fast transports [EPFs]). The scaled-up figures for these two categories were left unchanged. Appendix B. Additional Ships Needed in 30-Year Shipbuilding Plan This appendix discusses in further detail the additional ships added to the 30-year shipbuilding plan that are shown in the final column of Table 3 . SSNs—Notional Objective of 59 Industrial-base capacity permitting, an SSN force of 59 boats could be achieved by inserting 12 additional SSNs into the current 30-year shipbuilding plan, for a total procurement of 56 SSNs rather than 44 during the 30-year period. A notional profile could insert these 12 additional SSNs into the 12 years (FY2021, FY2024, and FY2026-FY2035) where the current plan would procure 1 SSN rather than 2. (These are the 12 years when the 12 Columbia class [Ohio replacement] SSBNs are to be procured.) Under this profile, the SSN force would reach a minimum of 43 boats around FY2028-FY2029 and then grow to 59 boats in FY2041. It would continue to grow after that, reaching 63 boats by about the end of the 30-year period, unless older SSNs are retired before the ends of their service lives to keep the force at 59. Aircraft Carriers—Notional Objective of 12 Under the current 30-year shipbuilding plan, carriers are to be procured every five years (FY2018, FY2023, and so on). Carriers would enter service nine years after the year in which they are procured, and the resulting carrier force is projected to remain at 11 ships, except for the three-year period FY2022-FY2024, during which it would increase to 12, and the final seven years of the 30-year period (FY2040-FY2046), during which it would decline to 10 as a long-term consequence of procuring carriers every five years. A total of four carriers would be procured from FY2018 through FY2034, in FY2018, FY2023, FY2028, and FY2033. Given this projection, a 12-ship carrier force could be achieved and maintained by procuring a total of 6 carriers, rather than 4, from FY2018 through FY2034. The 6 carriers would be procured at mostly three-year intervals, in FY2018, FY2021, FY2024, FY2028, FY2031, and FY2034. The resulting force would continue include a total of 12 ships during the three-year period FY2022-FY2024. It would then decline to 11 ships, return to 12 ships in FY2030, and remain at 12 ships through the end of the 30-year period, except for FY2032 and FY2042, when it would dip to 11 ships. Under this scenario, FY2030 could be viewed as the year when the Navy attained a 12-ship carrier force. Cruisers and Destroyers—Notional Objective of 100 Under the current 30-year shipbuilding plan, the cruiser-destroyer force is projected to reach 100 ships in FY2024 and remain at or close to that figure through FY2028 before dropping below 90 ships in FY2032 and to 80 ships by the end of the 30-year period. Given this projection, a force of about 100 cruisers and destroyers could be achieved and maintained over the entire 30-year period by inserting 16 cruisers and destroyers into the current 30-year shipbuilding plan, for a total procurement of 82 cruisers and destroyers rather than 66. A notional profile would insert 1 additional cruiser or destroyer per year over the 16-year period FY2020-FY2035, increasing the procurement rate for this period from 2 ships per year to 3 ships per year. This notional profile would achieve a 100-ship cruiser destroyer force in FY2024 (as under the current 30-year shipbuilding plan) and maintain a force of between 96 and 104 cruisers and destroyers for the remainder of the 30-year period. Frigates and LCSs—Notional Objective of 56 Although the 308-ship plan calls for 52 frigates and LCSs, the LCS/frigate program has been reduced from 52 ships to 40. Under the current 30-year shipbuilding program, the annual procurement rate for the LCS/frigate program has been limited to 1 or 2 ships per year, a successor small surface combatant design is scheduled to begin procurement in FY2029, and the force of frigates and LCSs is not projected to exceed 45 during the 30-year period. Given currently planned procurement and the resulting projected force level, one notional profile for achieving a force of 56 frigates and LCSs and maintaining about this number through the end of the 30-year period would be to insert 17 additional frigates and LCSs into the nine-year period FY2017-FY2025, and then remove 5 frigates and LCSs from the seven-year period FY2029-FY2035. This would result in a net increase of 12 frigates and LCSs procured during the 30-year period—a total procurement of 70 rather than 58. (A total of 70 frigates and LCSs are procured over the 30-year period to support a force level goal of 56 ships because the earliest of the first 56 LCSs/frigates to enter service will reach the ends of their service lives and be retired during the 30-year period.) Under this notional profile, frigates and LCSs would be procured in FY2019-FY2023 at a rate of four ships per year, a rate that is currently shown for procuring frigates and LCSs for some of the later years of the current 30-year shipbuilding plan. Producing LCSs/frigates at a rate of four ships per year might require producing them at more than one shipyard. Under the notional profile, a force of at least 56 frigates and LCSs would be achieved in FY2029 (there would be 57 that year), procurement of the successor design would begin in FY2033 rather than FY2029, and the force would be maintained at a level of 55 to 57 ships through the remainder of the 30-year period. Table B-1 shows, for the period FY2017-FY2035, the notional procurement profile compared to the profile in the current 30-year shipbuilding plan. (The procurement profile for the years after FY2035 would remain unchanged.) Amphibious Ships—Notional Objective of 38 Under the current 30-year shipbuilding plan, the amphibious force is projected to grow to 38 ships in FY2033, and then decline to 32 or 33 ships by the final years of the 30-year period. Given this projection, inserting additional amphibious ships into the Future Years Defense Plan (FYDP) (i.e., FY2017-FY2021—the first five years of the 30-year shipbuilding plan) could accelerate the attainment of a 38-ship amphibious force by several years, and keep the amphibious force at or relatively close to the 38-ship level for most of the 30-year period. For example, adding 3 amphibious ships to the FYDP could accelerate the attainment of a 38-ship amphibious force to FY2025 and keep the amphibious force within 3 ships of the 38-ship figure for the remainder of the 30-year period. The situation is summarized in Table B-2 . CLF Ships—Notional Objective of 33 Under the current 30-year shipbuilding plan, the CLF force is projected to remain at 29 or 30 ships throughout the 30-year period. The 3 or 4 additional CLF ships that would need to be added to the 30-year shipbuilding plan to achieve and maintain a force of 33 CLF ships could be added so that the additional ships enter the force at about the time that they would be needed to support growing numbers of surface combatants and amphibious ships. Support Ships (Including EPFs)—Notional Objective of 39 Under the current 30-year shipbuilding plan, the number of support ships (including Expeditionary Fast transports, or EPFs—the ships previously known as Joint High Speed Vessels, or JHSVs), is projected to increase to 35 in FY2020, increase further to a maximum of 39 in FY2025, remain at or above the current 34-ship goal until FY2038, and then decline to 32 ships for the final seven years of the 30-year period. Given this projection, the situation for these ships can be viewed as somewhat similar to the one described above for amphibious ships: adding additional support ships during the FYDP could accelerate the date for attaining a force of at least 39 ships from FY2025 to an earlier year, and keep the force closer to the 39-ship figure in the final years of the 30-year period. If one or more of the additional ships are to be EPFs, then from a production standpoint, it might be efficient for those additional ships to be added directly after the ones that have already been funded, so as to preserve production learning-curve benefits.

Current Navy plans call for achieving and maintaining a fleet of 308 ships of certain types and numbers. Some observers have advocated increasing the Navy's force-level goal to about 350 ships. The Navy is currently conducting a force structure assessment (FSA), and some observers anticipate that this FSA will lead to a new Navy force-level goal of more than 308 ships, although not necessarily 350 ships. The Navy's actual size in recent years has generally been in the range of 270 to 290 ships. Those who advocate increasing the planned size of the Navy to something more than 308 ships generally point to China's naval modernization effort, resurgent Russian naval activity, and challenges that the Navy has sometimes faced in meeting requests from the various regional U.S. military commanders for day-to-day, in-region presence of forward-deployed Navy ships. The figure of 350 ships is by no means the only possibility for a Navy of more than 308 ships; fleets of more than 350 ships, or of fewer than 350 ships (but still more than 308), are also possible. There have also been proposals in recent years from other observers for fleets of less than 308 ships. For purposes of illustration, this CRS report presents a notional force structure for a Navy of about 350 ships. (It happens to total 349 ships.) This notional 349-ship fleet may be of value as one possible point of departure for discussing Navy force structure plans for fleets of more than 308 ships, and for understanding how proposals for future fleets of about 350 ships might depart from a proportional scaling up of the current 308-ship force-structure goal. Many combinations of about 350 ships other than the notional 349-ship force structure are possible. Achieving and maintaining the notional 349-ship force structure might require adding a total of 45 to 58 ships to the Navy's FY2017 30-year shipbuilding plan, or an average of about 1.5 to 1.9 additional ships per year over the 30-year period. Using current procurement costs for Navy ships, procuring these additional 45 to 58 ships might require an average of roughly $3.5 billion to $4.0 billion per year in additional shipbuilding funding over the 30-year period. Given current constraints on defense spending under the Budget Control Act of 2011 (S. 365/P.L. 112-25 of August 2, 2011) as amended, as well as the Navy's current share of the defense budget, the Navy faces challenges in achieving its currently planned 308-ship fleet, let alone a fleet of more than 308 ships. If current constraints on defense spending are not lifted or relaxed, achieving and maintaining a fleet of more than 308 ships could require reducing funding for other defense programs. A key potential reason for increasing the planned size of the Navy to something more than 308 ships would be to reestablish a larger U.S. Navy forward-deployed presence in the European theater, and particularly the Mediterranean. Forward homeporting additional Navy ships in the Mediterranean could substantially reduce the number of additional ships that the Navy would need to support a larger forward-deployed presence there. Forward homeporting, however, does not substantially change the number of ships needed for warfighting, and it poses certain challenges, costs, and risks. The question of whether to increase the planned size of the Navy to something more than 308 ships poses a number of potential oversight issues for Congress concerning factors such as mission needs; the potential impacts on future required Navy force levels of unmanned vehicles, potential new fleet architectures, expanded use of forward homeporting, and contributions from allies and partner states; the potential costs of achieving and maintaining a fleet of more than 308 ships; and the potential impact of those costs on funding available for other defense programs.

Introduction The Earned Income Tax Credit (EITC) is a refundable tax credit available to eligible low-wage workers. Many low-income workers, especially those with children, can receive several thousand dollars of financial assistance from this tax provision. (Childless recipients can receive slightly less than $500 if they qualify for the maximum credit.) Because the credit is refundable, an EITC recipient need not owe taxes to receive the benefit. In the 113 th Congress, many legislative proposals have been introduced that would modify the EITC. In general, these bills modify either how the credit is calculated or eligibility requirements for the credit, or both. To understand how these bills would modify the credit, this report first provides a brief overview of eligibility requirements for the credit and how the credit is calculated under current law. (For a more detailed description of EITC eligibility requirements and the calculation of the credit, see CRS Report RL31768, The Earned Income Tax Credit (EITC): An Overview , by [author name scrubbed].) The report then summarizes how different legislative proposals modify certain parameters of the credit, starting with modifications that expand the credit for workers without qualifying children , followed by those that expand the EITC for workers with qualifying children . (Some legislative proposals modify the credit for workers both with and without children.) O ther modifications to the credit, including those made by House Ways and Means Committee Chairman Camp 's tax reform proposal, are briefly summarized. Overview of the EITC Eligibility for and the amount of the EITC are based on a variety of factors, including residence and taxpayer ID requirements, the presence of qualifying children, age requirements for certain recipients, amount of investment income, and the recipient's earned income. This section briefly describes key eligibility factors and provides an overview of how eligible taxpayers calculate the value of the credit under current law. Eligibility for the EITC There are a variety of eligibility criteria for the EITC, described below. Residence and ID Requirements: Under current law, an EITC recipient must be a resident of the United States, unless the recipient resides in another country because of U.S. military service. In addition, to be eligible for the credit, the tax filer must provide valid Social Security numbers (SSNs) for work purposes for themselves, spouses if married filing jointly, and any qualifying children. Definition of Qualifying Child: To be considered a "qualifying child" of an EITC recipient, three requirements must be met. First, the child must have a specific relationship to the tax filer (son, daughter, step child or foster child, brother, sister, half-brother, half-sister, step brother, step sister, or descendent of such a relative). Second, the child must share a residence with the taxpayer for more than half the year in the United States. Third, the child must meet certain age requirements ; namely, the child must be under the age of 19 (or age 24, if a full-time student) or be permanently and totally disabled. Age Requirements for EITC Recipients with No Qualifying Children: If a tax filer has no qualifying children , he or she must be between 25 and 64 years of age. Childless taxpayers under age 25 or older than 64 are not eligible for the EITC. There is no age requirement for tax filers with qualifying children. Investment Income: Tax filers with investment income greater than $3,350 in 2014 are ineligible for the EITC. Investment income includes interest income (including tax-exempt interest), dividends, net rent, and royalties that are from sources other than the filer's ordinary business activity, net capital gains, and passive income. Calculating the Credit The EITC is calculated based on a recipient's earnings. Specifically, the EITC equals a fixed percentage (the "credit rate") of earned income until the credit amount reaches its maximum level. The EITC then remains at its maximum level over a subsequent range of earned income, between the "earned income amount" and the "phase-out amount." Finally, the credit gradually decreases in value to zero at a fixed rate (the "phase-out rate") for each additional dollar of earnings above the phase-out amount. The specific values of these EITC parameters (i.e., credit rate, earned income amount, etc.) vary depending on the several factors, including the number of qualifying children and the marital status of the tax filer, as illustrated in Table 1 . Figure 1 provides a graphic representation of the amount of the EITC for an unmarried EITC recipient with one child in 2014. As illustrated in Figure 1 (and in the "one qualifying child" column in Table 1 for unmarried tax filers), the credit phases in at a rate of 34% of earnings for tax filers with earnings under $9,720 in 2014. At $9,720 of earnings, the EITC reaches its maximum level of $3,305 and remains at that level until earnings exceed $17,830. For taxpayers with earnings above this threshold, the $3,305 amount is gradually reduced by 15.98 cents for every dollar above $17,830. Unmarried tax filers with one child and earnings at or above $38,511 are ineligible for the EITC. Legislation That Expands the Credit for Childless Workers Several bills introduced in the 113 th Congress would expand the EITC for childless workers. These bills— H.R. 4117 , H.R. 2116 , S. 836 , S. 2162 , H.R. 2359 , and the Obama Administration's FY2015 budget—would modify how the credit is calculated, increasing the amount of the credit for childless workers. All of these bills—except H.R. 2359 —would also modify various eligibility rules for the credit, expanding the number of taxpayers eligible to claim it. These legislative changes are summarized below in Table 2 and described subsequently in this report. Increasing the Amount of the Credit A variety of legislative changes made to the formula used to calculate the EITC for childless workers would increase the amount of the credit. Generally, these bills would increase a variety of different parameters, including the credit rate, the earned income amount, and the phase-out income level. As illustrated in Figure 2 and Figure 3 , these changes would generally increase the maximum value of the credit for childless workers from $496 to approximately $1,000 (Administration budget proposal); $1,300 ( H.R. 2359 ); $1,350 ( H.R. 2116 , S. 836 , S. 2162 ); or $1,500 ( H.R. 4117 ). Increasing the Credit Rate Under current law, the credit rate for childless EITC recipients is 7.65%. All else being equal, increasing the credit rate would increase the amount of the credit. Under H.R. 4117 , the credit rate for childless workers would increase to 23.15% (the phase-out rate would also increase from 7.65% to 23.15%). Under H.R. 2359 , the credit rate for childless workers would increase to 20% (the phase-out rate would remain at its current level of 7.65%). Under H.R. 2116 , S. 836 , S. 2162 , and the FY2015 Administration budget proposal , the credit rate for childless workers would double to 15.3% (the phase-out rate would also increase from 7.65% to 15.3%). Increasing the Earned Income Amount As previously discussed, the "earned income amount" is the earnings level at which the credit reaches it maximum value. All else being unchanged, increasing the earned income amount increases the amount of the credit for most EITC claimants. For example, under current law, the earned income amount for a childless EITC claimant is $6,480. If the earned income amount was increased to $10,000 (and all other parameters of the credit remained unchanged from current law), all tax filers with income above the current earned income threshold of $6,480 would receive a larger credit. The maximum value of the credit would increase from $496 to $765. Under H.R. 2116 , the earnings level at which the childless EITC reaches its maximum value would increase from its current level of $6,480 to $8,820 (adjusted annually for inflation). Increasing the Phase-Out Amount and Marriage Penalty Relief The EITC phases out for recipients when income exceeds a "phase-out amount." Increasing the phase-out amount increases the credit amount for tax filers whose income places them in the downward sloping "phase-out range" of the credit (see Figure 1 for an illustration of the "phase-out range"). Under current law, the phase-out amount for unmarried tax filers is specified by law and the phase-out amount for married tax filers is calculated by adding the applicable amount of marriage penalty relief. (For example, as illustrated in Table 1 , the phase-out amount for married taxpayers with a given number of children is calculated by adding $5,430—the current level of "marriage penalty relief"—to the phase-out amount for unmarried recipients with the same number of children.) Beginning in 2018, this marriage penalty relief is scheduled to revert permanently to $3,000 (adjusted for inflation). H.R. 4117 would increase both the phase-out amount and marriage penalty relief. Specifically, the bill would increase the phase-out amount from its current level of $8,110 for unmarried tax filers to $16,630 (and subsequently adjust this amount for inflation in future years). For childless workers only, this bill would also increase marriage penalty relief permanently to $8,000 (adjusted for inflation). H.R. 2116 would increase the phase-out amount for unmarried recipients to $10,425 (and adjust this amount annually for inflation). The 2009 temporary increase in the marriage penalty relief of $5,000 (adjusted for inflation, $5,430 in 2014) would also be made permanent. The President's FY2015 budget would increase the phase-out amount for unmarried tax filers to $11,500 in 2015. These levels would be annually adjusted for inflation in the future. Like H.R. 2116 , the 2009 temporary increase in the marriage penalty relief would be made permanent. Changing Eligibility Rules A variety of legislative changes made to the eligibility rules of the EITC for childless workers would expand eligibility for the credit to more childless workers. Changing the Eligibility Age for the Childless EITC Currently, childless workers must be between the ages of 25 and 64 to be eligible for the childless EITC. H.R. 4117 and S. 836 would lower the minimum age requirement for the childless EITC from 25 to 21, leaving the maximum age limitation unchanged. H.R. 2116 and S. 2162 would also lower the minimum age requirement for the childless EITC from 25 to 21. However, eligible workers between the ages of 21 and 24 could not be full-time students. The maximum age limitation would remain unchanged. The Obama Administration's FY2015 budget proposal would expand eligibility for both younger and older childless workers. Specifically, the proposal would "allow tax filers at least aged 21 and under 67 years old to claim the EITC for workers without qualifying children." , Full-time students between the ages of 21 and 24 would remain ineligible for the EITC. Allowing Tax Filers Whose Children Do Not Have Social Security Numbers (SSNs) to Receive the Childless EITC Under current law, tax filers with qualifying children must provide those children's SSNs (as well as their own). If tax filers do not provide the SSNs of all of their otherwise qualifying children when they claim the EITC, the tax filers will be ineligible for the EITC—even the EITC for childless workers. (By contrast, if tax filers provide the SSNs of some but not all of their qualifying children, the IRS will recalculate the filers' EITC credit value based on the number of qualifying children with SSNs.) H.R. 2116 would allow tax filers to receive the childless EITC if the tax filer does not provide the SSNs of all of their otherwise qualifying children. Simplifying the Rules Regarding the Presence of a Qualifying Child to Allow Certain Tax Filers to Claim the Childless EITC Under current law, for the purposes of the EITC, qualifying children must meet three requirements: (1) they must be relatives of the tax filer, (2) they must live with the tax filer for more than half the year in the United States, and (3) they must be under 19 years old (or 24, if a full-time student). As a result of this definition, a child may be the qualifying child of more than one tax filer in the household. For example, a child who lives with a single parent, grandparent, and aunt in the same house could be a qualifying child of all three of these individuals. But only one of these individuals can claim the qualifying child for the EITC, and the others are barred from claiming the childless EITC. Specifically, the IRS states, "If you have a qualifying child and do not claim the EITC using that qualifying child, you cannot take EITC for those who do not have a qualifying child." In other words, you cannot claim the EITC for childless workers if you in fact do have a qualifying child, but do not claim them for the EITC. For example, in the situation where a grandparent or aunt claims their qualifying grandchild or niece/nephew for the EITC, the child's parent—even if the parent lives with the child and that child is also their qualifying child—could not claim the EITC for childless workers. H.R. 2116 would allow certain tax filers who did not claim their qualifying child for the EITC (and whose qualifying child was claimed by another tax filer for the EITC) to claim the EITC for childless workers. This rule would not apply if the qualifying child lived with both parents. Hence, if a child lived with their grandmother, aunt, and mother at the same address for the year, and the grandmother claimed the child for purposes of the EITC, both the aunt and mother could claim the childless EITC under this bill. In contrast, according to this legislation, if the child lived with both unmarried parents at the same address for the year, and one parent claimed the child for the EITC, the other parent could not claim the childless EITC. The Obama Administration's FY2015 budget , like H.R. 2116 , proposes simplifying the rules regarding the presence of a qualifying child. According to the Treasury's description of the proposal, this change "would allow otherwise eligible tax filers residing with qualifying children whom they do not claim to receive the EITC for workers without qualifying children." Legislation That Expands the Credit for Workers with Qualifying Children There are several bills introduced in the 113 th Congress that would expand the EITC for workers with qualifying children. Several of these bills— H.R. 2116 , S. 836 , H.R. 2320 , and the Obama Administration's FY2015 budget—would make the larger credit for families with three or more children, enacted temporarily as part of the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ), permanent. H.R. 2320 would also expand the EITC for tax filers with four, five, six, and seven or more qualifying children. H.R. 2116 also includes a provision to enable certain separated spouses with children to claim the credit. Finally, S. 2162 includes a proposal that would allow dual-earner couples with at least one child to reduce their earned income if it would result in a larger credit. Increasing the Amount of the Credit The value of the EITC depends on the credit rate. Under current law, the credit rate increases based on the number of qualifying children an EITC recipient has, up to three qualifying children. The current credit rates for EITC recipients with one, two, and three or more qualifying children are 34%, 40%, and 45%, respectively. Before 2009, there were two credit rates for EITC recipients with qualifying children: one for those with one qualifying child (34%) and one for those with two or more qualifying children (40%). The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) created a new increased credit rate of 45% (and hence larger credit) for families with three or more children. This modification was extended several times on a temporary basis. Most recently it was extended through the end of 2017 by the American Taxpayer Relief Act (ATRA; P.L. 112-240 ). All else being equal, increasing the credit rate results in a larger credit. H.R. 2116 , S. 836 , and the FY2015 Administration budget proposal would make the 45% credit rate for families with three or more children permanent. H.R. 2320 would expand the EITC for tax filers with four, five, six, and seven or more qualifying children by increasing the credit rate, as illustrated in Table 3 . Changing the Separated Spouse Rule Under current law, married tax filers generally have only two options when they file their tax returns: they can file a joint return (married filing jointly) or they can file a separate return (married filing separately). Even in cases where legally married spouses live apart (like separation), the spouses generally cannot file their income taxes using another status like single or head of household. Currently, only those married tax filers who file jointly may claim the EITC. However, a separated spouse with a qualifying child (or children) may be able to claim the EITC as an unmarried tax filer (using the head of household filing status) if he or she fulfills three rules. First, the separated spouses must have lived apart for the last six months of the year. Second, the separated spouse claiming the EITC must have lived with the qualifying child (or children) for more than six months of the year. Third, the separated spouse claiming the EITC must meet the "household maintenance test." This test requires tax filers to show that they pay more than half of household expenses from their own income. Child support payments and public program benefits do not count as part of their own income. This "household maintenance test" may limit the ability of a poor working separated spouse with children—who may receive a significant amount of income from child support and public benefits—from claiming the EITC for unmarried individuals. H.R. 2116 would allow certain married tax filers who are living separately to claim the EITC without needing to meet the requirements of the "household maintenance test." Specifically, if a married individual resides with the couple's qualifying children for more than half the year and either has a legally binding separation agreement or lives apart from a spouse for the last six months of the year, he or she may claim the EITC as an unmarried individual with qualifying children. If the other spouse does not live with a qualifying child, he or she remains ineligible for the EITC, including the EITC for childless workers. Allowing Tax Filers to Increase the Credit Amount by Deducting the Income of the Lesser-Earning Spouse Under current law, married EITC recipients calculate the value of their credit based on their combined earnings. Dual-earner families may find that their combined income pushes them into the phase-out range of the credit (see Figure 1 for a graphical representation of the phase-out range), resulting in a smaller credit in comparison to the combined amount of the credits of two unmarried EITC recipients. In these cases, reducing the recipient's earned income for purposes of calculating the EITC could yield a larger credit. S. 2162 includes a proposal that would allow dual-earner couples with at least one child to reduce their earned income for the purposes of calculating the EITC. This provision—the "dual earner deduction"—would allow the tax filer to reduce earnings by an amount equal to 20% of the earned income of the spouse with the lesser earnings, up to a maximum deduction of $12,000. For example, if a married couple with one child earned $25,000 and $10,000 respectively, their earnings amount for purposes of calculating the EITC would be $35,000 under current law. If they applied the dual-earner deduction, their earnings would instead be $33,000 ($25,000 plus $8,000), which would result in a larger EITC. Specifically, in 2014, this couple's EITC would be $1,749 using the dual-earner deduction, instead of $1,429 without the deduction. Other Legislative Changes Several bills, including H.R. 4117 , H.R. 2116 , and Chairman Camp's tax reform proposal, include changes to the EITC that are not solely dependent on whether the EITC claimant does or does not have qualifying children. Allowing Residents of Puerto Rico and American Samoa to Benefit from the EITC Under current law, individuals who live in U.S. territories (CNMI, American Samoa, the U.S. Virgin Islands (USVI), Guam, and Puerto Rico) cannot claim the federal EITC. H.R. 4117 would require the Secretary of the Treasury to transfer revenue to Puerto Rico and American Samoa that would be equal to the total amount of EITC benefits Puerto Rican and American Samoan residents could claim if they were eligible for the credit. This provision would not apply to the other U.S. territories (including CNMI, USVI, and Guam). Puerto Rico and American Samoa would be required to provide the U.S. Treasury with a plan for how it would distribute the aggregate funds. The legislation does not provide a method or formula that Puerto Rico and American Samoa must use when distributing this money to Puerto Rican and American Samoan residents. Eliminating the Investment Income Test Under current law, eligible EITC recipients cannot have investment income greater than $3,350 in 2014. Investment income includes interest income (including tax-exempt interest), dividends, net rent, and royalties that are from sources other than the filer's ordinary business activity, net capital gains, and passive income. H.R. 2116 would repeal this limitation. Chairman Camp's Tax Reform Proposal Among its many changes to the income tax code, the House Ways and Means Committee Chairman Camp tax reform proposal (hereinafter referred to as the "Camp proposal") would change the structure of and eligibility for the EITC. Specifically, the Camp proposal would reduce the amount of the EITC for most tax filers by reducing the maximum value of the credit and the credit rates, as well as by eliminating the expanded credit for families with three or more children. In addition, the Camp proposal would modify the age limit for the qualifying child for the EITC to under 18 years old, with no exception made for full-time students. The changes made to the EITC under the Camp proposal, however, would occur in the broader context of comprehensive changes to a wide variety of family- and child-related tax provisions. Given the significant revisions made to the tax code by this proposal, an evaluation of the EITC in isolation would not accurately reflect how tax liabilities would change for tax filers under the proposal. For example, while the EITC is generally reduced in size, the child tax credit, standard deduction, and 10% tax bracket are all expanded. These legislative changes may offset or even exceed any reductions in the EITC for certain tax filers, especially those with children. Hence, some low-income workers who claim the EITC would see their tax liabilities fall under the Camp proposal, while others would see their tax liabilities increase. The Joint Committee on Taxation found that beginning in 2017, tax filers with income under $20,000—which would likely include many EITC recipients—would on average see a reduction in their taxes. However, an analysis of the Camp proposal by the Tax Policy Center highlighted that the actual impact of the proposal on individual taxpayers would depend on their particular circumstances, including their income, number and age of any qualifying children (and whether they were college students or not), and filing status. Appendix. Inflation Adjustments in the EITC and Legislative Proposals in the 113th Congress Several parameters of the EITC are listed at statutory levels in the tax code and then adjusted annually for inflation using a cost-of-living adjustment (COLA) specified in Section (1)(f)(3) of the Internal Revenue Code (IRC). Under current law, the COLA for any year is the percentage (if any) by which the consumer price index (CPI) for the preceding calendar year exceeds the CPI for the calendar year, referred to as the "base year." Hence, the inflation factor used to adjust statutory levels to 2014 levels is the ratio of the CPI for 2013 divided by the CPI for the base year. Different parameters of the EITC can have different base years. Statutorily, the inflation adjustment for any calendar year is the average of the CPI as of the close of the 12-month period ending on August 31 of such calendar year. Thus, the inflation adjustment for 2013 would be equal to the annual average of the CPI from September 2012 to August 2013. This report provides an overview of changes to the statutory amounts of the EITC for childless workers that are made by various bills introduced in the 113 th Congress. However, these bills use different "base years" when adjusting parameters for inflation, like the earned income amount, phase-out amount, and marriage penalty relief. In addition, these bills are drafted in such a way that they could, if enacted in 2014, go into effect in different years. Hence, the first time these parameters would be adjusted for inflation may differ. It is unclear under the FY2015 Obama Administration proposal what the base year for inflation adjustments would be, and therefore it is not included in the table.

The Earned Income Tax Credit (EITC) is a refundable tax credit available to eligible workers earning relatively low wages. (Because the credit is refundable, an EITC recipient need not owe taxes to receive the benefit.) Under current law, the EITC is calculated based on a recipient's earnings, using one of eight different formulas, which vary depending on several factors, including the number of qualifying children a tax filer has (zero, one, two, or three or more) and his or her marital status (unmarried or married). All else being equal, the amount of the credit tends to increase with the number of eligible children the claimant has. For example, the maximum value of the credit in 2014 is $496 for claimants with zero children; $3,305 for claimants with one qualifying child; $5,460 for claimants with two qualifying children; and $6,143 for claimants with three or more qualifying children. In addition, tax filers who have no qualifying children must be between 25 and 64 years of age to be eligible for the EITC. Childless taxpayers under 25 and older than 64 years of age are not eligible for the credit. (There is no age requirement for tax filers with qualifying children.) This report discusses and analyzes legislative proposals introduced in the 113th Congress that propose modifying the EITC. Some of the bills include provisions to expand the credit for childless workers, by increasing the amount of the credit for these workers (through changes to the formula) and by expanding eligibility. Proposals that expand the credit for childless workers include the following: H.R. 4117, which would lower the age limit for childless workers to 21 and expand the size of the credit for childless workers, increasing the maximum credit to an estimated $1,500; H.R. 2116, S. 836, and S. 2162, which would lower the age limit for childless workers from 25 to 21 and expand the size of the credit for childless workers, increasing the maximum credit to an estimated $1,350; H.R. 2359, which would increase the size of the credit for childless recipients to an estimated $1,300; and the Obama Administration's FY2015 budget, which would expand eligibility for childless workers to include those 21-67 years of age and expand the size of the credit for childless workers, increasing the maximum credit to an estimated $1,000. Some bills would also expand the credit for workers with qualifying children. H.R. 2116, S. 836, and the FY2015 Administration budget proposal would make the temporary 45% credit rate for families with three or more children permanent. In addition, H.R. 2320 would expand the EITC for tax filers with four, five, six, and seven or more qualifying children. Chairman of the House Ways and Means Committee Dave Camp's tax reform proposal would reduce the amount of the EITC for most tax filers, although these reductions could be offset by other tax law changes made by the proposal.

Introduction This report is part of a suite of reports that discuss appropriations for the Department of Homeland Security (DHS) for FY2016. It specifically discusses appropriations for the components of DHS included in the fourth title of the homeland security appropriations bill—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 (DNDO). Collectively, Congress has labeled these components in recent years as "Research and Development, Training, and Services." The report provides an overview of the Administration's FY2016 request for Research and Development, Training, and Services, and the appropriations proposed by Congress in response, and those enacted thus far. Rather than limiting the scope of its review to the fourth title, the report includes information on provisions throughout the proposed bill and report that directly affect these functions. The suite of CRS reports on homeland security appropriations tracks legislative action and congressional issues related to DHS appropriations, with particular attention paid to discretionary funding amounts. The reports do not provide in-depth analysis of specific issues related to mandatory funding—such as retirement pay—nor do they systematically follow other legislation related to the authorization or amending of DHS programs, activities, or fee revenues. Discussion of appropriations legislation involves a variety of specialized budgetary concepts. The appendix to CRS Report R44053, Department of Homeland Security Appropriations: FY2016 , explains several of these concepts, including budget authority, obligations, outlays, discretionary and mandatory spending, offsetting collections, allocations, and adjustments to the discretionary spending caps under the Budget Control Act ( P.L. 112-25 ). A more complete discussion of those terms and the appropriations process in general can be found in CRS Report R42388, The Congressional Appropriations Process: An Introduction , by [author name scrubbed], and the Government Accountability Office's A Glossary of Terms Used in the Federal Budget Process . Note on Data and Citations Except in summary discussions and when discussing total amounts for the bill as a whole, all amounts contained in the suite of CRS reports on homeland security appropriations represent budget authority and are rounded to the nearest million. However, for precision in percentages and totals, all calculations were performed using unrounded data. Data used in this report for FY2015 amounts are derived from the Department of Homeland Security Appropriations Act, 2015 ( P.L. 114-4 ) and the explanatory statement that accompanied H.R. 240 as printed in the Congressional Record of January 13, 2015, pages H275-H322. Contextual information on the FY2016 request is generally from the Budget of the United States Government, Fiscal Year 2016 , the FY2016 DHS congressional budget justifications, and the FY2016 DHS Budget in Brief . However, most data used in CRS analyses in reports on DHS appropriations are drawn from congressional documentation to ensure consistent scoring whenever possible. Information on the FY2016 budget request and Senate-reported recommended funding levels is from S. 1619 and S.Rept. 114-68 . Information on the House-reported recommended funding levels is from H.R. 3128 and H.Rept. 114-215 . Data for FY2016 are derived from P.L. 114-113 , the Omnibus Appropriations Act, 2016—Division F of which is the Homeland Security Appropriations Act, 2016—and the accompanying explanatory statement published in Books II and III of the Congressional Record for December 17, 2015. Summary of DHS Appropriations Generally, the homeland security appropriations bill includes all annual appropriations provided for DHS, allocating resources to every departmental component. Discretionary appropriations provide roughly two-thirds to three-fourths of the annual funding for DHS operations, depending how one accounts for disaster relief spending and funding for overseas contingency operations. The remainder of the budget is a mix of fee revenues, trust funds, and mandatory spending. Appropriations measures for DHS typically have been organized into five titles. The first four are thematic groupings of components: Departmental Management and Operations; Security, Enforcement, and Investigations; Protection, Preparedness, Response, and Recovery; and Research and Development, Training, and Services. A fifth title contains general provisions, the impact of which may reach across the entire department, impact multiple components, or focus on a single activity. The following pie chart presents a visual comparison of the share of annual appropriations requested for the components funded in each of the first four titles, highlighting the components discussed in this report. As shown below, the components funded under Research and Development, Training, and Services would have received roughly 3% of the discretionary budget authority requested for FY2016. Research and Development, Training, and Services As noted above, Title IV of the DHS appropriations bill provides funding for several of the department's support functions. Funding was also included in Title V, General Provisions, for some of these components. The Administration requested $5,428 million in total budgetary resources for these accounts in FY2016, an increase of $526 million (10.7%) above the projected FY2015 level. Of this total budget, $1,554 million is discretionary authority. The Senate-reported bill would have provided $1,461 million in adjusted net discretionary budget authority, a decrease of $103 million (6.6%) from the request and $344 million (19.2%) below the FY2015 enacted level. House-reported H.R. 3128 would have provided the components included in this title $1,503 million in net discretionary budget authority. This would have been $51 million (3.3%) less than requested, and $292 million (16.2%) less than was provided in FY2015. Division F of P.L. 114-113 , the Consolidated Appropriations Act, 2016, was the Department of Homeland Security Appropriations Act, 2016. The act included $1,499 million for these components in FY2016, a $55 million (3.5%) decrease from the request and $296 million (16.5%) below FY2015. Table 1 presents the enacted funding level for the individual components funded under Research, Development, Training, and Services for FY2015, as well as the amounts requested for these accounts by the Administration, proposed by the Senate and House appropriations committees, and provided by the enacted annual appropriation for FY2016. The table includes information on funding under Title IV as well as other provisions in the bill. In addition, it also notes the cost of a legislative change proposed by the Administration to the U visa program, which would have been charged to discretionary "score" of the DHS appropriations bill had it been enacted. U.S. Citizenship and Immigration Services7 Three activities dominate the work of the U.S. Citizenship and Immigration Services (USCIS): (1) processing and adjudication of all immigration applications and petitions, including family-based petitions, employment-based petitions, nonimmigrant change of status petitions, work authorizations, and travel documents; (2) adjudication of naturalization petitions for legal permanent residents to become citizens; and (3) consideration of refugee and asylum claims, and related humanitarian and international concerns. USCIS funds the processing and adjudication of immigrant, nonimmigrant, refugee, asylum, and citizenship benefits largely through its fee revenues deposited into the Immigration Examinations Fee Account. In the last decade, the agency has received annual appropriations from the Treasury that have been directed largely towards specific projects such as reducing petition processing backlogs and operating the E-Verify program. The agency receives most of its revenue from adjudication fees of immigration benefit applications and petitions. FY2016 Request The Administration requested $130 million in appropriations for USCIS for FY2016, including $120 million for the E-Verify program and $10 million for the Immigrant Integration Initiative. Together with $3,874 million in projected fee collections, the request projected $4,004 million in new gross budget authority for USCIS (see Table 2 ). Of this FY2016 amount, $3,229 million was to fund adjudication services, which included $268 million for asylum, refugee, and international operations and $226 million for digital conversion of immigrant records ("Business Transformation"). Apart from adjudication services, $143 million was to fund information and customer services, $415 million was to fund administration expenses, and $27 million was to fund the Systematic Alien Verification for Entitlements (SAVE) program. In addition, the Administration proposed legislative changes to the U visa program, which CBO scored as potentially costing the general fund of the Treasury $21 million. These changes were accounted for as discretionary spending by USCIS in the budget request, and are reflected elsewhere in this report's narrative and tables as such, although they would not have provided additional operational resources to USCIS. As the USCIS section of this report focuses on resources available to USCIS under the terms of these various proposals in the legislative process, the proposal is not reflected in this section's narrative analysis of resource levels proposed for USCIS. Senate-Reported S. 1619 Senate-reported S. 1619 recommended that USCIS receive gross budget authority for FY2016 of $3,610 million, $394 million below the amount requested. The bill included $120 million in appropriations for USCIS's E-Verify Program, $10 million below the Administration's total appropriations request. The Senate-reported bill would have permitted up to $10 million of fee revenue to be allocated for immigrant integration grants. The committee specified that no funds could be used by USCIS to grant immigration benefits unless the requisite background checks had been performed, and the results submitted to USCIS did not preclude the granting of the benefit. House-Reported H.R. 3128 House-reported H.R. 3128 also recommended that USCIS receive gross budget authority for FY2016 of $3,610 million, $394 million below the amount requested. The bill included $120 million in appropriations for USCIS, $10 million below the amount requested. Like the Senate-reported bill, the recommendation only provided appropriations for the E-Verify Program and did not include amounts for the requested immigrant integration grants. Language was included in the bill permitting USCIS to expend up to $10 million in user fees to support these grants. Within the total fees collected, the committee directed USCIS to provide at least $29 million to continue converting paper immigration records to a digital format. The House-reported bill did not prohibit USCIS from providing pay raises to its personnel using fee revenue. If such raises were foregone, however, any potential savings were to be made available to enhance the E-Verify program. The House-reported bill also specified that USCIS appropriations could not be used by the agency to grant immigration benefits to an individual unless USCIS had received the results of a criminal background check and the results did not preclude the granting of the benefit. The bill also specified that none of the funds made available to USCIS for immigrant integration grants could be used to provide services to aliens who had not been lawfully admitted for permanent residence. Division F of P.L. 114-113 Division F of P.L. 114-113 (the Homeland Security Appropriations Act, 2016) provided $120 million in appropriations for USCIS, $10 million below the amount requested by the Administration and the same amount as Senate-reported S. 1619 and House-reported H.R. 3128 . Together with $3,491 million in projected fee collections, the total gross budget authority for USCIS in FY2016 was $3,610 million—$394 million less than the FY2016 request and the same as both Senate-reported S. 1619 and House-reported H.R. 3128 . As in the House- and Senate-reported bills, appropriated amounts were solely to fund the E-Verify Program. The act allowed USCIS to make funds available for immigrant integration grants from fee revenues. The amount for such grants was not specified. The act specified that the grants should be used to provide services only to individuals who have been lawfully admitted into the U.S. for permanent residence. The act also continued a provision described above in the Senate- and House-reported bills that requires the completion of background checks and their receipt by DHS prior to the granting of any immigration benefits. The explanatory statement accompanying Division F directed USCIS to brief the Committees on actions to implement the Government Accountability Office's recommendations from its review of fraud in the asylum process, and to provide progress updates every 60 days thereafter until all recommendations have been implemented for all types of benefits. GAO was directed to perform a similarly scoped review of fraud for the refugee screening process. The statement directed USCIS to include E-Verify usage statistics on its website and to report on the use of advance parole within 90 days following passage of the act. It directed USCIS to report on the results of its fee study within 30 days of passage of the act. It also directed the agency to report on noncitizen compliance with address change notification requirements under 8 U.S.C. 1305 within 120 days of passage of the act. Issues for Congress A potential issue for Congress involved ongoing concerns about E-Verify operability. E-Verify E-Verify helps employers ascertain whether their employees have the requisite legal status and work authorization to work lawfully in the United States. The Senate committee report acknowledged improvements in the accuracy of E-Verify and directed USCIS to include national-level E-Verify utilization statistics on its website. The Senate committee directed USCIS to increase incentives for smaller businesses to use E-Verify and directed USCIS to report to Congress on estimated costs and time required for making E-Verify mandatory for employers. P.L. 114-113 was silent on further directions from Congress to USCIS regarding E-Verify. Federal Law Enforcement Training Center14 The Federal Law Enforcement Training Center (FLETC) provides basic and advanced law enforcement instruction to 91 federal entities with law enforcement responsibilities. FLETC also provides specialized training to state and local law enforcement entities, campus police forces, law enforcement organizations of Native American tribes, and international law enforcement agencies. By training officers in a multi-agency environment, FLETC intends to promote consistency and collaboration across its partner organizations. FLETC administers four training sites throughout the United States, but also uses online training and provides training at other locations when its specialized facilities are not needed. FLETC employs approximately 1,100 personnel. FY2016 Request The Administration requested $267 million in net discretionary budget authority for FLETC for FY2016, $8 million (3.2%) above the enacted level for FY2015. The request envisions an additional $117 million in reimbursements from other government agencies for law enforcement training. Senate-Reported S. 1619 The Senate-reported bill included $246 million for FLETC, $21 million (7.8%) less than requested, and more than $12 million (4.8%) less than FY2015. House-Reported H.R. 3128 The House-reported bill included $239 million for FLETC, almost $28 million (10.4%) less than requested, and $19 million (7.5%) less than FY2015. Like many appropriations in the House-reported bill, funding for FLETC salaries and expenses was reduced in the House-reported bill due to unfilled personnel needs. This had a deeper impact on the proposed FLETC appropriation as not only were several of FLETC's positions unfilled, but law enforcement positions at CBP were unfilled that would have driven training expenses at FLETC. Division F, P.L. 114-113 The Department of Homeland Security Appropriations Act, 2016 included $245 million for FLETC, almost $22 million (8.2%) less than requested, and $13 million (5.0%) less than FY2015. The act included almost $28 million for Acquisition, Construction, Improvements, and Related Expenses as requested. The net reduction of almost $22 million from the requested level for the Salaries and Expenses appropriation was attributed to unfilled law enforcement positions at CBP that would have required FLETC training had they been filled. The explanatory statement notes almost $5 million in additional funding was included for 38 additional FTE for other training requirements. Science and Technology Directorate17 The Directorate of Science and Technology (S&T) is the primary DHS organization for research and development (R&D). Led by a Senate-confirmed Under Secretary for Science and Technology, it performs R&D in several laboratories of its own and funds R&D performed by the Department of Energy national laboratories, industry, universities, and others. It also conducts testing and other technology-related activities in support of acquisitions by other DHS components. See Table 3 for a breakdown of S&T Directorate funding for FY2015 and FY2016. FY2016 Request The Administration's request of $779 million for the S&T Directorate in FY2016 was 29.4% less than the FY2015 appropriation of $1,104 million. Most of the difference resulted from a lower request for Laboratory Facilities, which received $300 million in FY2015 for construction of the National Bio and Agro-Defense Facility (NBAF). No further funds for NBAF construction were requested for FY2016. Within the request for Research, Development, and Innovation (RD&I), support for Apex projects was to increase to $78 million in FY2016. Apex projects are multidisciplinary projects agreed to between the S&T Directorate and the head of another DHS component. The FY2016 request proposed supporting six Apex projects in addition to the previous two. It also proposed a crosscutting "technology engines" activity within the Apex program. The request for University Programs, which primarily funds S&T's university centers of excellence, was $31 million, down from $40 million in FY2015. Senate-Reported S. 1619 The Senate committee's recommendation of $765 million for the S&T Directorate was $14 million less than the request. In its report, the Senate committee recommended an $8 million increase (relative to the request) for University Programs, offset by a $20 million decrease for RD&I. Other differences relative to the request were small. The committee stated that the University Programs increase would allow the directorate to maintain at least 10 university centers of excellence (the current number). The committee did not specify how the decrease for RD&I should be allocated. It did state that "not less than prior year funding" should be allocated to the Apex program and directed the directorate to "continue its focus" on three of the six new Apex projects. House-Reported H.R. 3128 The House committee's recommendation of $787 million for S&T was $8 million more than the request. In its report, the House committee recommended a $9 million increase (relative to the request) for University Programs, which it said would be sufficient to support all the existing centers of excellence. Other differences relative to the request were small. The committee expressed support for the Apex concept and recommended Apex funding at the requested level. Division F, P.L. 114-113 The final appropriation of $787 million was $8 million more than the request. It included an increase of $9 million for University Programs, partially offset by decreases of less than $1 million for Laboratory Facilities and Management and Administration. The explanatory statement was silent regarding the Apex program. Issues for Congress Coordination of Research & Development Activities DHS-wide coordination of R&D activities has been an issue for several years. In September 2012, the Government Accountability Office (GAO) reported that although the S&T Directorate, DNDO, and the Coast Guard are the only DHS components that report R&D activities to the Office of Management and Budget, several other DHS components also fund R&D and activities related to R&D. The GAO report found that DHS lacked department-wide policies to define R&D and guide reporting of R&D activities, and, as a result, DHS did not know the total amount its components invest in R&D. The report recommended that DHS develop policies and guidance for defining, reporting, and coordinating R&D activities across the department, and that DHS establish a mechanism to track R&D projects. In the FY2013 and FY2014 appropriations cycles, Congress responded to GAO's findings by directing DHS to develop new policies and procedures. The explanatory statement for the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ) directed the Secretary of Homeland Security, through the Under Secretary for Science and Technology, to establish a review process for all R&D and related work within DHS. The joint explanatory statement for the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) directed DHS to implement and report on new policies for R&D prioritization, and to review and, in accordance with GAO's recommendations, to implement policies and guidance for defining and overseeing R&D department-wide. Concerns remain, however. In September 2014, GAO testified that DHS had updated its guidance to include a definition of R&D, but that efforts to develop a process for coordinating R&D across the department were ongoing but not yet complete. In April 2015, GAO's annual report on fragmented, overlapping, or duplicative federal programs stated that its concerns about DHS R&D had been only "partially addressed." In the FY2016 appropriations cycle, the House committee's report stated that "The Department needs a strategic planning process to focus research and development and future investments." In December 2015, the explanatory statement noted as follows: The Department lacks a mechanism for capturing and understanding research and development (R&D) activities conducted across DHS, as well as coordinating R&D to reflect departmental priorities. As part of the Unity of Effort initiative and in order to address the above concerns, DHS is establishing Integrated Product Teams (IPTs) to assist the Science and Technology Directorate (S&T) with requirements gathering, validation, and alignment of budgetary resources. IPTs, comprised of personnel from across DHS, will be tasked with identifying and prioritizing technological capability gaps and coordinating departmental R&D to close those gaps. The overall IPT effort will be led by the Under Secretary for S&T, but individual IPTs will be led by senior representatives from the operational components, and will have representation from the JRC [Joint Requirements Council] Portfolio Teams and S&T. S&T will also play a critical role in helping DHS-wide acquisition programs by conducting independent technical assessments of acquisitions, including participation in developmental test and evaluation activities, to ensure DHS acquisitions effectively fill identified capability gaps. S&T is directed to brief the Committees not later than January 15, 2016, on the results of the first IPTs and technology assessments. Domestic Nuclear Detection Office26 The Domestic Nuclear Detection Office (DNDO) is the DHS organization responsible for nuclear detection research, development, testing, evaluation, acquisition, and operational support. It is led by a presidentially appointed Director. In addition to its responsibilities within DHS, it is charged with coordinating federal nuclear forensics programs and the U.S. portion of the global nuclear detection architecture. See Table 4 for a breakdown of DNDO funding for FY2015 and FY2016. FY2016 Request The Administration requested $357 million for DNDO in FY2016, an increase of 16.1% from the FY2015 appropriation of $308 million. In the Systems Acquisition account, the Administration proposes to merge the Radiation Portal Monitors program ($5 million in FY2015) and the Human Portable Radiation Detection Systems program ($49 million in FY2015) into a single, expanded Radiological and Nuclear Detection Equipment Acquisition program ($101 million requested for FY2016). The increase in funding for the merged program was to support recapitalization of DHS radiation detection equipment that is at or past its life expectancy. Senate-Reported S. 1619 The Senate committee's recommendation of $320 million for DNDO was $37 million less than the request. The reduction included $1 million from the Management and Administration account and $36 million from the new Nuclear Detection Equipment Acquisition program. House-Reported H.R. 3128 The House committee's recommendation of $357 million for DNDO was the same as the Administration's request, except for a reduction of less than $1 million in the Management and Administration account. The committee concurred with the Administration's proposed consolidation and expansion of the Nuclear Detection Equipment Acquisition program. Division F, P.L. 114-113 The final appropriation of $347 million for DNDO was $10 million less than the request. The reduction included less than $1 million from Management and Administration and $10 million from Nuclear Detection Equipment Acquisition. Issues for Congress Proposed Reorganization In 2013, Congress directed DHS to review its programs relating to chemical, biological, radiological, and nuclear threats and to evaluate "potential improvements in performance and possible savings in costs that might be gained by consolidation of current organizations and missions, including the option of merging functions of the Domestic Nuclear Detection Office (DNDO) and the Office of Health Affairs (OHA)." The report of this review was completed in June 2015. In July 2015, DHS officials testified that DHS plans to consolidate DNDO, OHA, and smaller elements of several other DHS programs into a new office, led by a new Assistant Secretary, with responsibility for DHS-wide coordination of chemical, biological, radiological, nuclear, and explosives "strategy, policy, situational awareness, threat and risk assessments, contingency planning, operational requirements, acquisition formulation and oversight, and preparedness." The House and Senate committee reports on FY2016 appropriations did not address the proposed consolidation. A provision in the final bill prohibited DHS from using FY2016 funds to establish an Office of CBRNE Defense "until such time as Congress has authorized such establishment." The provision did, however, give DHS the authority to transfer funds for the establishment of such an office, if authorized.

This report is part of a suite of reports that discuss appropriations for the Department of Homeland Security (DHS) for FY2016. It specifically discusses appropriations for the components of DHS included in the fourth title of the homeland security appropriations bill—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 (DNDO). Collectively, Congress has labeled these components in appropriations acts in recent years as "Research and Development, Training, and Services." The report provides an overview of the Administration's FY2016 request for Research, Development, Training, and Services, the appropriations proposed by Congress in response, and those enacted. Rather than limiting the scope of its review to the fourth title, the report includes information on provisions throughout the proposed bill and report that directly affect these functions. Research and Development, Training, and Services is the second smallest of the four titles that carry the vast majority of the funding in the bill. The Administration requested $1,554 million for these components in FY2016, $241 million less than was provided for FY2015. These four components made up 3.7% of the Administration's $41.4 billion request for the department in net discretionary budget authority. The completion of funding for construction of the National Bio- and Agro-defense Facility in FY2015 reduced the demand for facilities funding by $300 million—part of an overall reduction of $325 million in the request for S&T from FY2015 enacted levels. DNDO's budget request rose by $49 million (16.1%), while USCIS and FLETC saw smaller increases in their requests. Senate-reported S. 1619 would have provided the components included in this title $1,451 million in net discretionary budget authority. This would have been $103 million (6.6%) less than requested, and $344 million (19.2%) less than was provided in FY2015. House-reported H.R. 3128 would have provided the components included in this title $1,503 million in net discretionary budget authority. This would have been $51 million (3.3%) less than requested, and $292 million (16.2%) less than was provided in FY2015. On December 18, 2015, the President signed into law P.L. 114-113, the Consolidated Appropriations Act, 2016, Division F of which was the Department of Homeland Security Appropriations Act, 2016. The act included $1,499 million for these components in FY2016, a $55 million (3.5%) decrease from the request and $296 million (16.5%) below FY2015. Additional information on the broader subject of FY2016 funding for the department can be found in CRS Report R44053, Department of Homeland Security Appropriations: FY2016, as well as links to analytical overviews and details regarding appropriations for other components. This report will be updated if supplemental appropriations are provided for any of these components through the FY2016 appropriations process.

Introduction Although "too big to fail" (TBTF) has been a perennial policy issue, it was highlighted by the near-collapse of several large financial firms in 2008. Bear Stearns (an investment bank), GMAC (a non-bank lender, later renamed Ally Financial), and AIG (an insurer) avoided failure through government assistance. Lehman Brothers (an investment bank) filed for bankruptcy after the government decided not to offer it financial assistance. Fannie Mae and Freddie Mac (government-sponsored enterprises) entered government conservatorship and were kept solvent with government funds. The Federal Deposit Insurance Corporation (FDIC) arranged for Wachovia (a commercial bank) and Washington Mutual (a thrift) to be acquired by other banks without government financial assistance. Citigroup and Bank of America (commercial banks) were offered government guarantees on selected assets they owned. In many of these cases, policymakers justified the use of government resources on the grounds that the firms were "systemically important," popularly called "too big to fail." TBTF is the concept that a firm's disorderly failure would cause widespread disruptions in financial markets that could not easily be contained. Although the government had no explicit policy to rescue TBTF firms, several were rescued on those grounds once the crisis struck. TBTF subsequently became one of the systemic risk issues that policymakers grappled with in the wake of the recent crisis. Systemic risk mitigation, including eliminating the TBTF problem, was a major goal of the Dodd-Frank Wall Street Reform and Consumer Protection Act (hereinafter, the Dodd-Frank Act; P.L. 111-203 ), comprehensive financial regulatory reform enacted in 2010. Different parts of this legislation jointly address the "too big to fail" problem through requirements for enhanced regulation for safety and soundness for "systemically important" (also called "systemically significant") financial institutions (SIFIs), limits on size and the types of activities a firm can engage in (including proprietary trading and hedge fund sponsorship), and the creation of a new receivership regime for resolving failing non-banks that pose systemic risk. In addition, Basel III, an international agreement, placed heightened requirements on the largest banks. Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act ( P.L. 115-174 ) reduced the number of banks to which the Dodd-Frank Act and Basel III provisions apply. (There has not yet been legislation enacted to reform Fannie Mae and Freddie Mac, which remain in government receivership.) Some critics argue that the Dodd-Frank and Basel III policy reforms do not go far enough to solve the TBTF problem, and others argue they have had the perverse effect of exacerbating the TBTF problem. Ultimately, the failure of a large firm is the only test of whether the TBTF problem still exists. This report discusses the economic issues raised by TBTF, broad policy options, and policy changes made by the relevant Dodd-Frank provisions, as amended. Economic Issues Context Evidence on the size of financial firms can be viewed in absolute and relative terms—relative to other industries and within the industry (i.e., concentration). In the first quarter of 2018, there were 13 financial holding companies with more than $250 billion in assets in the United States, of which four had more than $1.9 trillion in assets. In 2003, there was only one U.S. holding company with more than $1 trillion in assets. In recent decades, the U.S. banking industry has become more concentrated, meaning that a greater percentage of total industry assets is held by large banks. According to one study, the three largest banks held 5% to 15% of total commercial banking depository assets from the 1930s until the 1990s. The share of the top three then rose until it had reached about 40% by 2008. Assets of the five largest bank holding companies (BHCs) totaled 48% of total BHC assets as of December 31, 2017. This share has been relatively steady in recent years. By international standards, U.S. banks are not that large, however. Relative to GDP, the combined assets of the top three U.S. banks were the lowest of any major OECD economy in 2009. The four largest BHCs each held a majority of their assets in commercial bank subsidiaries. Not all very large financial institutions are commercial banks, however. Companies with more than $100 billion in assets include insurers, broker-dealers, investment funds, specialized lenders, and government-sponsored enterprises (Fannie Mae and Freddie Mac are among the largest firms overall by assets). As the financial system has evolved over the long run, large non-banks have emerged, which may or may not be chartered as bank holding companies or thrift holding companies. Today, a bank can incorporate as a financial holding company that has depository subsidiaries, insurance subsidiaries, and broker-dealer subsidiaries, for example. The financial crisis reduced the number of large financial firms, but also led to an increase in the size of the remaining large firms, through a series of mergers and acquisitions. Compared with other industries, financial firms are large in dollar terms when measured by assets and liabilities, but not by measures such as revenue because of the nature of financial intermediation. For example, there is only one firm (Berkshire Hathaway) with revenues from financial businesses—and it also has substantial non-financial revenues—and no BHCs among the 10 largest Fortune 500 firms in 2018 when measured by revenue, but financial companies are the only Fortune 500 firms in the top 10 for assets or with more than $1 trillion in assets. Financial firms are also not as concentrated as some other industries. The top four firms' shares of industry revenues in 2012 were 29.9% in credit intermediation, 17.3% in securities and commodities, and 14.1% in insurance, respectively. In layman's terms, there is no "Pepsi/Coke" dominance in the financial sector. These comparisons may help to illustrate why traditional policy tools such as antitrust have not been used against large financial firms recently and suggest that the TBTF phenomenon in finance lies in the nature of financial intermediation, which is the topic of the next section. Economic Effects of Too Big to Fail Contagion can be transmitted from small or large financial institutions (see the following text box), but large firms pose unique problems. Firms are likely to have more counterparty exposure to large firms, and the losses or disruptions caused by counterparty exposure when a large firm fails could be severe enough to lead to failure of third parties. Problems at large firms could also lead to "fire sales" in specific securities markets that depress market prices, thereby imposing losses on other holders of similar securities. Some economists argue that the real problem is some firms are "too interconnected to fail." That is, it is not the sheer size of certain firms that causes contagion, but the fact that most activity in certain key market segments flows through those firms. According to the International Monetary Fund (IMF), a few large firms "dominate key market segments ranging from private securitization and derivatives dealing to triparty repo and leveraged investor financing." Were the interconnected firm to fail, other firms would have difficulty absorbing the failed firm's business, and there would be disruptions to the flow of credit. If problems in one market segment undermine an interconnected firm, problems can spread to the other market segments in which the firm operates. The systemic risk posed by Lehman Brothers suggests that a firm that is not one of the largest in absolute terms can nevertheless be too interconnected to fail. Finally, since policymakers cannot be certain beforehand which firms pose systemic risk, more firms could be politically TBTF than economically TBTF. While some policymakers have dismissed the claim that any firm could be too big to fail, many analysts believe the failure of Lehman Brothers, occurring in the context of difficulties at several large financial firms, was the proximate cause of the worsening of the crisis in September 2008. It is debatable whether policy actions in the months leading up to Lehman Brothers' failure made its failure more or less disruptive, but it is fair to say that it is unlikely that the panic that followed could have been avoided since the nature of the disruptions its failure caused (notably, its effect on money markets) was not widely foreseen. "Bailing out" TBTF firms may not be an intended policy objective, but may become the second-best crisis containment measure when the failure of a TBTF firm is imminent to prevent fallout to the broader financial system and the economy as a whole. While many people object to rescuing TBTF firms on moral or philosophical grounds, there are also economic reasons why having firms that are TBTF is inefficient. In general, for market forces to lead to an efficient allocation of resources, finding a good use of resources must be financially rewarded and a bad use must be financially punished. Firms generally run into financial problems when they have persistently allocated capital to inefficient uses. To save such a firm would be expected to retard efforts to shift that capital to more efficient uses, and may allow the firm to continue making more bad decisions in the future. The TBTF problem results in too much financial intermediation taking place at large firms and too little at other firms from the perspective of economic efficiency, although not necessarily from the perspective of non-economic policy rationales. Because large and small financial firms do not serve exactly the same customers or operate in exactly the same lines of business, too much capital will flow to the customers and in the lines of business of large firms and too little to those of small firms in the presence of TBTF. Preventing TBTF firms from failing is argued to be necessary for maintaining the stability of the financial system in the short run. But rescuing TBTF firms is predicted to lead to a less stable financial system in the long run because of moral hazard that weakens market discipline. Moral hazard refers to the theory that if TBTF firms expect that failure will be prevented, they have an incentive to take greater risks than they otherwise would because they are shielded from at least some negative consequences of those risks. In general, riskier investments have a higher rate of return to compensate for the greater risk of failure. If TBTF firms believe that they will not be allowed to fail, then private firms capture any additional profits that result from high-risk activities, while the government bears any extreme losses. Thus, if TBTF firms believe that they will be rescued, they have an incentive to behave in a way that makes it more likely they will fail. To see how the moral hazard problem is transmitted, it is helpful to examine who gets directly "rescued" when the government intervenes to prevent the fallout to the overall financial system and broader economy. The direct beneficiaries of a rescue will include some combination of the firm's management, owners (e.g., shareholders), creditors (including depositors), account holders, and counterparties. Under bankruptcy, these groups would bear losses to differing degrees depending on the legal priority of their claims. Government assistance, depending on its terms, can protect some or all of these groups from losses. In some recent government rescues, management has been replaced; in others, it has not. Even if management believes that losses will lead to removal, managers may prefer excessive risk-taking (with higher expected profits) because they are not personally liable for the firms' losses. In some cases, shareholders have borne some losses through stock dilution, although their losses may have been smaller than they would have been in a bankruptcy. Creditors, account holders, and counterparties have generally been shielded from any losses. Thus, government rescues have not mitigated the moral hazard problem for creditors and counterparties. Because the government will only intervene in the case of extreme losses, moral hazard may manifest itself primarily in areas affected only by systemic events (referred to as "tail risk"). For example, extreme losses from counterparty risk may be ignored by counterparties to TBTF firms if they believe that government will always intervene to prevent failure; if so, costs (such as the amount of margin a counterparty will require) will be lower for TBTF firms than competitors in these markets. Do TBTF Firms Enjoy a Funding Advantage or Implicit Subsidy? Economic theory predicts that in the presence of moral hazard, creditors and counterparties of TBTF firms provide credit at an inefficiently low cost. Some studies have provided evidence that the funding advantage exists, although many of these studies cover time periods that end before the enactment of the Dodd-Frank Act. Identifying a lower funding cost for large banks alone is not enough to prove a moral hazard effect because lower cost could also be due to other factors, such as greater liquidity or lower risk (e.g., greater diversification). A Government Accountability Office (GAO) review of the empirical literature found that a funding advantage for large firms during the financial crisis had declined by 2011. Its own econometric analysis found evidence of a funding advantage during the crisis, but mixed evidence on the existence of a funding advantage in 2012 and 2013—indeed, more versions of their model found higher funding costs for large banks rather than the expected lower costs, holding other factors equal. Some view the decision by certain credit rating agencies to rate the largest financial firms more highly because they assume the firms would receive government support as evidence of the funding advantage, although two of the three major rating agencies have reduced the magnitude of this "ratings uplift" in recent years. (It should be noted that credit ratings do not directly determine funding costs.) This funding advantage is sometimes referred to as the TBTF subsidy, although a subsidy typically implies a government willingness to provide the recipient with a benefit. Note also that a subsidy typically takes the form of an explicit direct payment, financial support, or guarantee, whereas in this case, if the funding advantage exists, it would derive from the expectation of future support that has not been pledged. Policy Options and the Policy Response After the Crisis This report organizes policy options for addressing TBTF into the following six broad categories: "Bailouts"; Limiting Firm Size; Limiting Scope of Activities; Regulation; Minimizing Spillovers; and Resolving a Failing Firm. The Dodd-Frank Act contained provisions in each of these categories, but its most significant changes were in the areas of regulation and resolution. Likewise, recent legislative proposals can be found in each of these areas. Policy options for TBTF can be categorized as preventive (how to prevent TBTF firms from either emerging or posing systemic risk) or reactive (how to contain the fallout when a TBTF firm experiences a crisis). A comprehensive policy is likely to incorporate more than one approach because different approaches are aimed at different parts of the problem. A policy approach that would not solve the TBTF problem in isolation could be successful in conjunction with others. Some policy approaches are complementary—others could counteract each other. When considering each policy option discussed in this section, an alternative perspective to consider is that problems at large firms during the crisis—such as overleveraging, a sudden loss of liquidity, concentrated or undiversified losses, and investor uncertainty caused by opacity—were not TBTF problems per se. If, in fact, they were representative of problems that firms of all sizes were experiencing, policy should directly treat these problems in a systematic and uniform way for all firms, and not just for TBTF firms, in this view. In other words, prudential regulation, a special resolution regime, and policies limiting spillover effects could be applied to all firms operating in a given area rather than just large firms, so arguments for and against these policy options do not apply only to their application to large firms. If the causes of systemic risk are not tied to firm size or interconnectedness, then policies based on differential treatment of TBTF firms could result in systemic risk migrating to non-TBTF firms rather than being eliminated. End or Continue "Bailouts"? "Bailouts" are defined differently by different people. For the purposes of this report, they are defined as government assistance to a single firm to prevent it from failing (i.e., allow it to meet all ongoing obligations in full), in contrast to widely available emergency government programs to provide liquidity to solvent firms. TBTF bailouts could be delivered through assistance unique to the firm or through existing government programs on a preferential, subsidized basis. They could come in the form of federal loans, insurance, guarantees, capital injections, or other firm-specific commitments. When addressing TBTF, the first question to ask is, what should happen to large financial firms when they are no longer financially viable—should they be bailed out, as was the case for some firms during the crisis, or should they be wound down in some way? Current Policy TBTF policy before the crisis could be described as purposeful ambiguity—policy was not explicit about what would happen in the event that large financial firms become insolvent, or which firms were considered TBTF. (Certain statutory benefits conferred to Fannie Mae and Freddie Mac came closer to an explicit TBTF status, and markets treated them as such by lending to them at interest rates closer to government than private-sector borrowing costs.) Arguably, a TBTF policy was not explicit because it did not have to be—there had not been a comparable episode of financial instability since the Great Depression. Aside from a couple of isolated incidents, such as the bank Continental Illinois and the hedge fund Long Term Capital Management, there was also little experience since then with large firms needing to be rescued. Financial turmoil in the decades prior to the crisis had been neutralized using the Federal Reserve's normal monetary and "lender of last resort" tools. The Fed was authorized to provide liquidity to banks through collateralized loans at the discount window, with limitations for banks that are not well capitalized. In previous episodes of financial turmoil such as 1987 and 1998, the Fed's decision to flood markets with liquidity had proven sufficient to restore confidence. There was no standing policy to provide liquidity to non-bank financial firms to guard against runs before the recent crisis, perhaps because there was less historical experience with non-bank runs, and perhaps because non-bank financial firms have become a more important part of the financial system over time. The Fed had broad existing emergency authority under Section 13(3) of the Federal Reserve Act to lend to non-banks, but prior to the crisis had not done so since the 1930s or articulated under what circumstances it would do so. Policy during the recent crisis could be described as reactive, developing ad hoc in fits and starts in reaction to events. Ultimately, some banks and non-bank financial firms received federal assistance, despite the lack of an explicit safety net and federal prudential regulation in the case of non-banks AIG and Bear Stearns. In the absence of explicit authority to rescue a TBTF firm, as the crisis unfolded, broad standing authority was used: Section 13(3) was used to prevent the failures of Bear Stearns and AIG. Section 13(3) and the FDIC's systemic risk authority were used to offer asset guarantees to Bank of America and Citigroup. These authorities were also used to create broadly based emergency programs. Other programs were created after the crisis began under authority granted by Congress in 2008. Assistance was given under the Housing and Economic Recovery Act (HERA; P.L. 110-289 ) to prevent Fannie Mae and Freddie Mac from becoming insolvent. In October 2008, Congress passed the Emergency Economic Stabilization Act (EESA; P.L. 110-343 ), creating the Troubled Asset Relief Program (TARP), which was used, among other things, to inject capital into several large financial firms. The HERA and EESA authority expired in 2010 and were not replaced, although funds continued to be available after expiration under several outstanding contracts. At the time, it appeared that the ultimate cost to the government of TBTF "bailouts" could run into the hundreds of billions, collectively. In hindsight, all of the special assistance to large financial firms (Bear Stearns, the GSEs, Ally Financial, Chrysler Financial, AIG, Citigroup, and Bank of America), as well as the broadly based emergency programs that large and small financial firms accessed, turned out to be cash-flow positive for the government (i.e., income and principal repayments exceeded outlays). Cash-flow measures, however, do not reflect the economic cost of assistance, which would factor in the rate of return a private investor would have required to make a similar investment, incorporating risk and the time value of money. On an economic basis, the Congressional Budget Office has estimated that special assistance through TARP to Citigroup, Bank of America, the auto financing firms, and broadly based programs have generated positive profits for the government, while the TARP assistance to AIG was subsidized. Although there were ultimately no net losses in these cases, these government interventions exposed the government to large potential losses. Maintaining broad discretionary standing authority while attempting to limit its scope to prevent bailing out insolvent firms could be seen as the approach taken by Title XI of the Dodd-Frank Act. It limited the Fed to providing emergency assistance only through widely available facilities, required the Fed to issue rules and regulations on how such assistance will be provided, and prohibited the Fed from lending to failing firms. It also created new statutory authority for the FDIC to set up emergency liquidity programs in the future with restrictions and limitations, including that the recipient must be solvent, rather than allowing the FDIC to again rely on an open-ended systemic risk exception. Earlier, EESA ruled out future uses of the Exchange Stabilization Fund to guarantee money market funds. Few other standing authorities to intervene in financial markets are available. Policy Debate The crisis left many policymakers and observers criticizing ad hoc bailouts as arbitrary, unfair, lacking in transparency, and requiring too much taxpayer exposure (although funds were eventually repaid in full with interest). Many economists would also credit it with eventually restoring financial stability, however, by restoring healthy and unhealthy financial firms' access to liquidity and capital. There has been widespread support among policymakers since the crisis for eliminating future bailouts. In theory, if creditors believed that a firm would not receive government support, they would not enable firms to take what they perceived to be excessive risks, and risky actions would be priced more efficiently. Unfortunately, imposing "market discipline" is not necessarily achieved simply by proclaiming a "no bailouts" policy. If the moral hazard problem is to be avoided, market participants must be convinced that when faced with a failure that could potentially be highly damaging to the broader economy—and just how damaging cannot be fully known until after the fact—policymakers will not deviate from the stated policy and provide bailouts. But current policymakers cannot prevent future policymakers from offering assistance to a failing TBTF firm. Although it is in the long-term interest of policymakers to withhold assistance to prevent moral hazard, it is in the short-term interest of policymakers to provide assistance to prevent systemic risk. This logic underpinned the decision to rescue firms in the crisis, and the fact that it happened then may lead creditors to conclude that the same thing would happen again in the next crisis. This makes it difficult to craft a "no bailouts" policy that is credible to market participants. Even if policymakers did intend to maintain a market discipline policy, as long as creditors disbelieved such a policy would be maintained in the event of a crisis, the moral hazard problem would remain. Although it is impossible to prevent future policymakers from making statutory changes to current policy, current policymakers can make it more difficult for future policymakers to "bail out" firms by repealing or limiting the existing standing authority that policymakers used to provide assistance in the recent crisis. Enacting new authority is likely to be a higher hurdle than invoking existing authority. The Dodd-Frank Act narrowed emergency authority to prevent future bailouts, but critics believe that emergency authority remains broad enough that regulators would be likely to use it to save TBTF firms in the future. Policymakers have debated repealing or further limiting standing authority such as the Fed's 13(3) emergency authority, the Treasury's Exchange Stabilization Fund, and the FDIC's systemic risk exception to least cost resolution. The advantage to maintaining broad discretionary emergency authority is that it allows policymakers to react quickly to unforeseen contingencies, and the authority may be needed for purposes other than bailouts, as defined in this report. If assistance became necessary in a fast-moving crisis, new authority might take too long to enact. By then, the damage to the economy could be worse. In other words, eliminating broad authority could still result in a TBTF rescue, but after more financial disruption had occurred. TARP is an example of authority that was enacted unusually quickly during a crisis; nevertheless, its enactment took weeks, whereas contagion can spread in days. Three other disadvantages to the ad hoc approach to bailouts are often cited. First, assistance could be provided arbitrarily or on the basis of favoritism. Second, a lack of contingency planning shifted risk to the taxpayer. Third, it led to policy uncertainty, which can heighten systemic risk. Arguably, lack of explicit policy added to the panic after Lehman Brothers failed, because market participants may have incorrectly based decisions on the expectation that Lehman Brothers would receive the same type of government assistance that Bear Stearns received. All three of these disadvantages could be addressed through a no bailouts policy—or, alternatively, by explicitly stating the terms and conditions under which companies will receive assistance and creating a funding mechanism beforehand. The latter approach could make the moral hazard problem worse, however, by leaving no ambiguity about which firms will receive assistance. The optimal approach to bailouts from an economic perspective is arguably the one that is least costly to the economy in the short and long run. The cost of TBTF to the economy includes the direct expenditures by the government and the costs of a less stable financial system due to moral hazard. Budgetary costs do not include preventing the broader costs of a systemic disruption to the economy, which would have feedback effects on the federal budget. It can be argued that a failure to bail out TBTF firms would be more costly in the short run because it would potentially allow systemic risk to spread. Alternatively, if bailouts increase moral hazard, it can be argued that greater moral hazard causes the system to be less stable in the long run by encouraging TBTF firms to act less prudently. However, even without moral hazard, firms would sometimes fail, as finance is inherently risky. The 2008 experience lacks a counterfactual to definitively answer the question of which approach is least costly in the short run. In this sense, the question of whether it is more costly to bail out TBTF firms or allow them to fail cannot be definitively settled. The crisis worsened after Lehman Brothers was allowed to fail and ended after TARP and other broadly based emergency programs were created. Standard measures of financial stress, such as the spread between Treasury rates and the London Inter-bank Offering Rate (LIBOR), did not begin to fall until legislation creating TARP was enacted. Ad hoc rescues of failing TBTF firms had not succeeded in stabilizing financial markets to that point, but it is unknown whether financial conditions would have eventually normalized had that ad hoc policy been pursued for Lehman Brothers and beyond. There is also no counterfactual as to what would have happened if there had been a consistent policy of allowing firms to fail in the crisis dating back to Bear Stearns, but the outcome that policymakers believed would occur if Bear Stearns had not been rescued is similar to events following the Lehman Brothers bankruptcy. Successfully eliminating bailouts does not address the fundamental problem posed by TBTF—how can a large interconnected firm fail without causing financial instability? Effective market discipline may reduce the likelihood of a firm failing, but reducing the probability to zero is not a realistic or desirable goal of creditors. The experience of the Lehman Brothers bankruptcy suggests that the existing bankruptcy process can lead to financial instability, at least in an already stressed environment. Thus, if policymakers wish to eliminate bailouts and maintain financial stability, that goal must be paired with one or more of the other approaches below. Limiting the Size of Financial Firms One approach to eliminating TBTF is to alter the characteristics of firms that make them TBTF. If TBTF is primarily a function of size, policymakers could require TBTF firms to sell businesses, divest assets, or break up to the point that they are no longer TBTF. Alternatively, policymakers could tax size—explicitly or implicitly through punitive regulatory requirements—to put large firms at a competitive disadvantage (or eliminate advantages that stem from perceptions of TBTF). Current Policy Size limits are in place in current law, but only to approve mergers or when there is a threat to financial stability. Before the crisis, mergers or consolidations were prohibited if they would result in a BHC holding more than 10% of national deposits and 30% of any state's deposits. Section 622 of the Dodd-Frank Act prevents mergers or consolidations that would result in a firm with more than 10% of total liabilities of certain financial firms or, in the case of a bank, 10% of the total amount of deposits of insured depository institutions in the United States. This limit can be waived in the case of the acquisition of a failing firm. The limit does not prevent firms from increasing their market share "organically." The Financial Stability Oversight Council (FSOC) determined that Section 622 would limit the acquisitions of only the four largest BHCs in 2011. Section 121 of the Dodd-Frank Act, as amended by P.L. 115-174 , allows the Federal Reserve to prevent mergers and acquisitions, restrict the products a firm is allowed to offer, terminate activities, and sell assets if the Federal Reserve and at least two-thirds of FSOC believe that a firm that has more than $250 billion in assets poses a "grave threat to the financial stability of the United States." It does not allow the Fed to undertake these actions simply because a firm is large. The Dodd-Frank Act, as amended by P.L. 115-174 , allows fees to be assessed on banks with more than $50 billion, $100 billion, or $250 billion in assets, depending on the fee, and non-banks designated as systemically important. The fees were intended to finance the costs of supervision and resolution, as well as the budget of the Office of Financial Research, as opposed to being a deterrent on size, however. Regulations applying only to large financial firms that make size more costly are discussed in the section below entitled " Regulating TBTF ." Under the terms of conservatorship, the GSEs have been reducing their investment portfolio balances by 15% a year until they reach $250 billion by the end of 2018. These size restrictions apply only to the GSE's investment holdings; they do not limit their other activities and are not set by statute. Policy Debate Size can be measured in different ways (assets, liabilities, revenues, etc.), and regulators would likely need to use discretion to weigh a number of measures. It is also not obvious at what size a firm becomes a source of systemic risk—should the line be drawn at, say, $1 trillion, $100 billion, or $50 billion of assets? A firm could be TBTF because of its overall size or because of its size or importance in a particular segment of the financial market, suggesting that overall size alone may not be a sufficient determinant of systemic importance. It is also possible that if all institutions were smaller because of a size cap, the largest institutions would still be systemically important, even though their size would not be large by today's standards. A parallel might be the decision to rescue Continental Illinois in 1984—it was the seventh-largest bank, but had assets of only $45 billion at its peak, as geographic restrictions meant that the average size of all banks was smaller. The benefits of reducing the size of firms are that, if successful, it could eliminate the moral hazard and the need for future "bailouts" stemming from TBTF. Other potential costs and benefits are more ambiguous. Size restrictions may raise the cost or reduce the quality of financial products currently provided by TBTF firms to consumers and investors; whether this is good or bad from an economic perspective depends on the cause. If low costs currently stem primarily from the TBTF "subsidy," then economic efficiency would improve if large firms are eliminated even if costs rose as a result. Alternatively, if low costs currently stem primarily from economies of scale, then economic efficiency would be reduced by size restrictions. Beyond cost, large firms may make markets more liquid and enhance customer convenience (such as a nationwide physical presence). Large non-financial firms may also have financial needs (such as the underwriting of securities) that would overwhelm small financial firms. Similarly, if the success of the largest firms comes primarily through their ability to innovate and provide more sophisticated or superior products, then size restrictions could reduce economic efficiency. Alternatively, if success of large firms comes primarily through the ability to extract monopoly rents, size restrictions could improve economic efficiency. While reducing size should reduce systemic risk, there is mixed evidence on whether large firms are more or less likely to fail than small firms. They could be less likely to fail because of greater diversification or more sophisticated risk management. Canada's unique experience in avoiding the 2007-2009 financial crisis is attributed by some to its highly concentrated banking system. Unless rules to limit the size of financial firms are global, size restrictions could place U.S. firms at a disadvantage at home and abroad in their competition with foreign financial firms. (Some types of financial activities can be performed abroad more easily than others, so the relevance of this factor depends on the activity in question.) If business were to shift to large foreign firms, the overall level of systemic risk in the financial system (which already involves large international capital flows) may not decline, or could even increase if prudential regulation in the foreign firm's home country were inferior to U.S. regulation. An alternative to restricting size would be to penalize size through a tax or assessment on assets or liabilities above a stated threshold. In theory, the tax could be set at the rate that would neutralize any funding advantage that a bank enjoys because of its TBTF status. Given that it is uncertain at what size a financial firm becomes TBTF, a tax could be viewed as less harmful than a cap if set at the wrong threshold and perhaps more easily adjusted over time. Other policy options that raise funding costs for large firms, such as higher capital requirements, can be viewed as having a similar effect to a tax. If policymakers decided to reduce the size of firms, a phase-in or transition period might be desirable to avoid significant short-term disruptions to the overall financial system as business shifted away from the largest firms. Likewise, when designing a policy that applies only to firms above a size threshold, one consideration is whether to make the threshold graduated to avoid cliff effects. Otherwise, firms might take actions to remain just below the threshold. Limiting the Scope of Financial Firms Some policy options, such as Glass-Steagall and the Volcker Rule, focus on limiting the types of activities that certain financial firms may engage in. Current Policy Most large financial firms are organized as bank holding companies. The activities in which bank subsidiaries may engage are restricted by statute, but BHCs may own non-bank subsidiaries. The subsidiaries of, and off-balance sheet entities associated with, the largest BHCs are active participants, to varying degrees, in multiple lines of business outside of traditional bank lending, including asset-backed securitization, trust services, insurance, money market mutual funds, and broker-dealers. Some large firms are predominantly engaged in one line of finance, while others are more evenly mixed. A large firm's presence throughout the financial system is one source of its "interconnectedness." Section 619 of the Dodd-Frank Act, popularly referred to as the "Volcker Rule," prohibited banks from engaging in proprietary trading and owning hedge funds and private equity funds in the United States, and required additional capital to be held by systemically important non-banks that engage in proprietary trading or own hedge funds and private equity funds in the United States. Insurance companies are largely excluded from the Volcker Rule. Exemptions from the Volcker Rule include the purchase and sale of assets for purposes of underwriting, market making, hedging, and on behalf of clients. Securities issued by federal, state, or local governments and government-sponsored enterprises (GSEs) are exempted, as are investments in small business investment companies. A final rule implementing the Volcker Rule was adopted in December 2013, with conformance required by June 2015. P.L. 115-174 exempted banks with less than $10 billion in assets and minimal trading activities from the Volcker Rule. Section 716 of the Dodd-Frank Act required banks to "push out" certain swap dealer activities outside of the depository subsidiary and into a separately capitalized subsidiary. The stated goal of the provision is to prevent swap dealers and major swap participants from accessing deposit insurance or the Fed's discount window. The rule implementing Section 716 was effective July 2013, with a two-year transition period. A provision in the FY2015 appropriations bill ( P.L. 113-235 ) limited the scope of the pushout rule. The housing GSEs are an example of large financial firms with a charter that permits only a narrow range of business activities. Policy Debate Imposing a size restriction on firms is relatively straightforward—it requires establishing a measure of size, identifying the threshold size that makes a firm TBTF, and preventing firms from exceeding that threshold. Altering firms so that they are not too interconnected to fail is more complicated because there is less consensus on what characteristics make a firm "too interconnected." If interconnectedness is taken to mean that the firm is an important participant in several different segments of financial markets, then policymakers could take what has popularly been described as the "reinstate Glass-Steagall" approach. Echoing Glass-Steagall's separation of banking and investing, the essence of this proposal is to prevent a single financial holding company from operating in multiple lines of financial business. Reintroducing the separation of lines of business alone would not necessarily prevent the existence of very large or interconnected firms within a market segment, however, in which case the TBTF problem would not be eliminated. The benefits of reducing the scope of firms are that, if successful, it could reduce the riskiest activities of large firms and thus the need for future "bailouts" stemming from TBTF. It could also reduce the complexity of large firms, making it easier for regulators and creditors to monitor them. Weighed against those benefits would be a number of costs that lead other policymakers to prefer to eliminate policies that limit scope. First, there may be economies of scope that make the financial system more efficient and complete if firms are large, diversified, and interconnected. Customers may benefit from the convenience, sophistication, and savings of "one-stop shopping" and expertise in multiple market segments. Second, large firms that operate in multiple lines of business may be better able to reduce risk through diversification, making them less prone to instability in that sense. Traditional banking is not inherently safe, so forbidding banks from engaging in other activities is no panacea to avoid bank failures. Fannie Mae and Freddie Mac are examples of firms that were deemed "too big to fail" and rescued on those grounds, although their business was narrowly focused in the mortgage market. Third, reintroducing Glass-Steagall separations of businesses without other changes to the regulatory system would reinforce a system in which banking is subject to close federal prudential regulation and other financial firms are not. This system would only mitigate systemic risk if non-banking activities and institutions could not be a source of systemic risk—the recent crisis experience casts doubt on that assumption. In some cases, activities may still be a source of systemic risk even if banks or TBTF firms are banned from conducting them. Further, the growth in "shadow banking" makes it more difficult to segregate activities and their regulation by charter—financial innovation has blurred the distinction between different lines of business in finance to the point where the distinction may not be meaningful. In other words, some activities of non-banks are not fundamentally different from core banking activities from an economic perspective. Thus, the activities that banks could undertake would be limited, but it would be difficult to prevent non-banks from engaging in bank-like activities with the same implications for systemic risk, but less or no prudential regulation. Similar arguments apply to the potential for activities to migrate abroad, where "universal banking" is common. Another policy approach would be to limit or ban TBTF firms' participation in activities that are deemed inherently too risky—particularly those likely to generate large losses at times of financial stress—and not central to the business model of the firm. This approach usually focuses on banks because of their access to the "federal safety net" (deposit insurance and Fed lending), and hence justified in terms of limiting risk to taxpayers. For example, the Volcker Rule has been justified on the grounds that banks should not participate in proprietary trading of private securities with the bank's own funds. Although all financial activities are risky, some risks can be more easily managed through techniques such as hedging and supervised by regulators. Whether proprietary trading is an inherently riskier activity than other banking functions, such as lending, is subject to debate. In addition to proprietary trading, Thomas Hoenig and Charles Morris have proposed to also ban banks from acting as broker-dealers and market-makers in securities and derivatives. Another variation of this proposal, made by the Vickers Commission in the United Kingdom and the Liikanen Group in the European Union, is to "ring fence" banking activities from these other types of activities into legally, financially, and operationally separate entities within a holding company structure. This type of approach can be seen in the United States in the swap push out rule. A drawback to limiting permissible activities is that there is unlikely to be any sharp distinction between the risky activity and similar activities that are central to the firm's core activities. As a result, regulators may have to make arbitrary distinctions between which activities fall under the ban, and firms would have an incentive to skirt the ban by designing transactions that resemble allowed activities but accomplish the same goals as the banned activity. For example, proprietary trading ("playing the market" with a firm's own assets) may be hard to distinguish from market-making (providing clients with a ready buyer and seller of securities) or hedging (buying and selling securities such as derivatives to reduce risk), and there may be economies of scale to market-making that concentrate those activities at large firms. It should also be noted that proposals limiting scope would generally apply to all banks, small and large. As a practical matter, large banks are more likely to operate in a wide range of non-bank businesses, however. Regulating TBTF Another approach to addressing the TBTF problem takes as its starting point the view that no policy can prevent TBTF firms from emerging. In this view, the dominant role of a few firms in key segments of the financial system is unavoidable. Breaking them up or eliminating all spillover effects is unlikely to be practical or feasible, for reasons discussed elsewhere. If so, regulation could be used to try to counteract the moral hazard problem and reduce the likelihood of their failure. Prudential regulation, such as capital requirements, could be set to hold TBTF firms to higher standards than other financial firms, whether or not those firms are already subject to prudential regulation. This approach would involve a choice between setting a quantitative threshold (based on size, for example) and applying standards to all firms over that size or designating firms believed to systemically important to be subject to the standards on a case-by-case basis. Current Policy Generally, the regulatory regime before the crisis was not based on firm size, but rather on charter type. A framework for prudential regulation is well established in depository banking regulation, featuring the establishment of safety and soundness standards and regulatory supervision to ensure adherence to those standards. Depository institutions were regulated for safety and soundness to minimize the costs of, and the moral hazard that results from, deposit insurance and access to the Fed's discount window. Because some non-bank financial firms did not receive analogous government protection before the crisis, there was not seen to be a moral hazard problem that justified regulating them for safety and soundness. Pre-crisis safety and soundness regulation did not explicitly address the additional moral hazard that results from TBTF, in part because TBTF firms were not explicitly identified. Before the crisis, large financial firms were subject to Fed prudential oversight at the holding company level if they were organized as BHCs or financial holding companies. In 1997, the Fed and the Office of the Comptroller of the Currency (OCC) set up an internal team to supervise large complex banking organizations. Regulation at the holding company level did not mean that all subsidiaries were regulated in the same way as depository subsidiaries. "Firewalls" were meant to protect the depository subsidiary from losses at non-bank subsidiaries. The holding company had to demonstrate that it was a source of strength for the depository subsidiary. Government-sponsored enterprises, such as Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, were also subject to prudential regulation by their own regulators. Some of the large firms that experienced financial difficulties in the recent crisis, however, were not BHCs, under Fed regulation, at that time. Types of large firms that were not BHCs included some government-sponsored enterprises, insurance companies, investment banks (or broker-dealers), and hedge funds. Insurance subsidiaries were regulated for safety and soundness at the state level. Investment banks complied with an SEC net capital rule. Some large financial firms, including AIG and Lehman Brothers, were thrift holding companies supervised by the Office of Thrift Supervision before the crisis. The Office of Thrift Supervision was mainly concerned with the health of AIG's and Lehman Brothers' thrift subsidiaries, although those were a minor part of their businesses. Some large financial firms voluntarily became BHCs during the crisis. The five largest investment banks either merged with BHCs (Bear Stearns, Merrill Lynch), became BHCs (Goldman Sachs, Morgan Stanley), or declared bankruptcy (Lehman Brothers) in 2008. Title I of the Dodd-Frank Act created an enhanced prudential regulatory regime for all large bank holding companies and "systemically important" non-bank financial firms. It grants the FSOC the authority to identify non-bank systemically important financial institutions (SIFI) by a two-thirds vote, which must be supported by the head of FSOC (the Treasury Secretary). Such a firm would be deemed systemically important on the basis of a council determination that "material financial distress at the [firm] or the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the [firm] could pose a threat to the financial stability of the United States." Foreign financial firms operating in the United States could be identified by the council as systemically important. By regulation, firms with consolidated assets of less than $50 billion are exempted. Besides the $50 billion threshold, FSOC stated in its final rule that under its three-stage process it would consider designating only firms with at least $30 billion in gross notional credit default swaps outstanding in which it was the reference entity, $3.5 billion of derivatives liabilities, $20 billion in debt outstanding, a 15 to 1 leverage ratio (a capital-asset ratio that is not risk-weighted), or a 10% short-term debt ratio. FSOC has designated three insurers (AIG, Metlife, and Prudential Financial) and one other firm (GE Capital) as systemically important, and therefore subject to heightened prudential regulation, but only Prudential Financial's designation remains in place. On March 30, 2016, the U.S. District Court for the District of Columbia struck down MetLife's designation; the government initially appealed this decision, but requested a dismissal of its appeal in 2018. In April 2015, GE announced that it intended to sell most of GE Capital over the next 18 months to 24 months in an effort, in part, to no longer be designated as systemically important. As a result, FSOC rescinded GE Capital's designation on June 28, 2016. In 2017, FSOC rescinded the designation of AIG, which played a central role in the financial crisis and was rescued by the government. FSOC has researched whether any "asset managers" (a diverse group that includes mutual funds, hedge funds, and private equity funds) are systemically important, but has not designated any to date. Under Subtitle C of Title I of the Dodd-Frank Act, the Fed became the prudential regulator for firms that the FSOC has designated as a non-bank SIFI and any BHC with total consolidated assets of more than $50 billion. The Fed, with the FSOC's advice, is required to set "enhanced" safety and soundness standards that are more stringent than those applicable to other non-bank financial firms and BHCs that do not pose a systemic risk. P.L. 115-174 raised the $50 billion threshold to $250 billion in assets, but granted the Fed discretion to apply individual enhanced prudential provisions to individual BHCs with assets between $100 billion and $250 billion if it would promote financial stability or the institution's safety and soundness. There are currently 13 U.S. BHCs with more than $250 billion in consolidated assets. Under the "Hotel California" provision, BHCs that participated in the Capital Purchase Program (part of the Troubled Asset Relief Program) would not be able to change their charter to avoid this regulatory regime without FSOC's permission. To date, this has happened once. In 2018, Zions converted from a BHC to a bank without a holding company structure. Since enhanced regulation is applied only to BHCs and designated firms, Zions could not be released from enhanced regulation without FSOC's permission. A large number of foreign banks operating in the United States are also subject to the enhanced prudential regime, as amended by P.L. 115-174 , because they have over $250 billion in global assets. If these foreign banks are operating with more than $50 billion in assets in the United States, they are required to set up intermediate BHCs that will be subject to heightened standards comparable to those applied to U.S. banks. Less stringent requirements apply to large foreign banks with less than $50 billion in assets in the United States. Rulemaking implementing enhanced regulation for non-bank SIFIs has not yet been finalized, to date. Final rules have been promulgated incorporating most enhanced regulatory standards for large BHCs, including stress tests, liquidity standards, capital planning, and risk management standards. At the recommendation of the council or on its own initiative, the Fed may propose additional prudential standards not required by the Dodd-Frank Act, and P.L. 115-174 requires the Fed to set different standards for different systemically important firms or categories of firms based on various risk-related factors. Fees are assessed on banks and non-banks regulated under this regime to finance the costs of supervision, as well as the budget of the Office of Financial Research. Regulation of large banks is tiered—it becomes increasingly stringent as asset size increases. In addition to the $250 billion threshold, the Dodd-Frank Act, as amended by P.L. 115-174 , requires banks with more than $10 billion in assets that are publicly held to establish risk committees on their corporate boards and banks with more than $100 billion in assets to undergo Fed-run stress tests. In conjunction with the Dodd-Frank Act, bank regulation was reformed after the financial crisis by Basel III, a nonbinding international agreement implemented in the United States through the rulemaking process. One tier of enhanced regulation applies to banks subject to the Basel III "Advanced Approaches" rule, which are those banks with $250 billion or more in assets or $10 billion or more in foreign exposure. Another tier of regulation applies to "global systemically important banks" (G-SIBs). Since 2011, the Financial Stability Board (FSB), an international forum that coordinates the work of national financial authorities and international standard setting bodies, has annually designated G-SIBs, based on the banks' cross-jurisdictional activity, size, interconnectedness, substitutability, and complexity. The FSB has currently designated 30 banks as G-SIBs worldwide, 8 of which are headquartered in the United States. In addition, several of the foreign G-SIBs have U.S. subsidiaries. Tiered regulation for advanced approaches banks and G-SIBs includes the following: Advanced approaches banks must meet a 3% supplementary leverage ratio, which includes off-balance sheet exposures. In April 2014, the U.S. bank regulators adopted a joint rule that would require the G-SIBs to meet a supplementary leverage ratio of 5% at the holding company level in order to pay all discretionary bonuses and capital distributions and 6% at the depository subsidiary level to be considered well capitalized as of 2018. Basel III also required G-SIBs to hold relatively more capital in the form of a common equity surcharge of at least 1% to "reflect the greater risks that they pose to the financial system." In July 2015, the Fed issued a final rule that began phasing in this capital surcharge in 2016. Currently, the surcharge applies to the eight G-SIBs, but under its rule, it could designate additional firms as G-SIBs, and it could increase the capital surcharge to as much as 4.5%. The Fed stated that under its rule, most G-SIBs would face a higher capital surcharge than required by Basel III. In addition, the Fed issued a final rule implementing a Basel III counter-cyclical capital buffer that is applied to the "Advanced Approaches" banks that can be modified over the business cycle to counteract excessive credit growth. Since implementation, it has been set at zero, and it is unclear how likely it is that regulators would raise it above zero, and under what circumstances an increase would be triggered. Basel III also created two liquidity standards, the liquidity coverage ratio and the net stable funding ratio, that apply only to large banks. In September 2014, the banking regulators finalized a rule implementing the liquidity coverage ratio. The liquidity coverage ratio would require firms to hold enough liquid assets to meet cash flow needs during a stress period. In May 2016, the banking regulators proposed a rule implementing the net stable funding ratio. The net stable funding ratio would require firms to have stable funding to meet net outflows in a stressed environment over a year. These rules do not apply to non-bank SIFIs, but regulators indicated that non-bank SIFIs would face their own liquidity requirements. Size thresholds are also used in other regulations besides enhanced regulation. For example, in the Dodd-Frank Act as amended, the Volcker Rule and debit card interchange fees (the "Durbin Amendment") apply only to banks with over $10 billion in assets; CFPB supervision for consumer compliance applies only to banks with over $10 billion in assets; and executive compensation rules for financial firms apply only to firms with over $1 billion in assets, with more stringent requirements as asset size increases. The FSB has also identified nine insurers as "globally systemically important insurers," three of whom (AIG, Prudential Financial, and MetLife) are headquartered in the United States. FSB members have agreed to require designated insurers to develop recovery and resolution plans and hold more capital than other insurers by 2019. The FSB has released a methodology for identifying global systemically important firms that are not banks or insurers, but has not designated any to date. Statutory changes to GSE prudential regulation await broader GSE reform. Policy Debate Successfully containing TBTF through regulation involves a series of considerations. What types of financial firms pose systemic risk? How can the government best identify which firms are systemically important? Can prudential regulation be effective for all types of firms? Could regulation backfire and make the TBTF problem worse? Historically, banks have been subject to a closer and more intense federal prudential regulatory regime than non-banks because of the systemic risk and moral hazard problems they posed. Some argue that banks generate unique sources of systemic risk (such as deposit taking) that have no analogue in other types of financial firms. If the recent crisis leads to the conclusion that TBTF non-bank financial firms can also be sources of systemic risk and contagion, the same arguments made for regulating banks for systemic risk also apply to TBTF non-banks, however. There are a wide variety of types of large non-banks, with diverse features. Some non-banks have some of the features that have been viewed as a source of systemic risk, such as leverage and vulnerability to runs, while others do not. There are a few large insurers, which are already regulated for safety and soundness at the state level. On the other hand, state regulators may not be equipped to regulate noninsurance subsidiaries or the overall firm for systemic risk. A study by the Office of Financial Research (OFR) identified several channels through which "asset managers"—a diverse group that includes hedge funds, pension funds, and mutual funds—could pose systemic risks. Others have argued that only activities, not firms, in this industry pose systemic risk. The OFR report identified 10 asset managers each with more than $1 trillion in assets under management. A "one size fits all" model for regulating firms in different businesses for safety and soundness is unlikely to be practical. Bringing non-banks under the Fed's purview raises questions about whether rules designed for banks can be applied to non-banks, and whether the federal bank regulators have the expertise to do so effectively. For example, insurers have argued that bank regulations are not suitable for them, and the Fed does not have any specialized expertise in the area of insurance. Another issue is whether to regulate all of the activities of holding companies operating across several lines of business for safety and soundness, or regulate only certain activities that are deemed systemically important, perhaps with legal and financial "firewalls" that isolate the risks of nonregulated activities to the overall holding company. Prudential regulation does not and cannot prevent all failures from occurring—large, regulated depository institutions failed, and the GSEs were taken into conservatorship during the recent financial crisis. Nor is a system without any failures necessarily a desirable one, since risk is inherent in all financial activities. Regulation could aim to prevent large financial firms from taking greater risks than their smaller counterparts because of moral hazard. If successful, fewer failures or episodes involving disruptive losses would occur. The success of the regulatory approach versus the market discipline approach depends on whether regulators or creditors can more accurately identify risk. Both markets and regulators failed to predict the losses and failures (of firms with and without access to the federal safety net) that led to the financial crisis. Even if market participants were more accurately able to identify risk than regulators, market participants have a higher tolerance for risk than society as a whole because they are unlikely to internalize the systemic risks associated with a TBTF firm's failure. In addition, regulators potentially have greater access to relevant information on risk than creditors and counterparties if opacity is a problem with large, complex firms. Those who are skeptical that regulation will succeed point out that the same regulators were arguably unable or unwilling to prevent excessive risk-taking before and during the crisis by at least a few of the firms that they regulated. Regulators have adapted to weaknesses raised by the crisis, but the next crisis is likely to pose a novel set of problems. Although regulation is intended to limit risky behavior, regulators may inadvertently cause greater correlation of losses across firms by encouraging all firms to engage in similar behavior. Some have argued that large firms are "too complex to regulate," meaning regulators are incapable of identifying or understanding the risks inherent in complicated transactions and corporate structures. For example, the six largest BHCs had more than 1,000 subsidiaries each, and the two largest had more than 3,000 each in 2012. Further, their complexity has increased over time—only one BHC had more than 500 subsidiaries in 1990, and the share of assets held outside of depository subsidiaries has grown over time for the largest BHCs. One response to addressing this complexity is to make the regulatory regime more sophisticated, but some critics argue that this approach is likely to backfire and simple regulations are more likely to be robust. Others have argued that large firms are "too big to jail," meaning regulators cannot take effective supervisory actions against firms if those actions would undermine the firm's financial health, and thus financial stability. One way that a regulatory approach could potentially backfire is if a special regulatory regime for TBTF firms is not strict enough, in which case it would exacerbate the moral hazard problem. Critics fear that such a regime would be particularly vulnerable to "regulatory capture," the phenomenon in which the regulated exercise influence over their regulators to ease the burden of regulation. If so, a special regulatory regime could wind up exacerbating the moral hazard problem by, in effect, making TBTF status explicit, signaling to market participants that firms in the special regime enjoyed a protected status and would not be allowed to fail. Instead of increasing the cost of being TBTF, firms in the special regulatory regime could end up borrowing at a lower cost than other firms (since, in effect, these firms would enjoy a lower risk of default). Many would point to the experience with the GSEs, Fannie Mae and Freddie Mac, before conservatorship as a historical example of how a special regulatory regime could backfire. The GSEs could borrow at a lower cost than other firms because markets believed that the government would not let them fail—they enjoyed even lower borrowing costs than firms that markets might believe were implicitly TBTF but not chartered by the government like the GSEs. Institutional shortcomings, critics argue, led to regulatory capture. The GSEs were subject to their own unique capital requirements, set by statute, under which they were found well capitalized by their regulator at the time, OFHEO, two months before being taken into conservatorship. Yet compared with depositories, GSEs held little capital, were not well diversified, and experienced large losses during the crisis. The worst-case scenario of opponents of a separate regulatory regime for TBTF firms is that such a regime would provide a competitive advantage, such as the GSEs' ability to borrow at lower cost than other firms, that would enable more risk-taking than before. Enhanced regulatory safeguards may increase overall costs in the financial system, but in the presence of TBTF, market costs may otherwise be too low from a societal perspective, since risk-taking is too high. For example, requiring loans to be backed with more capital may make lending more expensive and less available, but make the firm less likely to fail. If more capital succeeded in creating a more stable financial system, then the availability of credit could be less volatile over time. At least partly offsetting the higher costs of capital for firms designated as systemically important would be relatively lower costs of capital for other firms. Even if a heightened prudential regime worked as planned, it could still partly backfire from a systemic risk perspective. To the extent that it causes financial intermediation to migrate away from TBTF firms to firms that are not regulated for safety and soundness, the result could be a less regulated financial system. Determining which financial firms should be subject to enhanced regulation can be done on a case-by-case basis (as with the FSOC designation process for non-bank SIFIs) or automatically according to some quantitative threshold (as with the $250 billion asset threshold for banks). Many economists believe that the economic problem of "too big to fail" is really a problem of too complex or interdependent to fail. Size correlates with complexity and interdependence, but not perfectly. It follows that a size threshold is unlikely to successfully capture all those—and only those—firms that are systemically important. A size threshold will capture some firms that are not systemically important if set too low or leave out some firms that are systemically important if set too high. (Alternatively, if policymakers believe that size is the paramount policy issue, then a numerical threshold addresses the issue most directly, although policymakers may debate the most appropriate number.) Size is a simpler and more transparent metric than complexity or interdependence, however. A case-by-case designation process would be more time-consuming and resource-intensive, however. For example, only four non-banks were designated as SIFIs in three years under the existing process. Furthermore, there is no guarantee that FSOC will correctly identify systemically important firms since there is no definitive proof that a firm is systemically important until it becomes distressed. Critics believe the designation process is not transparent enough—although FSOC modified the process to increase transparency in 2015 —and does not provide designated firms enough opportunity to address the reasons that FSOC deems them to be systemically important. Some fear that FSOC could make an incorrect judgment about a firm's systemic importance because most members of FSOC do not have expertise in any given business line or because the Treasury Secretary has effective veto power. Some Members of Congress have been concerned that the FSB designation process is superseding the FSOC designation process. Thus, policymakers face a trade-off between using a simpler, transparent but imperfect proxy for systemic importance, or trying to better target enhanced regulation on a more laborious case-by-case basis. Minimize Spillover Effects One set of policy options focuses on mitigating contagion via a TBTF firm's spillover effects on other firms. Counterparty risk is the exposure to losses because a counterparty in a transaction cannot fulfill its obligations. If counterparty exposure is large enough, the failure of one firm could cause its counterparty to fail. Examples of how counterparty risk can be reduced include moving transactions to clearinghouses and exchanges, requiring capital/margins for transactions, requiring risk exposures to be hedged, and placing limits on exposure to specific counterparties (transactions, debt, equity holdings, etc.). If spillover effects could be adequately contained, then a firm might cease to be TBTF (or more precisely, too interconnected to fail), regardless of its size, in the sense that its failure would no longer cause contagion. Current Policy The Federal Reserve's Regulation F (12 C.F.R., Part 206)—in place before the crisis—limits counterparty exposure for depository institutions. Under Title I of the Dodd-Frank Act, as amended by P.L. 115-174 , the Fed has set single counterparty credit exposure limits of 15% to 25% of a company's capital per counterparty for BHCs with more than $250 billion in assets. Counterparty limits for non-bank systemically significant financial institutions have not yet been proposed. To reduce counterparty risk, Title VII of the Dodd-Frank Act requires certain swaps, particularly those that involve large financial institutions, to be traded through clearinghouses or exchanges and be subject to margin requirements. Title VIII of the Dodd-Frank Act allows the Financial Stability Oversight Council to identify certain payment, clearing, and settlement systems and activities as systemically important "financial market utilities," and allows the Federal Reserve, Securities and Exchange Commission, or Commodity Futures Trading Commission to regulate those systems and activities for enhanced prudential supervision. It also allows systemically important systems to borrow from the Fed in "unusual or exigent circumstances." In 2012, regulators issued a final rule implementing Title VIII and designated eight financial market utilities, including major clearinghouses, as systemically important. Policy Debate A criticism of regulation before the crisis was that regulators did not focus enough on how a firm's failure would affect its counterparties or broader financial conditions, or conversely, whether a firm could withstand a stressed environment. Another approach holds that if firms are TBTF because their failure would cause spillover effects that would impair the overall financial system, then regulators should try to neutralize spillover effects to the point where the failure of a firm would not impair the broader financial system. According to this view, once creditors believed that a firm could now safely be allowed to fail regardless of its size or interconnectedness, the moral hazard problem associated with TBTF would vanish. A drawback to this approach is that spillover effects cannot always be identified beforehand. If counterparty exposure were transparent, in theory all market participants could hedge themselves against failure ahead of time and the failure would not have contagion effects, or at least the government could manage the exposure to prevent contagion. In practice, linkages have proven complex and opaque, and the sources of contagion have proven hard to predict. For example, in September 2008, policymakers reasoned that market participants and policymakers had had several months after the rescue of Bear Stearns to prepare for the failure of Lehman Brothers (indicators such as credit default swaps had signaled an elevated risk of default for months), so allowing it to enter bankruptcy should not be disruptive. Nevertheless, few anticipated that Lehman Brothers' failure would lead to a run on money markets, which proved highly disruptive to commercial paper markets, causing financing problems for many financial and non-financial issuers. Identifying spillover effects is likely to be more difficult if a firm is not already regulated for safety and soundness. Without a prudential regulator closely monitoring the firm's activities and examining its counterparties, it is less likely that policymakers could quickly and accurately identify who would be exposed to a firm's failure. In theory, creditors could demand a premium from firms that do not limit counterparty risk; in reality, much of the necessary information to make that judgment is unlikely to be identifiable or publicly available. Another issue is that some solutions shift, rather than eliminate, counterparty risk. For example, moving certain activities on to an exchange or clearinghouse would increase the systemic importance of those entities. The Dodd-Frank Act addresses this issue by designating financial market utilities for enhanced prudential regulation and emergency access to Fed lending, but critics argue that designation causes moral hazard by creating expectations that they will be rescued. Reducing counterparty risk may increase overall costs in the financial system. For example, counterparty limits and margin requirements could reduce liquidity and raise costs for transactions. In the presence of TBTF, however, market costs may otherwise be too low from a society-wide perspective, because firms lack the proper incentives to monitor or insure against counterparty risk. Resolving a Large, Interconnected Failing Firm If a TBTF firm were to fail, there are potentially two established approaches that could be used to manage the failure. Prior to the financial crisis, failing banks were resolved through the FDIC's resolution regime, while certain other financial firms, such as broker-dealers, were resolved through the corporate bankruptcy system. Bankruptcy is a judicial process initiated by creditors in order to recover debts and other liabilities, while the FDIC's resolution regime is an administrative process initiated by the FDIC. Current Policy If a bank is heading toward insolvency, the FDIC normally takes it into receivership and resolves it. Examples of the types of powers that the FDIC can exercise to resolve a depository include transferring and freezing assets, paying obligations, repudiating contracts, and obtaining judicial stays. One rationale behind a resolution regime for banks is that the need to safeguard federally insured deposits (which can be withdrawn rapidly) requires a swift resolution and gives the FDIC, which insures the deposits, priority over other creditors. Prompt corrective action and least cost resolution requirements are intended to minimize losses to the FDIC. The FDIC may initiate a resolution before failure has occurred—thereby limiting losses to the FDIC and other creditors—whereas a bankruptcy process cannot be initiated by creditors until default has occurred. Least cost resolution may also help to minimize moral hazard, because bailing out firms (i.e., making creditors whole) is often more costly than shutting a firm down. But, by statute, least cost resolution could be waived by the Treasury Secretary, upon the recommendation of the FDIC and Federal Reserve, if a systemic risk exception were invoked. Thus, market participants may have expected that the systemic risk exception would be invoked for large firms—as it was in the failure of Wachovia (although not ultimately needed) and to guarantee a portfolio of Citigroup's assets. The FDIC typically resolves failed banks through the "purchase and assumption" method, under which the bank is closed and some or all of the assets and deposits of the failed bank are sold to healthy banks. If losses are too large to be absorbed by creditors, they are absorbed by the FDIC's deposit insurance fund, which is prefunded through assessments on depositories, to protect depositors. The purchase and assumption method avoids open-ended government assistance and keeps the FDIC out of the business of running banks. Before the crisis, a failed non-bank was subject to the standard corporate bankruptcy process; there was no standing policy of government involvement in the failure of a non-bank, with the exception of federal resolution authority for Fannie Mae and Freddie Mac and state resolution authority for state insurance subsidiaries. In July 2008, Congress enacted the Housing and Economic Recovery Act (HERA), which included provisions creating a new regulator (the Federal Housing Finance Agency, or FHFA) for the housing GSEs (the Federal Home Loan Banks, Fannie Mae, and Freddie Mac). The FHFA was given augmented powers to resolve the GSEs. Under these powers, FHFA can manage assets, sign contracts, terminate claims, collect obligations, and perform management functions. In September 2008, FHFA determined that Fannie Mae and Freddie Mac were critically undercapitalized and they entered FHFA conservatorship, upon which FHFA took control of their operations while maintaining them as ongoing enterprises. HERA also gave the Treasury Secretary unlimited authority to lend or invest in the GSEs through the end of 2009. This authority has been used to cover the GSEs' losses and prevent insolvency during conservatorship, and funds from Treasury continued to be transferred until 2012. Fannie Mae and Freddie Mac have operated under government conservatorship ever since—unlike FDIC practice in bank resolutions. While existing shareholders saw their equity value plummet at the time of conservatorship, creditors and other counterparties have continued to be paid in full. Title I of the Dodd-Frank Act, as amended by P.L. 115-174 , required systemically important firms (SIFIs) and BHCs with at least $250 billion in consolidated assets to periodically prepare resolution plans, also called "living wills," explaining how they could be resolved in a rapid and orderly manner. Failure to submit a credible resolution plan would trigger regulatory action. Title I, as amended by P.L. 115-174 , also created early remediation requirements for domestic and foreign BHCs with at least $250 billion in assets and non-bank SIFIs that are in financial distress. Title II of the Dodd-Frank Act created the Orderly Liquidation Authority (OLA), a resolution regime for any financial firm whose failure would have "serious adverse effects on financial stability." (The firm does not have to have been previously subject to enhanced prudential regulation under Title I to be resolved under Title II.) However, subsidiaries that are insurance companies would be resolved under existing state resolution regimes, certain broker-dealers would be resolved by the Securities Investor Protection Corporation, and insured depository subsidiaries would be resolved under the FDIC's traditional resolution regime. The process for taking a firm into resolution has multiple steps and actors. First, a group of regulators (the group varies depending on the type of firm, but must always include the approval of two-thirds of the Federal Reserve's Board of Governors) must make a written recommendation to the Treasury Secretary that a firm should be resolved, explaining why bankruptcy would be inappropriate. Second, the Treasury Secretary must determine that resolution is necessary to avoid a default that would pose systemic risk to the financial system, and default cannot be prevented through a private-sector alternative. Prior identification by the FSOC could be used as evidence that the firm's failure poses systemic risk, but it is not a necessary condition. Third, if the company disputes the Treasury Secretary's findings, it has limited rights to appeal in federal court. Finally, the FDIC manages the resolution. If these steps are not met, then the failing firm would enter the standard bankruptcy procedure or any other applicable resolution process. The Dodd-Frank Act provides the FDIC with receivership powers, modeled on its bank receivership powers, with some differences, such as requirements that the FDIC consult with the primary regulator. As receiver, the FDIC can manage assets, sign contracts, terminate claims, collect obligations, and perform management functions. The Dodd-Frank Act sets priorities among classes of unsecured creditors, with senior executives and directors coming last before shareholders in order of priority. It requires that similarly situated creditors be treated similarly, unless doing so would increase the cost to the government. The FDIC is allowed to create bridge companies, as a way to divide good and bad assets, for a limited period of time to facilitate the resolution. Unlike FHFA's resolution regime, the Dodd-Frank regime does not allow for conservatorship. The Dodd-Frank Act calls for shareholders and creditors to bear losses and management "responsible for the condition of the company" to be removed. The FDIC is allowed to use its funds to provide credit to the firm while in receivership if funding cannot be obtained from private credit markets. Unlike the resolution regime for banks, there is no least cost resolution requirement and the regime is not pre-funded (the FDIC may borrow from Treasury to finance it). Instead, costs that cannot be recouped in the process of resolution must be made up after the fact through assessments on counterparties (to the extent that their losses were smaller under receivership than they would have been in a traditional bankruptcy process) and risk-based assessments on financial firms with assets exceeding $50 billion. Since the rationale for limiting losses to counterparties is to prevent systemic risk, it is unclear how those counterparties could be assessed after the fact without also posing some systemic risk. A lack of pre-funding means that a firm's resolution will, in effect, be financed temporarily by the taxpayers and ultimately by its competitors (i.e., firms with assets exceeding $50 billion) instead of itself. The FDIC is limited to providing assistance in the resolution up to 10% of the failed firm's total consolidated assets in the first 30 days of the resolution; thereafter the limit becomes 90% of total consolidated assets available for repayment. The FDIC has stated that the most promising resolution strategy [under Title II] from our point view will be to place the parent company into receivership and to pass its assets, principally investments in its subsidiaries, to a newly created bridge holding company. This will allow subsidiaries that are equity solvent and contribute to the franchise value of the firm to remain open and avoid the disruption that would likely accompany their closings.... Equity claims of the firm's shareholders and the claims of the subordinated and unsecured debt holders will be left behind in the receivership.... Therefore, initially, the bridge holding company will be owned by the receivership. The next stage in the resolution is to transfer ownership and control of the surviving franchise to private hands.... The second step will be the conversion of the debt holders' claims to equity. The old debt holders of the failed parent will become the owners of the new company.... This approach has been dubbed "Single Point of Entry," and the FDIC proposed a rule implementing it in December 2013. For the Single Point of Entry approach to succeed, the holding company must hold sufficient common equity and debt at the parent level that can absorb losses in resolution; otherwise, investors will anticipate that public funds will be used to absorb losses. In December 2016, the Fed finalized a rule to require G-SIBs to meet a "total loss-absorbing capacity" (TLAC) requirement through equity and long-term debt held at the parent level of the holding company. Policy Debate Part of what makes some financial firms too big to fail is the nature of the bankruptcy process, according to some analysts. A firm that dominates important financial market segments cannot be liquidated without disrupting the availability of credit, it is argued. They argue that the deliberate pace of the bankruptcy process is not equipped to avoid the runs and contagion inherent in the failure of a financial firm, and that the effects on systemic risk are not taken into account when decisions are made in the bankruptcy process. The bankruptcy experience of Lehman Brothers is viewed as evidence of why the current bankruptcy process cannot be successful for a TBTF firm. The Federal Reserve, with Treasury support, intervened to prevent the failure of Bear Stearns and AIG because it did not believe that those firms could be taken through the bankruptcy process without undermining financial stability. Thus, a resolution process removes one rationale for bailouts. Proponents argue that a resolution regime for all TBTF financial firms, regardless of whether the firm is a depository, offers an alternative to propping up failing firms with government assistance (as was the case with Bear Stearns and AIG in 2008) or suffering the systemic consequences of a protracted and messy bankruptcy (as was the case with Lehman Brothers). Supporting the argument for a special resolution regime, the failures of large depositories during the crisis that were subject to the FDIC's resolution regime, such as Wachovia and Washington Mutual, were less disruptive to the financial system than the failure of Lehman Brothers, even though Wachovia and Lehman Brothers were sequential (46 th and 47 th largest, respectively) on Fortune 's list of the 500 largest companies of 2007. Neither resolution involved government assistance. Losses were imposed on stockholders and unsecured creditors in the resolution of Washington Mutual. (The FDIC arranged for Wells Fargo to acquire Wachovia before the FDIC formally became receiver.) Whether the resolution of a non-bank could be handled as smoothly as these two banks is an open question. Typically, banks in receivership are resolved through acquisition by healthy firms. In the case of a large failing firm, the only entity capable of absorbing it in whole might be an even larger institution, leading to greater concentration. Were one of the nation's very largest firms to fail, it is not clear what firm would have the capacity to acquire it, in which case some other method of resolution would be necessary. Critics argue that Title II gives policymakers too much discretionary power, which could result in higher costs to the government and preferential treatment of favored creditors during the resolution. In other words, it could enable "backdoor bailouts" that could allow government assistance to be funneled to the firm or its creditors beyond what would be available in bankruptcy, perpetuating the moral hazard problem. The normal FDIC resolution regime minimizes the potential for these problems through its statutory requirements of least cost resolution and prompt corrective action. It would be expected that a resolution regime for TBTF firms, by contrast, would at times be required to subordinate a least cost principle to systemic risk considerations, which the FDIC regime permits. Therefore, a resolution could be more costly to the government than the bankruptcy process. (On the other hand, an administrative resolution process could potentially avoid some of the costs of bankruptcy, such as some legal fees and runs by creditors that further undermine the firm's finances.) Critics also point to the conservatorship of Fannie Mae and Freddie Mac—which have received government support on an ongoing basis since 2008—as evidence that a resolution regime could turn out to be too open ended and be used to prop up TBTF firms as ongoing entities, competing with private-sector rivals on an advantageous basis because of direct government subsidies. Title II does not allow conservatorship, but the Housing and Economic Recovery Act (HERA; P.L. 110-289 ) required mandatory receivership for the GSEs if they became insolvent; quarterly transfers from Treasury prevented insolvency to allow conservatorship to continue. If policymakers, wary of the turmoil caused by Lehman Brothers' failure, were unwilling to pursue the bankruptcy option in the future, opposing a resolution regime may be tantamount to tacitly accepting future "bailouts," unless some other policy change is made that future policymakers view as a workable alternative. As an alternative to a special resolution regime, some critics call for amending the bankruptcy code to create a special chapter for complex financial firms to address problems that have been identified, such as a speedier process and the ability to reorganize. To some extent, these concerns are already addressed in the bankruptcy code. For example, the bankruptcy process already allows qualified financial contracts to be netted out. In the case of Lehman Brothers, healthy business units were sold to competitors relatively quickly through the bankruptcy process, and remain in operation today. But unlike Title II, the bankruptcy process could not—for better or worse—base decisions on financial stability concerns or ensure that a financial firm has access to the significant sources of liquidity it needs. Unlike the bailout of AIG, a failing firm would not continue as an ongoing concern with the same ownership under Title II, but that does not guarantee that creditors would suffer losses. Given the size of the firms involved and the unanticipated transmission of systemic risk, it remains to be seen whether the government could impose losses on creditors via Title II without triggering contagion—or would be willing to try. A receiver would face the same short-term incentives to limit losses to creditors to limit systemic risk that caused policymakers to rescue firms in the recent crisis in order to restore stability. If the receiver is guided by those short-term incentives, the only difference between a resolution regime and a "bailout" might turn out to be that shareholder equity is wiped out, which would presumably not generate enough savings to avoid costs to the government. (The TLAC requirement creates a strong explicit assumption that losses would be imposed on those debtholders, however.) Unlike bailouts, a mandatory funding mechanism exists in Title II to recoup losses to taxpayers. But since that mechanism is not "pre-funded," there would be at least temporary taxpayer losses. Until a TBTF firm fails, it is open to debate whether a special resolution regime could successfully achieve what it is intended to do—shut down a failing firm without triggering systemic disruption. As noted above, uncertainty before the fact about which firms are TBTF may lead policymakers to err on the side of taking more failing firms than necessary into the special resolution process instead of allowing them to enter bankruptcy. One key challenge that has been identified is the resolution of foreign subsidiaries, requiring intergovernmental cooperation. Conclusion Contagion stemming from problems at TBTF (or too interconnected to fail) firms is widely regarded to have been one of the primary sources of systemic risk during the acute phase of the recent financial crisis. To avoid contagion, a series of ad hoc government interventions were undertaken that protected creditors and counterparties—and in a few cases, also managers and shareholders—of large and interconnected firms from losses. Economic theory predicts that these interventions exacerbated the moral hazard implications of TBTF, reducing the incentive for creditors and counterparties to safeguard against extreme outcomes, and increased the incentive to become larger and more interconnected going forward. Competing theories blame the lack of regulatory authority and failed regulation for the role of TBTF in the recent crisis. The failures of both highly regulated banks and lightly regulated non-banks suggest that neither lack of regulation nor failed regulation were solely responsible for TBTF. Policy before the financial crisis could be characterized as an implicit market discipline approach with ambiguity about which firms policymakers considered to be TBTF and how the imminent failure of a systemically important firm might be addressed. This ambiguity was defended on the grounds that it would result in less moral hazard than if TBTF firms were explicitly identified, since the ambiguity would promote market discipline. As the crisis unfolded, policy quickly shifted to an expectation of government assistance, where Bear Stearns, Fannie Mae, Freddie Mac, and AIG received direct government support and several emergency programs were instituted to ensure that other financial firms remained liquid and solvent. Not every large failing firm received assistance, however, with Lehman Brothers being the notable exception. Both before and during the crisis, policy could be characterized as ad hoc because arguably no general approach or principles were articulated that clearly signaled to firms or investors how a systemically important firm could expect to be treated in different scenarios. Some believe that this policy uncertainty made the crisis worse. The rapid shift from market discipline to government assistance during the crisis undermines the future credibility of the pre-crisis policy approach. If policymakers wanted to return to a market discipline approach, making that approach effective would arguably require statutory changes that "tie the hands" of policymakers to make assistance more difficult in the event of a future TBTF failure. This could be accomplished by eliminating broad, open-ended authority that was invoked during the last crisis, such as Section 13(3) of the Federal Reserve Act and the FDIC's systemic risk exception to least cost resolution. Policymakers dispute whether Dodd-Frank Act changes that narrow but preserve emergency authority have accomplished this goal. A Congress may not bind future Congresses, however. Policymakers cannot be prevented from enacting future legislation allowing assistance, much as TARP was enacted expeditiously when the crisis worsened in September 2008. If investors do not believe that market discipline will be maintained because policymakers face short-term incentives to provide government assistance in times of crisis, then a "no bailouts" promise would not prevent moral hazard. One view is that the genie cannot be put back in the bottle—market participants now believe that the government will provide assistance to TBTF firms based on the 2008 experience, in which case they face little incentive to monitor or respond to excessive risk-taking. If so, the policy options to mitigate moral hazard are to regulate TBTF firms for safety and soundness or use government policy to reduce the systemic risk posed by TBTF firms. In theory, a special regulatory regime for TBTF firms, such as the one created by the Dodd-Frank Act, could set safety and soundness standards at a strict enough level to neutralize moral hazard effects. The complexity and interconnectedness of large firms complicates their effective regulation, however. Moreover, a special regulatory regime for TBTF firms could backfire if regulatory capture occurs. Special regulation makes explicit which firms are TBTF, removing any ambiguity that might promote market discipline. As market discipline wanes, the burden on regulators to mitigate moral hazard increases. If regulators are unwilling or unable to apply regulatory standards strict enough to negate the benefits of being TBTF, then being subject to the special regulatory regime could give TBTF firms a competitive advantage over their industry rivals. The experience of Fannie Mae and Freddie Mac points to the dangers of this approach. Those two firms were subject to their own regulatory regime prior to the crisis and were able to borrow at lower interest rates than other financial firms, presumably because of the implicit government guarantee of their obligations. Systemic risk stemming from TBTF can also be mitigated by reducing potential spillover and contagion effects. Examples of Dodd-Frank Act provisions intended to reduce contagion effects include a special resolution regime for failing systemically important firms (OLA) and placing limits on counterparty exposure to large firms. Events in 2008, however, demonstrate the challenge in eliminating systemic risk posed by TBTF firms because it is unlikely that policymakers will correctly anticipate all of the channels of contagion in a crisis. Moreover, in determining whether to use government resources to limit losses to creditors, the receiver faces the same short-term incentives to spare creditors from losses that lead to moral hazard. Critics point to the open-ended assistance to Fannie Mae and Freddie Mac since 2008 as a cautionary tale, although this was through government conservatorship, rather than receivership. Some argue for eliminating TBTF directly by reducing the size or scope of the largest firms. It is uncertain what size limit would eliminate TBTF—given that interconnectedness is a nebulous concept—and policymakers would only know if they had set the right size limit by observing what occurs after a firm fails. Weighed against the benefits of eliminating the TBTF problem by eliminating large firms, the benefits to the financial system that would be lost are also disputed. In the case of reducing scope, some very large firms would remain, and they would be less diversified against risk. Fannie Mae and Freddie Mac are examples of large, narrowly focused firms that many nonetheless viewed as TBTF. A comprehensive policy is likely to incorporate more than one approach because different approaches are aimed at different parts of the problem. Some approaches focus on preventive measures (keeping TBTF firms out of trouble), whereas others are reactive (addressing what to do in the event of a TBTF failure). Some policy approaches are complementary—others could undermine each other. A market discipline approach is arguably most likely to succeed if coupled with size limits—although size limits thwart market-based profit incentives and outcomes. Policies that involve identification of TBTF firms, such as a special regulatory regime, are less compatible with a market discipline approach. Efforts to minimize spillover effects could be more effective if the TBTF firms are regulated for safety and soundness, so that spillover effects can more easily be identified ahead of time. Policymakers have historically coped with the moral hazard associated with deposit insurance through a combination of safety and soundness regulation, a resolution regime, and limits on spillover effects (e.g., limits on counterparty exposure). (Market discipline's role is limited by deposit insurance, but it plays a role with uninsured depositors and other creditors.) Yet TBTF poses some additional challenges to the bank regulation model, such as the difficulties of imposing a strict least cost resolution requirement on a resolution regime and effectively regulating firms with complex and wide-ranging activities. Each of these policy approaches to coping with TBTF has strengths and weaknesses; there is no silver-bullet solution to the problem because future policymakers face incentives to deviate from the approach to avoid crises, please interest groups, increase financial innovation and the availability of credit, and so on. Judging the relative merits of each policy approach depends in part on which approach future policymakers can best commit to and effectively carry out. The Dodd-Frank Act devised a strategy to end TBTF that, to varying degrees, incorporated each approach discussed in this report. Its attempts to limit the size and scope of firms were narrow and limited, however. Some take the fact that many of the largest financial firms have become larger since the crisis (at least in dollar terms) as a sign that the TBTF problem has not been solved. The existence of very large firms is necessary but not sufficient evidence that a TBTF problem exists. In principle, the TBTF problem can be eliminated even if large firms do not shrink, but it is difficult to verify success because ultimately, the only definitive test of whether the strategy succeeds is whether the failure of a large firm can be managed without a "bailout" and whether large firms stay healthy in a financial downturn—events that may not occur for years or even decades. Until then, perceptions of whether the TBTF problem still exists may develop (and be observable in market data), which could subsequently be proven true or false. Although TBTF was one source of systemic risk in the recent crisis, it was not the only one. Arguably, TBTF did not "cause" the crisis—TBTF firms were as much victims as perpetrators of the housing bubble and the collapse of the MBS market—but it did exacerbate the crisis. The Dodd-Frank Act also attempted to address other sources of systemic risk. Although the broader issue of systemic risk is beyond the scope of this report, some policy options discussed in this report may be more effective at mitigating systemic risk if applied more broadly than to TBTF firms exclusively. Otherwise, some sources of systemic risk may migrate to firms not regulated for safety and soundness, without increasing the stability of the overall financial system. If systemic risk mainly stems from certain activities, regardless of size, a policy focus on large institutions could risk creating a false sense of security. Risk is central to financial activity, so an optimal system is probably not one where large firms never fail. An optimal system is one in which a large firm can fail without destabilizing the financial system. The only system that can guarantee that large firms will not cause systemic risk is one without large firms, but a system without large firms may be less efficient and more prone to instability from other sources. Other approaches seek to limit systemic risk to acceptable levels. Creating a more stable financial system by mitigating the moral hazard associated with TBTF may result in credit becoming more expensive and less available in the short run, but the availability of credit could be less volatile over time. At least partly offsetting the higher costs of capital for firms designated as systemically important would be relatively lower costs of capital for other firms. Some policymakers would consider a tradeoff of less credit for a more stable financial system to be a tradeoff worth taking, considering that the recent crisis resulted in the deepest and longest recession since the Great Depression. Arguably, part of the cause of the crisis was that credit became too readily available, at least in some sectors (e.g., the housing bubble). Appendix. Enhanced Prudential Requirements for Large Banks Under the Dodd-Frank Act, as Amended by P.L. 115-174 Title I of the Dodd-Frank Act imposed a number of enhanced prudential regulatory requirements on bank holding companies and foreign banks operating in the United States with over $50 billion in assets, and non-banks designated as systemically important financial institutions (described in the section above entitled " Regulating TBTF "). P.L. 115-174 raised these thresholds, primarily to $250 billion in assets, but also gave the Fed the discretion to apply these requirements to banks in the $100 billion to $250 billion asset range on a case-by-case and bank-by-bank basis if necessary to promote financial stability or the bank's safety and soundness. This discretionary authority is not provided for most of the requirements classified in Table A-1 as emergency powers. The Fed may also apply these provisions to foreign banks operating in the United States with over $100 billion in global assets, although some provisions are currently applied only to foreign banks with over $50 billion in U.S. assets. Table A-1 divides these provisions into three broad categories: 1. requirements, implemented through rulemaking, that large institutions must adhere to on an ongoing basis; 2. emergency powers that may be imposed only under certain conditions, such as if there is a finding that an institution poses a threat to financial stability; and 3. assessments on large institutions to finance the administration of certain duties. Most of the ongoing requirements have already been implemented, whereas the emergency powers have never been invoked.

Although "too big to fail" (TBTF) has been a long-standing policy issue, it was highlighted by the financial crisis, when the government intervened to prevent the near-collapse of several large financial firms in 2008. Financial firms are said to be TBTF when policymakers judge that their failure would cause unacceptable disruptions to the overall financial system. They can be TBTF because of their size or interconnectedness. In addition to fairness issues, economic theory suggests that expectations that a firm will not be allowed to fail create moral hazard—if the creditors and counterparties of a TBTF firm believe that the government will protect them from losses, they have less incentive to monitor the firm's riskiness because they are shielded from the negative consequences of those risks. If so, TBTF firms could have a funding advantage compared with other banks, which some call an implicit subsidy. There are a number of policy approaches—some complementary, some conflicting—to coping with the TBTF problem, including providing government assistance to prevent TBTF firms from failing or systemic risk from spreading; enforcing "market discipline" to ensure that investors, creditors, and counterparties curb excessive risk-taking at TBTF firms; enhancing regulation to hold TBTF firms to stricter prudential standards than other financial firms; curbing firms' size and scope, by preventing mergers or compelling firms to divest assets, for example; minimizing spillover effects by limiting counterparty exposure; and instituting a special resolution regime for failing systemically important firms. A comprehensive policy is likely to incorporate more than one approach, as some approaches are aimed at preventing failures and some at containing fallout when a failure occurs. Parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) address each of these policy approaches. For example, it created an enhanced prudential regulatory regime administered by the Federal Reserve for non-bank financial firms designated as "systemically important" (SIFIs) by the Financial Stability Oversight Council (FSOC) and banks with more than $50 billion in assets. The Economic Growth, Regulatory Relief, and Consumer Protection Act (P.L. 115-174) raised this threshold to $250 billion in assets, but gave the Federal Reserve discretion to apply individual provisions as needed to banks between $100 billion and $250 billion in assets. Thirteen U.S. bank holding companies and a larger number of foreign banks have more than $250 billion in assets, and FSOC designated three insurers (AIG, MetLife, and Prudential Financial) and GE Capital as systemically important. MetLife's designation was subsequently rescinded by a court decision, and AIG's and GE Capital's designations were rescinded by FSOC. A handful of the largest banks face additional capital, leverage, and liquidity requirements stemming from Basel III, an international agreement. The Dodd-Frank Act also allowed FSOC to designate payment, clearing, and settlement systems as systemically important "financial market utilities" (FMUs) that are subject to enhanced prudential regulation. The Dodd-Frank Act also created the "orderly liquidation authority" (OLA), a special resolution regime administered by the Federal Deposit Insurance Corporation (FDIC) to take into receivership failing firms that pose a threat to financial stability. This regime has not been used to date, and has some similarities to how the FDIC resolves failing banks. Statutory authority used to prevent financial firms from failing during the crisis has either expired or been narrowed by the Dodd-Frank Act. The fact that most large firms have grown in dollar terms since the enactment of the Dodd-Frank Act has led some critics to question whether the TBTF problem has been solved and propose more far-reaching solutions, such as repealing parts of the Dodd-Frank Act, breaking up the largest banks, or restoring Glass-Steagall. Others argue that systemic risk regulation should focus on risky financial activities, regardless of firm size. (Fannie Mae and Freddie Mac remain in government conservatorship and have not been addressed by legislation to date.)

The Help America Vote Act (HAVA) The deadlocked November 2000 presidential election focused national attention on previously obscure details of election administration. Even before the U.S. Supreme Court decision resolving that election, more than a dozen bills had been introduced in the 106 th Congress to address the issues with voting systems, voter registration, and other aspects of election administration that the deadlock had exposed. Legislative activity continued when the 107 th Congress convened, along with the release of various independent reports and studies on election reform. In December 2001, the House passed H.R. 3295 , the Help America Vote Act, with no floor amendments. The Senate passed S. 565 , the Martin Luther King, Jr. Equal Protection of Voting Rights Act, in early 2002, after adopting 40 amendments. Following conference negotiations, the compromise bill, the Help America Vote Act of 2002 (HAVA; P.L. 107-252 ), was enacted in October. HAVA, for the first time, provided major federal funding to the states for the purpose of purchasing more modern voting equipment and for improving various aspects of election administration highlighted in the controversial 2000 Presidential election cycle. In addition, HAVA imposed a number of requirements on the states with respect to election administration, created a new independent agency, made some changes to improve military and overseas voting, and authorized other election reform activities. Among its major provisions, HAVA did the following: It established payment and grant programs to help states meet the law's requirements; replace punchcard and lever voting machines and make general election improvements; promote accessibility in the electoral process; promote student participation; and support research and pilot programs. It created the Election Assistance Commission (EAC), an independent, bipartisan agency to carry out payment and grant programs, provide for testing and certification of voting systems, study election issues, and assist state and local election officials by issuing guidelines and other guidance for voting systems and implementation of the act's requirements, in consultation with election officials and other stakeholders. It established requirements in the states to provide a provisional ballot to a voter who is not on the registration list or whose registration is in question; post a sample ballot and voter information at polling places on election day; restate the requirement for first time voters who registered by mail, to vote in person (first required by the National Voter Registration Act, NVRA) and impose a new voter identification standard; provide for voter error correction on voting systems used in federal elections; provide accessibility for persons with disabilities via at least one properly equipped voting machine per polling place; provide for manual auditing of the voting system and alternative-language accessibility; and create and maintain a computerized, verified statewide voter registration list. In addition, HAVA required the EAC to develop voting system guidelines for computer hardware and software for voluntary use by the states, and voluntary guidance to assist states in meeting HAVA requirements; left methods of implementation to the states and prohibited rulemaking by the EAC, leaving enforcement to the U.S. Attorney General while requiring states to establish grievance procedures; and amended the Uniformed and Overseas Citizens Absentee Voting Act (UOCAVA) to make improvements to voting procedures for members of the military and overseas citizens. Although many bills have been introduced to amend HAVA since it became law, only a minor change has been enacted. In 2009, the Military and Overseas Voter Empowerment Act (MOVE Act) established new military and overseas voting requirements under UOCAVA. It also amended HAVA to authorize appropriations to achieve compliance with those requirements. In general, local election officials (LEOs) have supported HAVA and its provisions, although some, such as the provisional ballot requirement, were initially controversial. A number of the issues raised during the legislative debate on HAVA have resurfaced subsequently, and some new ones have emerged. Topics and issues discussed in this report include the role of the EAC, HAVA funding and requirements, voter registration, voter identification, UOCAVA, the Voting Rights Act, and election technology, including cybersecurity. The report also discusses relevant legislative activity in the 114 th Congress. Election Assistance Commission (EAC) Before HAVA, federal activities relating to election administration were performed by the Office of Election Administration (OEA) of the Federal Election Commission (FEC). OEA provided assistance in developing voluntary standards for voting systems and performed clearinghouse functions and some administrative activities under the National Voter Registration Act (NVRA—also called the "motor-voter" law— P.L. 103-31 ). HAVA replaced the OEA with the Election Assistance Commission (EAC, http://www.eac.gov ), an independent, bipartisan federal agency. The act also established two EAC boards, with broad-based state and local membership. The Standards Board was designed to have 55 state election officials and 55 local election officials. The Board of Advisors was designed to have 37 members representing various associations, such as the National Governors Association and National Association of State Election Directors, as well as the Justice Department, the Federal Voting Assistance Program at the Department of Defense, and a number of science and technology professionals recommended by U.S. House and Senate leadership. HAVA also established the Technical Guidelines Development Committee, chaired by the Director of the National Institute of Standards and Technology (NIST), with members jointly appointed by the EAC and NIST, to address aspects of voting system technical standards and certification. The statute also provides for technical support and participation by NIST (see http://vote.nist.gov/ ). The EAC carries out grant programs, provides for 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 (except for limited authority under the NVRA) and does not enforce HAVA requirements. The act established two enforcement processes: The U.S. Attorney General may bring civil action with respect to HAVA requirements, and states, as a condition for receipt of funds, were required to establish administrative grievance procedures to handle complaints from individuals. Authorization of the EAC At the time HAVA was being debated in Congress, there was some dispute about whether it should be a permanent agency. Some supporters contended that a permanent agency was necessary to ensure the fairness and integrity of federal elections, whereas opponents were concerned about a permanent federal role in what was historically a responsibility of state and local governments. The outcome of the debate was that HAVA authorized appropriations for the EAC only for FY2003 through FY2005, but it did not contain a sunset provision for the agency. Bills have been introduced subsequently both to reauthorize the EAC and to eliminate it, but none has been enacted. Since FY2005, the agency has continued to receive funding each year through the appropriations process, pursuant to its enabling authorization. One of the agency's prominent critics has been the National Association of Secretaries of State (NASS). In most states, the Secretary of State is the chief election official. NASS first called for elimination of the EAC in a 2005 resolution encouraging Congress "not to reauthorize or fund the EAC after the conclusion of the 2006 federal general election," expressing concerns that the EAC not be allowed "to evolve into a regulatory body" and that the agency had "served its purpose" under HAVA. The association reaffirmed that resolution at its July 2010 summer conference and again at its July 2015 summer meeting. Local election officials appear to be more supportive. Three surveys of local election officials taken in 2004, 2006, and 2008 all found that a majority of officials believed that the EAC was advantageous for their jurisdictions. Several bills affecting the EAC's authorization have been introduced in recent Congresses. Some bills have called for the termination of the agency. Those included H.R. 3463 in the 112 th Congress, which was passed in the House, and H.R. 1994 in the 113 th Congress, which was reported by the Committee on House Administration. In addition, two bills that would have reauthorized the EAC were introduced. None of those bills received further action. In the 114 th Congress, H.R. 195 would eliminate the EAC and transfer its functions to the FEC. It was ordered to be reported by the Committee on House Administration on a voice vote on March 4, 2015. An amendment was offered to reauthorize the agency through FY2020 and was defeated on a voice vote. H.R. 12 and S. 3309 would reauthorize the agency through FY2019. Appointment of EAC Commissioners HAVA established the EAC as a bipartisan agency with four commissioners nominated by the President with recommendations from the majority and minority leadership in the House and the Senate. No more than two commissioners can be from the same party. Commissioners must have experience or expertise relating to election administration and are appointed for a term of four years, renewable once. Commission actions require the approval of at least three members. The commission had such a quorum from December 2003 to December 2010 ( Table 1 ). All positions were vacant from December 2011 to January 2015, when three new commissioners were sworn in. An additional nomination was made in April 2016. HAVA and Election Technology A broad consensus emerged after the 2000 election that resolving the problems that were encountered would require a range of solutions that addressed diverse issues. As a result, HAVA facilitated replacement of obsolete voting technology—especially punchcard and lever-machine voting systems—and other improvements. As discussed below, the act established technical requirements for voting systems and voter registration lists, as well as mechanisms for developing and updating technical standards for voting systems, certifying systems against those standards, and providing guidance to the states. But the act also stimulated controversy about election technology and other issues in election administration. Many of those issues remain part of the current policy debate, and some have taken on new urgency in light of developments relating especially to cybersecurity. See " Election Administration Issues since HAVA " for discussion of several of those issues. HAVA Voting System Requirements States have various practices and requirements for voting systems. HAVA does not require any particular voting system, but it sets requirements that influence what systems election officials choose. Under HAVA, systems used in federal elections must provide for error correction by voters, accessibility for persons with disabilities, manual auditing, alternative languages, and error-rate standards. Systems must also maintain voter privacy and ballot confidentiality, and states must adopt uniform standards for what constitutes a vote on each system. Section 301(a)(3)(B) of HAVA specifies that the accessibility requirement can be met "through the use of at least one direct recording electronic voting system or other voting system equipped for individuals with disabilities at each polling place." Kinds of Voting Systems One consequence of HAVA was the virtual elimination of lever-machine and punchcard voting systems in the United States. Currently, most jurisdictions use one or more of three kinds of voting system: Optical scan system s . Voters mark choices on paper ballots by hand or by machine via an electronic ballot-marking device (BMD), and the ballots are read by an electronic counting device—used in about 80% of states in some or all polling places and by all states for absentee or mail-in voting. The two main types of BMD are touchscreen computer interfaces and telephone-based assistive devices. BMDs were relatively uncommon when HAVA was enacted, but today, optical scan systems with BMDs can meet the HAVA accessibility requirements. Ballots are counted either at the polling place or the central election office. Direct recording electronic (DRE) systems . Voters mark choices via a computer interface and the voting machine records them directly to an electronic memory (either with or without a paper copy that the voter can check)—used in at least some jurisdictions in about 60% of states to meet HAVA accessibility requirements, with at least some jurisdictions in almost half of all states using it as the primary polling-place voting system. Hand-counted paper ballots . Voters mark choices on paper ballots that are counted by hand—used in some polling places in about 20% of states. As the description above suggests, voters in most jurisdictions cast their ballots using optical scan systems, whether they vote at the polling place or use absentee or mail-in ballots. Nevertheless, DREs constituted about 70% of all voting equipment used in the 2014 election. That is because a jurisdiction using DREs as the primary voting systems needs many more units of voting equipment than a jurisdiction using optical scan. For each polling place using DREs, each machine serves as a voting station, so several units may be required to accommodate the number of voters, whereas a jurisdiction using optical scan will often need only one counting machine at each polling place, and none if the ballots are scanned at the elections office rather than at the polling place. Voting System Standards, Guidelines, and Certification Voluntary technical standards for computer-based voting systems were first developed in the 1980s, with the participation of the FEC. HAVA codified the development and regular updating of those standards by the EAC, with assistance from NIST. Now called the Voluntary Voting System Guidelines or VVSG , they address both the HAVA voting-system requirements and other aspects of the technology. The method by which they are developed involves drafting by the Technical Guidelines Development Committee with NIST support, followed by public comment, review by the two EAC boards, revision as needed by the EAC, and adoption by vote of the commissioners. The first version of the VVSG was approved by the EAC in December 2005, with an update adopted in March 2015. Most states require that their systems be tested for conformance with EAC guidelines. HAVA does not require that voting systems be federally tested and certified, but it gave the EAC responsibility for managing voluntary testing and certification by laboratories accredited with the assistance of NIST. Voting systems or components from several companies have been certified by the EAC and are in use in about half the states, and a few other vendors have been involved in testing in 2016. However, the EAC process has not alleviated longstanding concerns about the expense and complexity of the certification process as a barrier to innovation and development of new systems. Voter Registration Prior to HAVA's enactment, the last major voter registration measure was adopted nearly eight years earlier with the passage of the National Voter Registration Act of 1993 (NVRA, P.L. 103-31 ). In HAVA, Congress addressed voter registration problems by requiring computerization, integration, maintenance, security, and accuracy of voter registration lists in each state and placing primary responsibility at the state level of government. Those requirements went into effect in January 2006. Unlike with voting systems, however, HAVA does not include any specific requirement or authority for the EAC to develop technical guidelines for registration systems. The act does require the EAC to provide guidance to states for meeting the HAVA requirements, but the guidance, issued in 2005, is fairly general and does not reference any technical standards or guidelines. The EAC also supported a study, released in 2010 by the National Research Council, with detailed recommendations on improving state voter registration databases. Funding under HAVA HAVA established the following payment and grant programs (see Table 2 for authorized and appropriated amounts). Election Administration Improvements. Provided expedited, one-time formula payments for general election administration improvements to states that applied, with a $5 million minimum combined payment per state for this and the replacement program (see next paragraph). Administered by General Services Administration (GSA). (§101.) Replacement of Punchcard and Lever Machine Systems. Provided expedited, one-time formula payments to replace punchcard systems and lever machines in qualifying states, with a $5 million minimum combined payment per state for this and the improvements program, summarized above. Administered by GSA. (§102.) Payments to Meet Election Requirements. Provides formula payments to states to meet the act's requirements and for general election administration improvements once the requirements have been met. Requires a 5% match and submission of a state plan. Administered by the Election Assistance Commission (EAC) created in the act. (§§251-258.) Payments to Assure Accessibility. Provides payments to states to make polling places accessible to persons with disabilities. Requires application. Administered by Department of Health and Human Services (HHS). (§§265-265.) Payments for Protection and Advocacy Systems. Provides payments to state protection and advocacy systems to ensure electoral participation by persons with disabilities. Requires application. Administered by HHS. (§§291-292.) Grants for Research and Pilot Programs. Provides grants for research to improve voting technology (§§271-273) and for pilot programs to test new voting technology (§§281-283). Requires application. Administered by EAC. Student Programs. Establishes three programs, one to recruit college students as poll workers (§§501-503), one to recruit high school students (§601), and one to provide grants for the National Student and Parent Mock Election (§§295-296). In addition, Congress has provided appropriations to fund EAC operations (§210), including support by NIST. States and territories were eligible to receive the requirements payments appropriated under HAVA once each jurisdiction had published a "state plan" in the Federal Register , followed by a 45-day public comment period and the filing of a certification with the EAC. The state plans were published on March 24, 2004. The initial $2.3 billion appropriations, in FY2003 and FY2004, could not be allocated until establishment of the EAC and publication of the state plans. The EAC distributed all of that funding to states by December 2005; no additional funding for requirements payments was appropriated until FY2008, when $115 million was appropriated. An additional $100 million was appropriated for FY2009. Those payments have also been distributed. FY2016 For FY2016, the Consolidated Appropriations Act, 2016 ( H.R. 2029 ) provided $9.6 million for the EAC, with $1.5 million of that amount to be transferred to NIST for its work testing guidelines for voter system hardware and software. FY2017 For FY2017, the President's budget request includes $9.8 million for the EAC, with $1.5 million of that amount to be transferred to NIST for its work on testing guidelines for voting system hardware and software. The House Committee on Appropriations included $4.9 million for the agency in H.R. 5485 , which passed the House on July 7, 2016. The Senate Committee on Appropriations included $9.6 million for the agency, with $1.5 million of that amount to be transferred to NIST, in S. 3067 , which was reported to the Senate on June 16, 2016. For details on HAVA appropriations since FY2003, see Table 2 and the Appendix . Election Administration Issues since HAVA Voter Registration In recent elections, some issues associated with voter registration systems have become more prominent. Among them are questions about the integrity and accuracy of the statewide systems, methods for registering new voters, concerns about various kinds of fraud and abuse, and the impacts of attempts to challenge the validity of voters' registrations at polling places. This section discusses three developments that may impact those broader issues: the growing use of electronic pollbooks, the adoption of online voter registration by most states, and initiatives for automatically registering citizens to vote that some states have adopted and others are considering. Statewide Voter Registration Databases and Electronic Pollbooks As the use of information technology (IT) has become more widespread in American society, potential applications in the polling place and the election office have also increased beyond traditional uses. This trend creates opportunities to improve the administration of elections in many ways, although it also raises security, cost-effectiveness, and other concerns. For example, the development of affordable laptop and tablet computers, and database software for them, has permitted the development of electronic pollbooks (EPBs). HAVA's voter registration requirements have facilitated the adoption of EPBs, which can reduce voter waiting times, check-in problems, and errors. If the EPBs are connected electronically to a central registration database, they can expedite the use of alternative voting procedures, including voting centers, early voting, and same-day voter registration. They can also facilitate verification of a voter's identity. However, the use of EPBs raises several unresolved issues, including a lack of actual data on performance and cost-effectiveness, the absence of accepted technical standards, and concerns about security and fraud prevention, especially for EPBs connected to remote computers via the Internet. Nevertheless, the January 2014 report of the Presidential Commission on Election Administration recommended that jurisdictions transition to EPBs. It also recommended other uses of IT, including online voter registration, integration and exchange of relevant data across intra- and inter-state databases, and electronic provision of ballots to military and overseas voters. Internet Voter Registration When the NVRA was adopted in 1993, there was little thought to online voter registration as an option. However, according to the National Council of State Legislatures (NCSL), as of June 14, 2016, 31 states plus the District of Columbia offer online voter registration. Another seven states have passed legislation to develop such systems but have yet to offer the option. While the systems vary among the states, the relatively widespread acceptance of online voter registration appears to be because of the major cost reduction such a system provides for voter registration as well as the additional accuracy it can provide over and above the traditional paper-based system. Automatic Voter Registration In many countries other than the United States, registering voters is an official government function. In the United States, however, initiating voter registration is the responsibility, by and large, of the individual citizen. Recently there has been a movement in several states to change this. There has been an attempt to have state governments take on the function of registering every eligible citizen to vote. Where countries have taken on this function, one method used is to automatically register citizens who have interacted with one or more government agencies within the country. Where an agency (or agencies) has information about a person's demographic and geographic characteristics, that information is used to register the individual to vote if they are eligible. This procedure is often referred to as automatic voter registration. Several states (Oregon, California, West Virginia, Vermont) have adopted laws that automatically register citizens to vote if the citizen has a driver's license, unless the citizen refuses to be registered. Bills or ballot initiatives on automatic voter registration have been introduced in 29 states and the District of Columbia, according to the Brennan Center for Justice. In the 114 th Congress, H.R. 2694 , H.R. 5779 , and S. 3252 would require states to implement some form of automatic voter registration. Cybersecurity and Related Technology Issues All states use computers to help manage voter registration lists, vote counting, and other aspects of election administration. As with all information systems, those computers are potentially vulnerable to unauthorized access aimed at stealing, deleting, modifying, or otherwise affecting the confidentially, integrity, or availability of the information they store or process. Such vulnerabilities apply not only to systems with Internet connectivity but also those that can be accessed through other means such as memory cards or other peripheral devices. Such devices can be infected with malicious software that can in turn infect the computers themselves and anything to which they are connected. Cybersecurity involves actions taken to prevent, minimize the impacts of, and recover from such intrusions. Concerns about the risk of a successful attack on information systems used in election administration predate the Internet, first arising with the advent of computerized punchcard voting systems in the 1960s. The issue became more prominent after states began adopting DREs and other electronic voting systems to meet HAVA requirements. It reemerged in the 2016 election cycle after documented intrusions into systems of state and local election offices and political organizations. DRE Voting Systems and the Verifiability of Votes HAVA's requirement for accessible voting systems (at least one per polling place), the funding it provided to meet its requirements, and other factors led some states to adopt DRE systems in the wake of the law's enactment, but controversy quickly arose about the security of those systems. DRE systems were first used in the 1970s. They can provide high usability and accessibility for voters and efficiency for vote counting and auditing. The choices that are recorded are unambiguous, which is not always the case with hand-marked paper ballots. They can reduce the risk of some types of tampering historically associated with paper ballots, but many observers believe that they pose a greater security risk overall than optical scan systems. The problem is that with a DRE, there is no way for the voter or an election official to verify that the choice the voter intends to make is the same as the choice recorded in the machine's electronic memory. Each voter selects and marks ballot choices and casts the ballot via a computer interface, and the voting machine records the votes directly to an electronic memory. The choices the voter sees on the face of the machine are ephemeral—they are reset after the voter casts the ballot. That is not the case with a paper ballot, with which the choices that the voter made are preserved as the voter saw them, and they can be checked independently by another machine or a human. In response to such concerns, many states enacted requirements for paper ballot records that can be verified by the voter and used in recounts. However, paper ballots marked by hand do not meet HAVA accessibility requirements. One solution employed by a number of states is to have at least one voting station with a BMD in each polling place, to meet the HAVA accessibility requirement. Alternatively, a DRE can be configured to produce a verifiable paper record of the voter's ballot choices (VVPAT) that a voter can check before casting the ballot and that can be used in an audit of the election. According to available information, at least some jurisdictions in 24 states use DREs as the standard equipment for polling-place voting. In ten of those states all of the machines produce a VVPAT, but in the others, some or all jurisdictions use DRE devices without VVPAT as their primary polling place voting systems. Seven states use DREs as the standard voting system in all polling places, with two of those using VVPAT. Altogether, about 20% of jurisdictions with DREs as standard equipment use VVPAT. While VVPAT can provide a countermeasure to vote-changing malware, it is effective only if voters check it before casting the ballot, and that may be problematic in a number of circumstances. Security of Optical Scan Voting Systems Optical scan systems are regarded as having superior cybersecurity by many experts because the paper ballots that voters mark can be verified before casting and cannot be altered electronically. The ballot forms are also designed to be difficult to modify without detection. Votes on paper ballots can be recounted either by machine or by hand in a manual audit. However, because optical scan voting systems ordinarily use electronic devices to count the ballots, vote counts are potentially subject to alteration through cyberattack as with DRE systems. Whether such tampering could be detected would depend on the criteria required to trigger a manual audit of the ballots, among other factors. Voting and the Internet Any form of voting other than at a polling place is known as remote voting, the most common method being absentee or mail-in balloting. There are various ways that the Internet can be used to facilitate remote voting. Options range from electronic provision of blank ballots (via email, fax, or a website) to end-to-end Internet voting (where a voter accesses, fills out, and casts a ballot entirely online). The latter is not generally used in public (i.e., government) elections in the United States, because of security and other concerns. It is common practice, however, in private (e.g., corporate) elections and is used in public elections in some other countries. Both HAVA (§245) and several defense authorization bills required studies of the potential use of the Internet in federal elections, including development and testing of an end-to-end Internet voting demonstration project by the Department of Defense (DOD), which began with the 2000 presidential election. This project quickly became controversial, largely because of security concerns, but it continued until terminated by Congress in 2015. All states provide UOCAVA voters with the option to receive blank ballots electronically, as required under the MOVE Act (§578). More than 30 states also provide at least some UOCAVA voters with the option to return ballots electronically—by email, fax, or a web portal, depending on the state. However, no states have implemented end-to-end Internet voting for federal elections. All forms of Internet-facilitated voting are potentially vulnerable to cyberattack. In addition to attacks that can disrupt access, compromise ballot secrecy, or even delete or modify ballots, even the authentication of voters online can be a challenge. However, the risk of adverse impacts from an attack varies substantially, depending on the role of the Internet in the voting process and the proportion of voters using the option. For example, states that permit electronic transmission only of blank ballots and only to UOCAVA voters would likely be at lower potential risk than states that permit any voter not only to obtain a blank ballot but to return a completed one electronically. Aging Technology Election technologies are acquired by election administrators from private-sector companies. Variations in state and local requirements, the episodic nature of elections, the largely fixed customer base, and uncertain funding for new acquisitions and upgrading make the market unusually fragmented, uncertain, and resistant to innovation. Those factors contributed to the use of obsolete voting technology that is thought to have been a significant source of problems associated with the 2000 presidential election. HAVA payments to states of almost $3.3 billion (see " Funding under HAVA ") resulted in most states replacing or updating their voting systems within a few years after enactment. Most of those payments are available until expended, along with interest earned by states from them. More than 90% of HAVA payments to states were appropriated in FY2003 and FY2004. States had spent 70% of available funds by the end of 2008 and 89% by the end of FY2015, with all but eight states having funds remaining at that time, ranging from $45,000 to $45 million, with a median of $2.4 million—about 7% of the median amount expended per state. The 2014 Presidential Commission report, among other sources, expressed concerns about the aging voting systems bought with HAVA funds. The useful life of a computer tends to be less than 10 years, on average, with private-sector and government organizations often using a 4-year life cycle for planning. Many of the electronic voting devices, ballot counters, and supporting information systems in use by election jurisdictions are approaching or have already exceeded those projected lifespans, and there appear to be significant barriers to the development, certification, and acquisition of replacement systems. Such aging systems are at greater risk of breakdowns and other technical problems, but they may also be more vulnerable to tampering via cyberattack or other means. The costs of updating those systems are difficult to estimate but may well exceed the unexpended HAVA payments of most states. Foreign Influence on U.S. Elections Between the enactment of HAVA and the 2016 presidential election, concerns raised about foreign influence in federal elections related largely to foreign ownership of election technology companies, although not in all cases. In 2010, consolidation of the voting-system market led to the dissolution of Premier Election Systems, the second-largest vendor at the time. The attempted acquisition of Premier's assets and customers by Election Systems & Software (ES&S), the company with the largest market share, raised antitrust concerns that led the Department of Justice to require a partial divestiture by ES&S. Dominion Voting, a Canadian firm, acquired the divested resources, and later acquired what was then the third-largest U.S. vendor, Sequoia Voting Systems. The entrance of Dominion into the U.S. market caused little debate, but other attempted acquisitions and mergers involving foreign-owned companies have been more controversial. An earlier attempt involving Sequoia and a company with some ties to Venezuela was withdrawn following public outcry, and the 2012 acquisition by a Spanish enterprise of a Florida company that provides some election-related software also caused controversy. In 2016, documented intrusions into systems of state and local election offices and political organizations have amplified concerns about foreign influence. The Director of National Intelligence has stated that the "U.S. Intelligence Community is confident that the Russian Government directed the recent compromises of emails from US persons and institutions, including from US political organizations," and that those compromises and subsequent disclosures "are intended to interfere with the US election process." With respect to the intrusions into systems of election offices, the Director stated that "most cases originated from servers operated by a Russian company" but noted that "we are not now in a position to attribute this activity to the Russian Government." In addition, just as cybercriminals and other adversaries have stolen information on customers and employees from businesses and government agencies, they might also target elements of the election infrastructure to obtain personal information on voters. However, in addition to well-established cybersecurity measures that can be taken by election jurisdictions, election administration as currently practiced in the United States would appear to create substantial barriers to intrusions with widespread impact. Some observers have pointed in particular to the longstanding pattern of decentralization and diversity that characterizes the U.S. election administration infrastructure, as well as a range of layered defenses that election jurisdictions have long had in place to protect the integrity of elections from a variety of risks. For those and other reasons, many observers expect that the risk of impacts of attempted intrusions is minimal at present. The Intelligence Community and the Department of Homeland Security have found that for those reasons, "it would be extremely difficult for someone, including a nation-state actor, to alter actual ballot counts or election results by cyber attack or intrusion." Nevertheless, some observers believe it feasible that a persistent, experienced adversary with sufficient resources, such as a nation-state, could in fact perform cyberattacks that affect an election and are difficult to detect. Successful attacks could compromise the confidentiality, integrity, or availability of election information or processes. That could create problems in elections in several ways. For example, voter registration lists could be deleted or altered. Information obtained illegally from cyberattacks could be used to misinform voters. Other information systems used by election officials could be disrupted or even destroyed. Disinformation could be disseminated to influence public opinion—a tactic used by Russians in other countries. Such attacks could erode public confidence in the administration of elections, by causing disruptions at polling places or delaying post-election certification of the results, for example. However, disruptive attacks are arguably likely to be detected quickly and unlikely to directly affect the outcome of the election. A potentially more worrisome threat could arise from attacks aimed at modifying electronic vote counts in favor of a particular candidate or ballot choice, especially in a close contest. Both DRE and optical scan voting systems are potentially vulnerable to such attacks. Defensive Measures Against Cyberattacks Broadly speaking, defensive measures range from those aimed at prevention of an attack or other incident, to detection and response, to recovery after an attack. In the past, most attention was given to prevention, including measures such as ensuring that voting systems meet current technical standards such as the VVSG and that procedures to prevent tampering are followed by election workers. However, it is now generally recognized among cybersecurity experts that preventive measures are insufficient by themselves and that an adversary with enough motivation, resources, and expertise, such as a nation-state, can often overcome them. In many cases, successful attacks might not be discovered until months later, if at all, depending on the skills and motivations of the attacker. Such attacks could be especially serious if aimed at manipulating vote counts to change the outcome of an election. Effective defense requires ways of detecting, responding to, and recovering from successful intrusions. It is for such reasons that some experts propose that election systems have ways of auditing results that are independent of any software used in casting and counting the votes. The most well-known way to achieve that would be to require that all voting systems produce paper ballots that can be verified by voters and that will serve as the official record of the votes for any recount. In the case of states permitting absentee voting by electronic submission of completed ballots, that could be accomplished by requiring that the ballot also be sent by postal mail. Such a system would permit manual audits that could be effective at ensuring that the actual outcome of the election can be determined even if there is a cyberattack, equipment malfunction, or other incident or flaw that changes the electronic count. What should trigger such an audit? Various criteria have been suggested, with some observers arguing that manual audits should be performed routinely for a subset of cast ballots. However, such views remain controversial within the broader community of election professionals, with at least some arguing that layered security and other safeguards can make DRE and optical scan systems sufficiently safe from tampering. Overall, good security practices involve assessing and responding to risks over the entire life cycle of an election, avoiding overemphasis on any one segment (such as voting in the polling place) or set of components (such as voting equipment). In light of the documented breaches and concerns about security, the Department of Homeland Security (DHS) has offered assistance to states in addressing the security of their election systems, in addition to the efforts of the EAC. DHS has formed a working group that includes some chief state election officials. Federal intelligence agencies are also reportedly involved in efforts to counter any foreign threats to U.S. elections. Some observers have suggested that state election systems be designated as critical infrastructure under federal law (42 U.S.C. 5195c(e)), although others have expressed concern about implications for state control of such a designation. Voter Identification HAVA requires that first-time voters who had registered by mail present a form of identification from a list specified in the act. States vary greatly in what identification they require voters to present, ranging from nothing beyond the federal requirement to photographic identification for all voters. A number of states enacted laws in recent years to require photo ID to vote, which resulted in a series of court challenges and rulings. In the 109 th Congress, the House passed legislation to require photo identification and proof of citizenship when voting in federal elections, but no further action followed. The U.S. Supreme Court has upheld an Indiana statute requiring photo identification for voting. The degree of restrictiveness and kinds of identification accepted have been controversial in some cases, with debate focusing on the degree to which voter fraud is a significant issue that such ID requirements can address, and the proper balance between protecting against such fraud and minimizing the risk that otherwise qualified voters would be disenfranchised by the requirements. For more information, see CRS Report R42806, State Voter Identification Requirements: Analysis, Legal Issues, and Policy Considerations , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Military and Overseas Voting Members of the uniformed services and U.S. citizens who live abroad are eligible to register and vote absentee in federal elections under the Uniformed and Overseas Citizens Absentee Voting Act (UOCAVA; P.L. 99-410 ) of 1986. The law is administered by the Secretary of Defense, who delegates that responsibility to the director of the Federal Voting Assistance Program at the Department of Defense (DOD). The law was amended following the 2000 presidential election because of controversy surrounding ballots received in Florida from uniformed services and overseas voters. Both the National Defense Authorization Act for FY2002 ( P.L. 107-107 ) and the Help America Vote Act ( P.L. 107-252 ) included various provisions concerning uniformed services and overseas voting. Minor revisions to the law were made again in 2005 and 2007. In the 111 th Congress, the National Defense Authorization Act for FY2010 ( P.L. 111-84 ) included the Military and Overseas Voter Empowerment Act (123 Stat. 2317), a major overhaul of UOCAVA. Most of the provisions of the MOVE Act were in effect for the 2010 election. Voting Rights Act The Voting Rights Act of 1965 (VRA, P.L. 89-110) is a landmark federal law enacted to remove restrictions on voting based on race or membership in a language minority. The VRA was successfully challenged in a June 2013 case decided by the U.S. Supreme Court in Shelby County, Alabama v. Holder. The suit challenged the constitutionality of Sections 4 and 5 of the VRA, under which certain jurisdictions with a history of racial discrimination in voting—mostly in the South—were required to "pre-clear" changes to the election process with the Justice Department (the U.S. Attorney General) or the U.S. District Court for the District of Columbia. The preclearance provision (Section 5) was based on a formula (Section 4) that considered voting practices and patterns in 1964, 1968, or 1972. At issue in Shelby County was whether Congress exceeded its constitutional authority when it reauthorized the VRA in 2006—with the existing formula—thereby infringing on the rights of the states. In its ruling, the Court struck down Section 4 as outdated and not "grounded in current conditions." As a consequence, Section 5 is intact, but inoperable, unless or until Congress prescribes a new Section 4 formula. Two identical bills were introduced in the 113 th Congress that would have amended the VRA to add a new coverage formula. Similar legislation has been introduced in the 114 th Congress ( H.R. 885 ), as well as two identical bills that would add a more far-reaching coverage formula ( H.R. 2867 and S. 1659 ). Legislative Activity in the 114th Congress Bills Voting and elections bills introduced in the 114 th Congress include those that would amend NVRA, HAVA, UOCAVA and other laws, making numerous changes to the voting process, including with respect to voter registration, voting systems, absentee voting, and auditing of elections, and reauthorizing the EAC ( H.R. 12 , S. 3309 ); direct the EAC to provide pilot program funds for local initiatives to provide 12 th graders with voter registration information ( H.R. 126 ); terminate the EAC and transfer certain election administration functions to the Federal Election Commission ( H.R. 195 ); require early voting and measures to prevent unreasonable waiting times at polling places in federal elections ( H.R. 411 ); direct the Bureau of Prisons to provide voting information to federal prisoners upon their release from prison ( H.R. 871 ); amend the Voting Rights Act of 1965 (VRA) to add a new coverage formula for determining which states and political subdivisions are subject to Section 4 ( H.R. 885 , H.R. 2867 , and S. 1659 ); amend the National Voter Registration Act of 1993 (NVRA) to permit a state to require a voter who uses the federal mail voter registration form to provide evidence of citizenship ( H.R. 951 ); secure the federal voting rights of persons when released from incarceration ( H.R. 1459 , H.R. 1556 , S. 772 ); prohibit certain state election officials from actively participating in electoral campaigns ( H.R. 1617 ); allow all eligible voters to vote by mail in federal elections ( H.R. 1618 ); amend NVRA to require an applicant for voter registration to affirm eligibility and to require a state to verify eligibility before registering the applicant ( H.R. 2392 ); require U.S. House and Senate candidates to run in an open primary election and limit the general election to the two candidates who received the greatest number of votes in the primary, establish election day as a federal holiday, and require a study of congressional redistricting practices ( H.R. 2655 ); amend NVRA to require states to automatically register to vote individuals who provide information to the motor vehicle authority unless the individual declines or does not meet eligibility requirements ( H.R. 2694 ); provide two hours of paid leave for employees to vote in federal elections ( H.R. 2887 ); amend HAVA to require states to provide for same-day voter registration ( H.R. 3276 ); prohibit election officials from requiring photo identification as a condition of registering to vote or voting in a federal election ( H.R. 3277 ); amend HAVA to permit a voter to meet a requirement for voter identification by presenting a sworn written statement attesting to their identity ( H.R. 3364 ); amend NVRA to require states to permit 16-year old individuals to pre-register to vote and to establish a grant program for that purpose ( H.R. 3522 ); change Election Day to the first weekend in November and set polling hours ( H.R. 3910 ); amend HAVA to prohibit straight-party voting ( H.R. 4679 ); amend HAVA to provide payments to states to replace voting systems, provide grants to state and local governments for education, training, and pilot testing of voting systems, and require NIST to develop interoperability standards for voting equipment, and require states to submit election software to the NIST library ( H.R. 5131 ); amend NVRA to restore voting rights of unincarcerated individuals convicted of most crimes ( H.R. 5352 ); amend HAVA to require EAC standards on location and operation of polling places, state compliance with them, and EAC studies on misidentification of party registration in primaries ( H.R. 5488 ); amend HAVA and NVRA to prohibit voter identification that has associated costs for the voter ( H.R. 5557 ); require states to institute automatic registration of voters, correction of registration information at the polling place, and online registration; and requires EAC grants to assist states in implementation ( H.R. 5779 , S. 3252 ); amend NVRA to require states to provide voter registration forms at naturalization proceedings ( H.R. 5793 ); amend HAVA to require states to permit postage-free voting by mail for all voters, and amend NVRA to require states to institute automatic registration of voters ( H.R. 5819 , S. 3214 ); amend HAVA to require that voting systems use voter-verifiable paper ballots and meet other requirements, provide additional requirements payments to states, require manual audits of election results, provide the EAC with rulemaking authority, and establish other election administration requirements ( H.R. 6072 ); amend HAVA to require that voting systems meet security NIST standards; designate voting systems as critical infrastructure, require the Department of Homeland Security to develop a plan to protect those systems, and require the National Science Foundation to perform research on innovative election technology ( H.R. 6073 ); make voting by an illegal alien an aggravated felony and deportable offense ( S. 68 ); establish a remedial plan to minimize voter waiting times in states where a substantial number of voters waited more than 30 minutes to vote in the November 6, 2012, election ( S. 212 ); secure the federal voting rights of non-violent persons upon release from incarceration ( S. 457 ); provide for voter registration through the Internet ( S. 1088 ); amend the Help America Vote Act to require same day registration ( S. 1139 ); protect the rights of Indian and Native Alaskan voters ( S. 1912 ); amend NVRA to provide for online voter registration ( S. 1950 ); amend HAVA to require early voting or no-excuse absentee voting ( S. 1951 ); amend NVRA to modify change of address procedures ( S. 1952 ); designate federal election day as a holiday ( S. 1969 ); establish procedures for automatic voter registration ( S. 1970 ); and expand voting residency guarantee for military family members to include all dependents; amend UOCAVA to require pre-election reports on ballot availability and transmittal, modify ballot-transmission requirements and enforcement provisions, and extend the effective period of ballot applications ( S. 2814 ). The Committee on House Administration favorably reported H.R. 195 on March 4, 2015, on a voice vote. At the markup, an amendment to reauthorize the agency through FY2020 was defeated. Hearings Committees in the 114 th Congress have held hearings relating to election administration: House Committee on Oversight and Government Reform, "The President's Executive Actions on Immigration and Their Impact on Federal and State Elections," February 12, 2016. House Committee on Science, Space, and Technology, "Protecting the 2016 Elections from Cyber and Voting Machine Attacks," September 13, 2016. House Committee on Oversight and Government Reform, "Cybersecurity: Ensuring the Integrity of the Ballot Box," September 28, 2016. Concluding Observations Several of the issues discussed herein are likely to continue to be relevant with respect to HAVA, including funding for programs to support election administration investments and activities by the states. No funds for payments to states for election administration programs have been appropriated since FY2010. Among specific potential uses for such payments are replacement of obsolete voting equipment and improvements in the security of the election infrastructure. The EAC did not have any commissioners for a period of time between December 2011 and January 2015. The Senate approved nominations for three of the four commissioner seats on December 16, 2014, and the new commissioners were sworn in on January 13, 2015. Tasks that require commissioner approval, such as adopting revisions to HAVA guidance and voting system guidelines, holding public hearings, and issuing new advisory opinions, have resumed. A fourth commissioner was nominated in April 2016. The increased use of information technology in election administration, spurred by HAVA requirements as well as the broad integration of such technology into business and government activities, has arguably improved many aspects of the election process, but it also creates challenges. Especially prominent in the run-up to the 2016 election have been cybersecurity and the aging of the technology that is currently in use. Legislation to either eliminate or reauthorize the EAC was introduced in the 112 th and 113 th Congresses. Legislation to eliminate the agency was again introduced in the 114 th Congress and was reported by the Committee on House Administration on March 4, 2015. The EAC has been criticized by some for exceeding its authority, or for being slow, ineffectual, or even unnecessary. Others believe that the agency is a necessary federal resource for improving election administration and has been hampered by budgetary constraints and difficulties in the nomination process for commissioners. Voter identification and management of voter registration remain controversial in some cases, with some state laws being challenged in the courts. Issues not covered in this report, such as the number and locations of polling places, provision for early voting, and mail-in or absentee balloting, have also been raised in this election cycle. Appendix. Appropriations FY2003 to FY2016 FY2003 The FY2003 omnibus appropriations bill ( H.J.Res. 2 , H.Rept. 108-10 , P.L. 108-7 ), signed into law on February 20, 2003, contained $1.5 billion for election reform programs authorized by HAVA, including $650 million combined for the election administration improvement and voting system replacement payments to be administered by GSA (with no specific allocation designated for either program and a maximum of $500,000 for administrative costs). GSA disbursed all of these funds to states in June 2003. All states and territories received payments for election administration improvements, based on a formula using each state's voting-age population, and payments to replace punchcard and lever voting systems were made to all states that applied. Also included was $830 million for requirements payments (with a maximum of 0.1% to be paid to any territory), and $20 million for other programs—$13 million for accessibility payments, $2 million for protection and advocacy programs, $1.5 million each for the college and high school programs, and $2 million for the EAC. P.L. 108-7 also included a $15 million appropriation to GSA for one-time payments to certain states that had obtained optical scan or electronic voting systems prior to the November 2000 election. FY2004 The President's budget request for FY2004 included $500 million, one-half the amount authorized, to fund EAC requirements payments and administration. No funds were specifically requested for the other programs described above. The final omnibus appropriations bill, H.R. 2673 , signed into law on January 23, 2004 ( P.L. 108-199 ), contained just over $1.5 billion for election reform, including $1.0 billion for requirements payments, $500 million for election reform programs, $10 million for accessibility payments, $5 million for protection and advocacy systems, and $1.2 million for the EAC. FY2005 For FY2005, the President's budget request included $65 million for election reform, of which $40 million was additional funding for requirements payments and $10 million was for EAC administrative expenses. The request also included $5 million for protection and advocacy programs and $10 million for accessibility payments. The omnibus appropriations bill for FY2005, H.R. 4818 , was signed into law on December 8, 2004, and included $14 million for the EAC, of which $2.8 million was to be transferred to NIST, and $15 million for disability voting access, with $5 million of that amount to apply to protection and advocacy systems. Also included was $200,000 for the student parent mock election program and $200,000 for the Help America Vote College Program. FY2006 The President's FY2006 budget request included $17.6 million for the EAC (of which $2.8 million was for NIST), as well as $5 million for protection and advocacy programs and $9.9 million for accessibility payments administered by HHS. The final appropriation ( P.L. 109-115 ) contained $14.2 million, including $2.8 million for NIST, with $13.5 million and $8.6 million, respectively, for the HHS programs, and $250,000 "encouraged" to be spent on the Help America Vote College Program. FY2007 The FY2007 request included $16.9 million for the EAC ($5 million for NIST), $4.83 million for protection and advocacy programs, and $10.89 million for accessibility payments administered by HHS. The 109 th Congress adjourned without enacting an appropriations measure, providing instead temporary funding until February 15, 2007, via a continuing resolution ( H.J.Res. 102 ). Continued funding through September 30 for FY2007 was subsequently provided via another continuing resolution, H.J.Res. 20 , which was signed by the President on February 15 ( P.L. 110-5 ). It provided $16.24 million for the EAC, of which $4.95 million was for NIST, $4.83 million for protection and advocacy programs, and $10.89 million for disability access. FY2008 The FY2008 request included $15.5 million for the EAC ($3.25 million for NIST), and $4.83 million for protection and advocacy programs and $10.89 million for accessibility payments administered by HHS. From the start of FY2008 until December 31, 2007, continued funding for the EAC was provided by a series of continuing resolutions. Ultimately, FY2008 funding was provided by the Consolidated Appropriations Act for 2008, enacted on December 16, 2007 ( P.L. 110-161 ). It provided $16.53 million for the EAC, of which $3.25 million was for NIST, and $200,000 was for the student and parent mock election program. It also provided $115 million for requirements payments, $10 million for data collection grants to selected states, $4.83 million for protection and advocacy programs, and $12.37 million for disability access. FY2009 The FY2009 request included $16.68 million for the EAC (with $4 million for NIST), as well as $5.26 million for protection and advocacy programs and $12.15 million for accessibility payments administered by HHS. The FY2009 appropriations were provided initially in a continuing resolution ( P.L. 110-329 ), which provided the same funding levels as FY2008, and then in an omnibus bill ( P.L. 111-8 ) that was passed on March 11, 2009. The omnibus provided $18 million for the EAC, with $4 million of that to be transferred to NIST, $750,000 for the College Program, and $300,000 for the high school mock election program. It also provided funding for requirements payments to the states in the amount of $100 million, with an additional $5 million for grants for research on voting technology improvements and $1 million for a pilot program for grants to states and localities to test voting systems before and after elections. Finally, the omnibus provided $12.2 million for disability access and $5.3 million for protection and advocacy programs. FY2010 For FY2010, the President's budget request included $16.5 million for the Election Assistance Commission (EAC) and $106 million for election reform payments to states, with $5.26 million for protection and advocacy programs and $12.15 million for accessibility payments administered by HHS, as in FY2009. The House and Senate bills ( H.R. 3170 , S. 1432 ) would have provided about the same amount for the EAC. The House bill would have provided nearly the same amount for election payments, while the Senate bill called for $52 million in election payments. The Consolidated Appropriations Act, 2010 ( P.L. 111-117 ), that was signed into law on December 16, 2009, included $18.0 million for the EAC, of which $3.5 million was to be transferred to NIST, $750,000 was for the Help America Vote College Program, and $300,000 was for a competitive grant program to support student and parent mock elections. It also included $75 million for election reform programs, with $70 million of that amount for requirements payments, $3 million for research grants to improve voting technology with respect to disability access, and $2 million for grants to states and localities for voting system logic and accuracy testing. Also, the omnibus provided $12.15 million for disability access and $5.26 million for protection and advocacy programs. FY2011 For FY2011, the President's budget request included $16.8 million for the EAC, of which $3.25 million was to be transferred to NIST. It also included $5.26 million for protection and advocacy programs and $12.15 million for accessibility payments administered by HHS. It included EAC "election reform grants" among programs to be terminated, and therefore provided no funding for requirements payments, research and pilot program grants, the college program, and mock elections. As justification, it pointed out that about $1 billion in EAC payments to states remained unspent, and claimed that states had accrued $763 million in interest on previously appropriated payments. The EAC, in contrast, listed accrued interest through 2008 as totaling $279 million. The cause of this discrepancy is not clear. Funding for federal agencies, including the EAC, was provided at FY2010 levels according to a series of seven continuing resolutions between September 30, 2010, and April 15, 2011. On that date, a continuing resolution was enacted to fund the federal government for the rest of the fiscal year. H.R. 1473 , the Department of Defense and Full-Year Continuing Appropriations Act, 2011, provided $16.3 million for the EAC, of which $3.25 million was to be transferred to NIST. It provided no new funding for election reform programs. FY2012 For FY2012, the President's budget request included $13.7 million for the EAC, of which $3.25 million was to be transferred to NIST, resulting in a 23% reduction in operating funds for the EAC from the FY2011 request and a 28% reduction from the FY2010 appropriation. The budget request also included no funding for the HAVA-authorized protection and advocacy programs and accessibility payments administered by HHS. P.L. 112-74 provided $11.5 million for the EAC, of which $2.75 million was for NIST and $1.25 million was for the Office of the Inspector General. FY2013 For FY2013, the President's budget request included $11.5 million for the EAC, of which $2.75 million was to be transferred to NIST and $1.3 million was for the Office of the Inspector General. Funding was provided under a continuing resolution, P.L. 112-175 , until March 2013, when it was superseded by P.L. 113-6 , the Consolidated and Further Continuing Appropriations Act, 2013. Under the President's sequester order, appropriations under the law were reduced for all federal agencies, although the specific amounts of the reductions are not known. The House and Senate reports for FY2014 appropriations for Financial Services and General Government both note that the FY2013 appropriation for the EAC was $11.5 million before the sequester reduction. FY2014 For FY2014, the President's budget request included $11.0 million for the EAC, of which $2.75 million of that amount was to be transferred to NIST for its work on testing guidelines for voting system hardware and software. The House Committee on Appropriations recommended eliminating the EAC and provided no funding for the agency; the Senate Committee on Appropriations would have provided $11.0 million for the EAC, with $2.75 million to be transferred to NIST. The Consolidated Appropriations Act of 2014 ( H.R. 3547 ) provided $10.0 million for the EAC, including $1.9 million for NIST. FY2015 For FY2015, the President's budget request included $10.0 million for the EAC, with $1.9 million of that amount to be transferred to NIST for its work on testing guidelines for voting system hardware and software. The House Committee on Appropriations recommended eliminating the EAC and provided no funding for the agency in H.R. 5016 , which passed the House on July 16, 2014. Funding for the EAC was provided in Consolidated and Further Continuing Appropriations Act of 2015 ( H.R. 83 ), which included $10.0 million, of which $1.9 million was for NIST. FY2016 For FY2016, the President's budget request included $9.6 million for the EAC, with $1.5 million of that amount to be transferred to NIST for its work on testing guidelines for voting system hardware and software. The House Committee on Appropriations included $4.8 million for the agency in H.R. 2995 , which was reported to the House on July 9, 2015. The Senate Committee on Appropriations included $9.6 million for the agency, with $1.9 million of that amount to be transferred to NIST, in S. 1910 , which was reported to the Senate on July 30, 2015. The Consolidated Appropriations Act, 2016 ( H.R. 2029 ), provided $9.6 million for the EAC, including $1.5 million for NIST.

The deadlocked November 2000 presidential election focused national attention on previously obscure details of election administration. Congress responded with the Help America Vote Act of 2002 (HAVA; P.L. 107-252). HAVA created the Election Assistance Commission (EAC), established a set of election administration requirements, and provided federal funding, but it did not supplant state and local control over election administration. Several issues have arisen or persisted in the years since HAVA was enacted. Some observers have criticized the EAC for being obtrusive, slow, ineffectual, or even unnecessary. Others believe that the agency is an important resource for improving the election administration. The EAC lacked a quorum of commissioners between 2011 and 2015. HAVA requires computerized state voter registration systems, and its voting-system requirements promote the use of electronic voting systems. However, those systems, especially the kinds that record votes directly into a computer's memory (DREs), raise concerns about security and reliability. In response, many states have enacted requirements for paper ballot records that can be verified by the voter and used in recounts. All states now use paper-based optical scan systems for at least some voters, and most use them in at least some polling places. DRE systems are also used in most states, in many cases to meet HAVA accessibility requirements, but in several states to serve as the primary voting system in at least some jurisdictions. Several states also have jurisdictions that still use hand-counted paper ballots. Both DRE and optical scan voting systems are computerized, with votes counted electronically. All computerized systems, whether used in the polling place or the election office, are potentially vulnerable to unauthorized access aimed at stealing, deleting, or modifying the information that the systems store or process. Such vulnerabilities apply not only to systems with Internet connectivity but also those that can be accessed electronically through other means, such as memory cards. Documented intrusions into systems of state and local election offices and political organizations in 2016 have amplified concerns about attempts by nation-states such as Russia, or by nonstate actors, to use tampering or disinformation campaigns to influence the election. The Department of Homeland Security and the EAC are providing assistance to states to help them secure their systems. Whether such actions will be sufficient is a subject of ongoing debate, although many observers expect that the risk of tampering is minimal. HAVA's limited voter-identification provisions did not resolve the longstanding controversy over whether broad identification requirements are needed to prevent voter fraud, or whether such requirements would create an unacceptable risk of disenfranchising legitimate voters. Many states have enacted requirements that voters present identification documents at polling places. Also, while HAVA's voter-registration requirements may have improved that process, some observers have argued that more automated registration systems are needed to make further improvements. HAVA authorized $3.65 billion in payments to states to replace voting systems and meet the requirements of the act. Congress appropriated $3.28 billion of that amount between FY2003 and FY2010. Altogether, more than $3.5 billion of HAVA funds were appropriated through FY2016: the $3.28 billion in election reform payments to states, $196 million for the EAC and its programs, and more than $129 million in accessibility payments to states, administered by the Department of Health and Human Services. Numerous bills to amend HAVA have been considered in Congress, but none have been enacted except the 2009 MOVE Act, which made some amendments relating to uniformed services and overseas voters. In the 114th Congress, H.R. 195, reported by the Committee on House Administration, would eliminate the EAC and transfer its functions to the Federal Election Commission. House-passed appropriations bills for FY2014 and FY2015 would have defunded the EAC, but the agency has received about $10 million in final appropriations for each fiscal year since FY2012. Other bills in the 114th Congress would address a variety of issues, and some committees have held hearings on election issues, including security.

Office of Technology Assessment Congress established OTA in 1972 with passage of P.L. 92-484. It was mandated to assess the consequences of applying technology by preparing comprehensive reports that discussed the pros and cons of policy options about an issue. The law effectively augmented existing congressional resources by creating a support agency dedicated to providing Congress with objective and authoritative analysis of complex scientific and technical issues to aid in policymaking. It was intended to facilitate congressional access to expertise and permit legislators to consider objectively information presented by the executive branch, interest groups, and other stakeholders to controversial policy questions. From 1973 until 1995, OTA conducted technology assessments, requested by committee chairmen for themselves, ranking minority members, or a majority of the committee, by the Technology Assessment Board (a body which was composed of equal numbers of House and Senate members and of members from both parties), or by the OTA Director in consultation with the Board. OTA had authority to hire staff and to contract for personnel and studies. Peak funding in the early 1990s totaled over $20 million annually, with about 140 hired staff plus additional contractors. OTA was effectively eliminated when Congress did not appropriate funds for FY1996 for its continued operation and appropriated funds to close down the office. Its archived reports are available via the Internet at http://www.wws.princeton.edu/~ota/ . Several reasons were given for terminating OTA's funding and numerous studies have been written about the rise and fall of the agency. Critics of OTA cited such factors as difficulty in completing reports in time to meet congressional schedules, lack of utility to congressional decisionmaking, alleged bias toward "liberal" solutions, or partisan politics. Some say that Congress can turn to and fund studies by The National Academies, composed of the National Academy of Sciences (NAS), the National Academy of Engineering, the Institute of Medicine, and the National Research Council (NRC), or utilize the services of GAO and the Congressional Research Service (CRS) for information and analysis on science and technology issues. Others disagree and cite the utility of OTA studies to decisionmaking and the need for Congress to maintain its own support agency devoted to assessing technology. Some former OTA staff members and science policy analysts have called for resumption of funding for OTA or creation of a legislative organization to perform OTA-like functions or to contract with outside groups to perform such functions. Some Members of Congress and others have said that if the OTA were still operating it might have provided Congress with information required to make important program and policy decisions relating to technological issues. Legislation to Fund OTA In the 107 th Congress, Representative Rush Holt introduced H.R. 2148 , the OTA Re-establishment Act. It would have authorized funding OTA at $20 million annually for FY2002 to FY2007. No further action was taken. Similar legislation, H.R. 125 , was introduced in the 108 th Congress. It proposed to rename the Technology Assessment Act of 1972 as the Office of Technology Assessment Reestablishment Act of 2003 and to authorize OTA appropriations at $20 million annually for FY2004 to FY2009. The bill was referred to the House Science Committee. Representative Holt sought, in 2002, to introduce an amendment to H.R. 5121 , the Legislative Branch Appropriations Act FY2003, to provide $4 million to fund OTA for FY2003. He made a similar attempt in 2003 to amend the FY2004 Legislative Branch Appropriations bill, H.R. 2657 , to fund OTA at $7 million. Both times the Rules Committee ruled the amendment not in order. Legislation to Create An OTA-like Organization for Congress Since 2001 proposals have been made to create an OTA-like office in the legislative branch to provide technology assessment-related support. Science and Technology Assessment Service Section 153 of S. 1716 , "The Global Climate Change Act," introduced in 2001 by Senator John F. Kerry, would have created a Science and Technology Assessment Service to provide ongoing independent science and technology advice "within ... the legislative branch." Assessments would have been conducted using experts selected in consultation with the National Research Council (NRC), the policy research arm of The National Academies. OTA had focused on providing information about technology's impacts , notably "early indications of the probable beneficial and adverse impacts of the applications of technology" and other information. In contrast, the proposed Service would have developed information on "the uses and applications of technology to address current national science and technology policy issues." It would have incorporated some features of OTA, including a bipartisan and bicameral congressional board to govern activities; a Director to carry out policies and manage activities; and a process to select studies using Committee chairmen, the Board, or the Director. But the Assessment Service would have used NRC to select experts to conduct assessments, a provision that was not in the OTA law; it would not have OTA's Deputy Director and Technology Assessment Advisory Council, the latter which was composed of private experts, the Comptroller General, and the CRS Director, to advise the Board on OTA operations and on assessment reports. It would have had authority to contract and use personnel, but would have had less specific authority than OTA to purchase and hold property, detail personnel from other agencies, or obtain information from them. It would not have had OTA's authority to seek assistance from CRS and the National Science Foundation, nor to distribute reports. Language to create an Assessment Service was included as Title XVI of S. 1766 , introduced in December 2001. S. 1766 was incorporated as substitute amendment (SA) 2917 to S. 517 , the Energy Security Policy bill. The language relating to the Assessment Service in S. 517 was identical to that in S. 1716 and S. 1766 . On April 10, 2002, during floor consideration, Senator John McCain submitted S.Amdt. 3089 to delete language to create the Assessment Service from S.Amdt. 2917 . However, on April 25, 2002, Senator McCain said on the floor of the Senate that he would withdraw his amendment and urged the Chairman of the Senate Commerce, Science, and Transportation Committee to hold hearings on the proposal in order to assess "the needs and benefits" of such a Service to Congress. On April 25, 2002, the Senate incorporated S. 517 , amended, into H.R. 4 as passed in the House, and passed the bill. The conference committee did not complete action. During the first session of the 108 th Congress, the Senate could not reach agreement on energy legislation ( S. 14 ) and acted on a substitute amendment to the energy bill passed in the House ( H.R. 6 ). The substitute was the energy bill ( H.R. 4 , 107 th Congress) passed in 2002, which contained Title XVI to create the Science and Technology Assessment Service. H.R. 4 (2002), was introduced as S.Amdt. 537 to H.R. 6 , as passed in the House. The Senate agreed to S.Amdt. 1537 , and H.R. 6 incorporating it was passed. The Assessment Service provision was not in the conference report on H.R. 6 , H.Rept. 108-375 , which the House agreed to. No further action occurred on this bill. Center for Scientific and Technical Assessment H.R. 4670 was introduced in June 2004, by Mr. Holt, with 15 bipartisan co-sponsors and referred to the House Science Committee. It proposed a center that would consist of a Technical Assessment Board, with 12 Members of Congress, 6 from each party and each body; the Comptroller General; and as non-voting members, the CRS Director and the center's director. Operating the center would be a director and deputy director empowered to act, with the permission of the Comptroller General, to hire staff and enter into contracts to perform assessments. The director would have been authorized to establish an advisory panel for each assessment; the panels would not be subject to the Federal Advisory Committee Act (FACA; 5 U.S.C.App.). Different from the earlier OTA, any Member of Congress would have been able to make requests to the board for assessments. Requests would have had priority as follows: "requests with bipartisan and bicameral support; requests with bipartisan support; requests from other members." Each assessment report would have been subject to rigorous external peer review before delivery to the director, who would have sought release approval from the board. The bill would have authorized $30 million annually to the Comptroller General for the center for the fiscal years 2005 to 2007. In 2004, Representative Holt offered H.Amdt. 667 to H.R. 4755 , the House's FY2005 Legislative Branch Appropriations bill, to add $30 million to GAO's account for a Center for Scientific and Technical Assessment; the House rejected the amendment. Technology Assessment in GAO Congress has directed GAO to conduct technology assessments on a pilot basis; legislation was introduced to make the program permanent or to authorize an assessment office in GAO. FY2002 H.Rept. 107-259 , the conference report to accompany H.R. 2647 , the Legislative Branch Appropriations Bill for FY2002, enacted as P.L. 107-68 , directed that up to $500,000 of GAO's appropriation be obligated to conduct a technology assessment pilot project and that results be reported to the Senate by June 15, 2002. The provision had originated in the Senate, sponsored by Senator Jeff Bingaman. S. 1172 would have authorized $1 million for the study; it was amended by S.Amdt. 1026 , and passed in the Senate. The provision seemed to focus on a study to be conducted by The National Academies and on a model that might lead to possible funding for a small OTA-like organization to conduct assessments largely by issuing contracts to non-profit groups. The enacted Legislative Branch Appropriations bill did not contain this language. The conference report did not specify an assessment topic, but three Senators requested GAO to assess technologies for U.S. border control together with a review of the technology assessment process. At the same time, six House Members wrote to GAO supporting the pilot technology assessment project. After consulting congressional staff, GAO agreed to assess biometric technologies. It used its regular audit processes and also its standing contract with The National Academies to convene two meetings which resulted in advice from 35 external experts on the use of biometric technologies and their implications on privacy and civil liberties. The resulting report was issued in November 2002 as Technology Assessment: Using Biometrics for Border Security , GAO-03-174. FY2003 The FY2003 Senate legislative branch appropriations report noted the utility of GAO's work and said it provided $1 million for three studies in order to maintain an assessment capability in the legislative branch and to evaluate the GAO pilot process ( S.Rept. 107-209 , on S. 2720 , pp. 49-50.) This language was not included in the Senate bill ( S. 2720 ); the House bill ( H.R. 5121 ) or the accompanying report; or in H.J.Res. 2 , enacted as P.L. 108-7 , which included Legislative Branch Appropriations for FY2003; or in the accompanying conference report. Although funds were not provided for a study, GAO conducted a technology assessment that was published as Cybersecurity for Critical Infrastructure Protection, May 2004, GAO-04-321, 214 pp. FY2004 The House Appropriations Committee's report on Legislative Branch Appropriations for FY2004 directed GAO to "... allocate within existing resources funding that will permit three technology assessment studies that will be of relevance to the Congress's work in the upcoming fiscal year" ( H.Rept. 108-186 , on H.R. 2657 , p. 25). The language was not in the House bill as passed. The Senate incorporated S. 1383 in H.R. 2657 , and passed it, amended. The accompanying S.Rept. 108-88 recommended $1 million for two or three assessments in FY2004 and said that the Appropriations Committee expected GAO's technology assessment work to be undertaken only if it were consistent with GAO's mission (p. 44). According to the Conference Committee, GAO's two-year evaluation of the need for legislative technology assessment showed that "such a capability would enhance the ability of key congressional committees to address complex technical issues in a more timely and effective manner." The conferees directed GAO to report by December 15, 2003 to the House and Senate Committees on Appropriations " ... the impact that assuming a technology assessment role would have on its current mission and resources" ( H.Rept. 108-279 ). The bill became P.L. 108-83 . GAO reported directly to the Appropriations Committees. FY2005 GAO requested $545,000 in FY2005 appropriations for four new FTE positions and contract support to establish "a baseline technology assessment capability," allowing GAO to conduct one assessment per year. The House Appropriations Committee in H.Rept. 108-577 , to accompany the Legislative Branch Appropriations Bill, FY2005, H.R. 4755 , did not address funding, but encouraged GAO to "... retain its core competency to undertake additional technology assessment studies as might be directed by Congress" (p. 27). In spring 2004, consistent with prior congressional directive, GAO initiated two assessments, one on cargo/port security (reportedly released in a classified version), and one published in April 2005 as Technology Assessment: Protecting Structures and Improving Communication During Wildland Fires, GAO-05-380. Representative Holt offered H.Amdt. 667 to H.R. 4755 , to add $30 million to GAO's account for a Center for S&T Assessment; the House rejected the amendment on July 12, 2004. S.Rept. 108-307 , to accompany S. 2666 , indicated that while the Senate Appropriations Committee supported GAO doing technology assessments, it did not intend to appropriate specific funding for this purpose, and that the topics of GAO assessments should be supported by both House and Senate leadership and should address issues of national scope. GAO was instructed to consult with the committee regarding definitions and procedures to conduct technology assessment. In 2004 Senator Bingaman, introduced S. 2556 , co-sponsored by Senator Joseph Lieberman, to establish a technology assessment capability in GAO. The bill, referred to the Governmental Affairs Committee, proposed to mandate the Comptroller General to initiate technology assessment studies himself or at the request of the House, Senate, or any committee; to establish procedures to govern the conduct of assessments; to avoid duplication of effort with other entities; in consultation with The National Academies to establish a five-member technology assessment advisory panel; and to have contracting authority to conduct assessments. It would have authorized $2 million annually to GAO to conduct assessments. No further action was taken. See also H.R. 4670 above. FY2006 In July 2006, the House Science Committee held background hearings on the issue of providing scientific and technical advice to Congress. The URL for the hearing is http://www.house.gov/science/hearings/full06/July%2025/index.htm . Policy Issues The following issues could be considered when evaluating alternative technology assessment proposals: (1) analysis of the need for more technology assessment information and advice; (2) evidence of political support for enhancing legislative capabilities for technology assessment; (3) with respect to augmenting GAO's "core capability" to conduct technology assessment, the availability of funds, the timing, and the utility of GAO's technology assessments for congressional decisionmaking, and the pros and cons of locating a large assessment center within GAO, including its impact on other GAO functions, including auditing and evaluation activities; and (4) the potential benefits and costs of establishing a more independent legislative technology assessment function, such as in a separate OTA-like support activity or in an existing congressional support agency.

Congress created the Office of Technology Assessment (OTA) in 1972, P.L. 92-484, and terminated its funding in 1995. The pros and cons of reviving OTA or re-creating a similar body have been examined. Since 2002, at congressional direction, the Government Accountability Office (GAO) has conducted several pilot technology assessments. Legislation was proposed during the 108th Congress to restore OTA's funding; to create an entity to conduct assessments for Congress; to conduct technology assessments in GAO; and to create a technology assessment capability in GAO or under its direction. In 2006, the House Science Committee held hearings on the issue of providing science and technology advice to Congress. Policy issues under discussion include the need for assessments, funding, the utility of GAO's technology assessment work, and options for design of an advisory body. This report will be updated as needed.

Overview of Opioid Abuse This section answers questions on the nature of opioid abuse in the United States. These questions provide background on the drugs that are abused, the associated harm to the population, and the extent of opioid abuse. What is an opioid? An opioid is a type of drug that when ingested binds to opioid receptors in the body—many of which control a person's pain and other functions. While these drugs are widely used to alleviate pain, some are abused by being taken in a way other than prescribed (e.g., in greater quantity) or taken without a doctor's prescription. Many prescription pain medications, such as hydrocodone and fentanyl, are opioids, as is heroin (an entirely illicit drug). How many Americans abuse opioids? In its annual National Survey on Drug Use and Health (NSDUH), the Substance Abuse and Mental Health Services Administration (SAMHSA) does not collect data using the category "opioids"; rather, it collects data on use of heroin and misuse of prescription pain relievers. In 2016, SAMHSA estimated that 329,000 Americans age 12 and older were current users of heroin and approximately 3.8 million Americans were current "misusers" of prescription pain relievers. According to the same survey, an estimated 11.8 million people aged 12 and older misused opioids in the past year (i.e., the year preceding the date on which the individual responded to the survey) including 11.5 million misusers of pain relievers and 948,000 heroin users. In its annual survey of adolescent students, the Monitoring the Future Survey measures drug use behaviors among 8 th , 10 th , and 12 th graders. In 2016, 0.2% of surveyed adolescents were current users of heroin; 5.4% of surveyed 12 th graders were current users of "narcotics other than heroin." What is the harm associated with opioid abuse? There are short-term and long-term effects of abusing opioids, but the most severe among them is the risk of overdose and death. Drug overdose deaths more than tripled from 1999 to 2014. In 2015, more than 52,000 people died from drug overdoses, and approximately 63% of those deaths involved an opioid. More than 15,000 overdose deaths involved prescription opioids, representing almost half of all opioid overdoses. Also, while U.S. life expectancy (at birth) increased by 2.0 years overall (due to decreasing death rates related to heart disease, cancer, etc.) from 2000 to 2015, researchers have found that the increase in opioid-related drug poisoning death rate reduced overall life expectancy by 0.2 years during this same time. Reports indicate that recent increases in overdose deaths are most likely driven by illicitly manufactured fentanyl and heroin. The National Institute on Drug Abuse (NIDA) states that fentanyl is largely to blame for the sharp increases in overdose deaths over the last several years. Further, NIDA explains that the number of fentanyl-related deaths is likely underestimated because some medical examiners do not test for fentanyl and some death certificates do not list specific drugs. Which areas are experiencing a high number and/or rate of drug overdose deaths? Opioids are the primary drugs involved in drug overdose deaths. The number and rate of drug overdose deaths varies by region of the United States. As might be expected, given it is the most populous state in the country, California had the highest number of drug overdose deaths (4,659) in 2015; however, not all states with the highest number of overdose deaths correspond with their high rank in population size. For example, Ohio had the second highest number of overdose deaths (3,310) and Massachusetts had the 9 th highest number (1,724). These states rank 7 th and 15 th , respectively, in state population size. As shown in Figure 1 , age-adjusted overdose death rates tell a different story than unstandardized numbers of overdose deaths. The Northeast and Appalachian regions, as well as certain Southwest states, have higher rates of drug overdose deaths compared to the rest of the country. As mentioned, fentanyl may be largely to blame for the sharp increases in overdose deaths over the last several years. According to a NIDA-funded study, in 2015 New Hampshire had the most fentanyl overdoses per capita, and nearly two-thirds of the 439 drug overdose deaths in the state involved fentanyl. Overview of Opioid Supply Heroin, fentanyl, and controlled prescription drugs have been ranked as the most significant drug threats to the United States. While the reported availability of controlled prescription drugs, which include opioids, has declined over the last several years, the reported availability of heroin has increased substantially. Further, there has been a rise in the availability of illicit fentanyl pressed into counterfeit prescription opioid pills. What is the recent history of the opioid supply in the United States? Opioids have been available in the United States since the 1800s, but the market for these drugs shifted significantly beginning in the 1990s. This section focuses on this latter period (see Figure 2 ) Prescription Drug Supply In the 1990s, the availability of prescription opioids, such as hydrocodone and oxycodone, increased as the legitimate production of these drugs and diversion of them increased sharply. This continued into the early 2000s, as abusers attained their prescription drugs through "doctor shopping," bad-acting physicians, pill mills, the Internet, pharmaceutical theft, prescription fraud, and family and friends. How has the federal government responded to the proliferation of prescription drugs? The federal government, along with state and local governments, undertook a range of approaches to reducing the unlawful prescription drug supply and prescription drug abuse, including diversion control through prescription drug monitoring programs, a crackdown on pill mills, the increased regulation of Internet pharmacies, the reformulation of OxyContin® (oxycodone hydrochloride controlled-release), and the rescheduling of hydrocodone. Some experts have highlighted the connection between the crackdown on the unlawful supply of prescription drugs and the subsequent rise in the heroin supply (as discussed in the next section) and abuse of the drug. Heroin is a cheaper alternative to prescription drugs that may be accessible to some who are seeking an opioid high. While most users of prescription drugs will not go on to use heroin, accessibility and price are central factors cited by patients with opioid dependence in their decision to turn to heroin. Heroin Supply The trajectory of the heroin supply over the last several decades is much different than that of prescription opioids, but their stories are connected. In the late 1990s and early 2000s, white powder heroin produced in South America dominated the market east of the Mississippi River, and black tar and brown powder heroin produced in Mexico dominated the market west of the Mississippi. Most of the heroin destined for the United States at that time came from South America, while smaller percentages came from Mexico and Southwest Asia. Price and purity varied considerably by region. The average retail-level purity of South American heroin was around 46%, which was considerably higher than that of Mexican, Southeast Asian, or Southwest Asian heroin. At the time, Mexican heroin was around 27% pure, while Southeast Asian and Southwest Asian heroin were around 24% and 30% pure, respectively. Prices for heroin fell dramatically in the 1990s—it was 55% to 65% less expensive in 1999 than in 1989. Over the last several years, heroin prices have further declined, while purity, in particular that of Mexican heroin, has increased. The availability of Mexican heroin has also grown. Over 90% of the heroin currently seized in the United States is from Mexico (while a much smaller portion is from South America). Mexico dominates the U.S. heroin market because of its proximity and its established transportation and distribution infrastructure, which improves traffickers' ability to satisfy U.S. heroin demand. Increases in Mexican production have ensured a reliable supply of low-cost heroin, even as demand for the drug has increased. Mexican traffickers have particularly increased their production of white powder heroin and may be targeting those who abuse prescription opioids. Fentanyl Supply Exacerbating the current opioid problem is the rise of non-pharmaceutical fentanyl on the black market. Diverted pharmaceutical fentanyl represents only a small portion of the fentanyl market. Non-pharmaceutical fentanyl largely comes from China, and it is often mixed with or sold as heroin. It is 50 to 100 times more potent than heroin, and over the last two years, reported prices ranged between $30,000 and $38,000 per kilogram. The increased potency of non-pharmaceutical fentanyl compounds, such as the recently emerged "gray death," is extremely dangerous. Law enforcement expects that the fentanyl market will continue to expand in the future as new fentanyl products attract additional users. Where is the opioid supply threat greatest in the United States? The supply of opioids varies by region. In 2016, approximately 45% of respondents to the National Drug Threat Survey (NDTS) reported heroin as the greatest drug threat in their area. In contrast, 8% of respondents reported heroin as the greatest threat in 2007. Reports of heroin as the greatest threat are concentrated in the Northeast, Midwest, and Mid-Atlantic regions. Additionally, DEA investigative reporting indicates high controlled prescription drug availability in cities throughout the United States. Opioids are the main cause of drug overdose deaths. Reports indicate that increases in overdose deaths are most likely driven by illicitly manufactured fentanyl and heroin. The increasing availability of heroin throughout the United States largely, but not entirely, corresponds to high numbers of drug overdose deaths (see Figure 1 ). For example, New Mexico and Utah rank 8 th and 9 th , respectively, in the country in drug overdose deaths, but only 4.7% of NDTS respondents in the Southwest reported heroin as the greatest drug threat and 22.6% reported high availability of heroin in their region. The discrepancy between overdose deaths and drug threats may be explained by a number of factors, including the lethality of fentanyl. Select Federal Agencies and Programs that Address Opioid Abuse This section discusses the efforts of federal agencies under the Department of Health and Human Services (HHS), the Department of Justice (DOJ), and the Office of National Drug Control Policy (ONDCP) to combat opioid abuse. While many federal departments/agencies are involved in these efforts, this section focuses on those agencies that include drug prevention, treatment, or enforcement as a primary mission. It also includes grant-issuing agencies that specifically target drug abuse. The Drug Enforcement Administration (DEA), part of DOJ, is the primary federal agency involved in drug enforcement, including diversion control efforts for prescription opioids. The Substance Abuse and Mental Health Services Administration (SAMHSA), part of HHS, is the primary federal agency supporting drug treatment and prevention. The federal government also has several programs (many of which are grant programs) that may be used, or are specifically designed, to address opioid abuse. These range from law enforcement assistance in combatting drug trafficking to assistance for states in developing a coordinated response to address opioid abuse. These programs span across several departments and agencies including, but not limited to, DOJ, HHS, and ONDCP. This section does not address other federal agencies that support—but are not focused on—drug enforcement, treatment, or prevention. For example, U.S. Customs and Border Protection, part of the Department of Homeland Security, concentrates on customs, immigration, border security, and agricultural protection. While drug control is a part of what it does (through drug interdiction at the border), it is not a central focus of the agency's mission. Other agencies across the federal government also take part in drug control activities, but they are beyond the scope of this report. Which HHS agencies address opioid abuse? Several agencies within HHS play roles in monitoring, researching, preventing, and/or treating opioid abuse. In most cases, opioid abuse—or drug abuse more generally—is a relatively small component of an agency's activities. Two HHS agencies focus on drug abuse: (1) SAMHSA and (2) the National Institute on Drug Abuse (NIDA) within the National Institutes of Health (NIH). What is SAMHSA's role in addressing opioid abuse? SAMHSA is the lead federal agency for increasing access to behavioral health services. SAMHSA supports community-based mental health and substance abuse treatment and prevention services through formula grants to the states and U.S. territories and through competitive grant programs to states, territories, tribal entities, local communities, and private entities. SAMHSA also engages in a range of other activities that support substance abuse prevention and treatment, such as technical assistance, data collection, and workforce development. Activities related to combatting opioid abuse are primarily administered by two centers within SAMHSA: the Center for Substance Abuse Prevention and the Center for Substance Abuse Treatment. What is NIDA's role in addressing opioid abuse? NIDA is the lead federal agency for advancing and applying scientific research on the causes and consequences of drug abuse. NIDA conducts its own research and funds outside basic (laboratory), clinical, translational, and implementation research. NIDA-conducted or -funded research aims to advance basic science, prevention, treatment, and public health approaches to drug abuse. NIDA publishes research summaries to disseminate findings and raise awareness. What are other HHS agencies' roles in addressing opioid abuse? HHS agencies other than SAMHSA and NIDA also play a role in combatting opioid abuse. Examples include (but are not limited to) the Centers for Medicare & Medicaid Services (CMS), the Health Resources and Services Administration (HRSA), and the Centers for Disease Control and Prevention (CDC). CMS finances health care services, including substance abuse treatment services, through Medicare and the federal share of Medicaid. HRSA supports access to care, including access to substance abuse treatment services, for underserved populations. CDC's National Center for Injury Prevention and Control seeks to prevent injuries and deaths, including those caused by drug overdoses. Which HHS grant programs may be used to address opioid abuse? Below are examples of HHS grant programs (including cooperative agreements and contracts) that address or may be used to address opioid abuse; it is not an exhaustive list of such programs, which would include nearly all of the programs administered by SAMHSA's Center for Substance Abuse Prevention and Center for Substance Abuse Treatment. Instead, this section focuses on programs and activities that HHS agencies have identified as part of their efforts to address the opioid crisis, as well as some examples of broader substance use disorder programs that may be used in part to address opioid use disorder. Substance Abuse Prevention and Treatment Block Grant (SABG) The SABG supports services to prevent and treat substance use disorders. SAMHSA distributes SABG funds to states (including the District of Columbia, specified territories, and one tribal entity ) according to a formula. Each state may distribute SABG funds to local government entities and nongovernmental organizations in accordance with a required state plan for providing substance use disorder prevention and treatment services (and subject to other federal requirements). States are given flexibility in the use of SABG funds within the framework of the state plan and federal requirements. Each SABG grantee must expend at least 20% of its SABG allotment on primary prevention strategies. State Targeted Response to the Opioid Crisis Grants The State Targeted Response to the Opioid Crisis grant program supports states in addressing the opioid abuse crisis through activities that supplement opioid-related activities undertaken by the state agency that administers the SABG. In FY2017 (the first year of this program), SAMHSA awarded formula grants to all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, the Northern Marianas, Micronesia, Palau, and American Samoa. Strategic Prevention Framework for Prescription Drugs The Strategic Prevention Framework for Prescription Drugs (SPF Rx), as part of SAMHSA's larger Strategic Prevention Framework, supports infrastructure development and prescription drug abuse prevention efforts. Eligibility is limited to states (including the District of Columbia, specified territories, and tribal entities) that have completed a Strategic Prevention Framework State Incentive Grant. First Responder Training The First Responder Training program aims to reduce the number of deaths and adverse events related to opioids and other prescription drugs. In FY2017 (the first year of this program), SAMHSA awarded 21 grants to states or other entities that will train first responders (and others) to "implement secondary prevention strategies, such as the administration of naloxone through FDA-approved delivery devices to reverse the effects of opioid overdose." Improving Access to Overdose Treatment Under the Improving Access to Overdose Treatment grant program, SAMHSA awarded one grant in FY2017 (the first year of this program) to expand access to emergency treatment of opioid overdose (i.e., naloxone). The grantee is to develop best practices for prescribing naloxone and train others accordingly. Medication Assisted Treatment-Prescription Drug and Opioid Addiction The Medication Assisted Treatment-Prescription Drug and Opioid Addiction (MAT-PDOA) program, as part of SAMHSA's Targeted Capacity Expansion program, supports states in expanding or enhancing the capacity to provide medication assisted treatment (i.e., the combined use of medication and psychosocial interventions to treat opioid addiction). State Pilot Grant Program for Treatment for Pregnant and Postpartum Women The Pregnant and Postpartum Women program has historically supported residential substance use disorder treatment services for pregnant and postpartum women. In FY2017, SAMHSA awarded three newly authorized state pilot grants to: (1) support family-based services for pregnant and postpartum women with a primary diagnosis of a substance use disorder, including opioid disorders; (2) help state substance abuse agencies address the continuum of care, including services provided to women in nonresidential-based settings; and (3) promote a coordinated, effective and efficient state system managed by state substance abuse agencies by encouraging new approaches and models of service delivery. These state pilot grants are in addition to new and continuing grants and contracts awarded under the larger Pregnant and Postpartum Women program. Building Communities of Recovery For FY2017 (the first year of the program), SAMHSA awarded eight grants under its Building Communities of Recovery grant program to recovery-focused community organizations. Grantees are to use the funds to develop, expand, and enhance recovery support services such as peer support services and linkages to other services (e.g., housing or child care). Criminal Justice Activities Under its "criminal justice activities" account, SAMHSA administers several grant programs that focus on drug courts and re-entry services for drug-involved criminal offenders. Through its Treatment Drug Court grants, SAMHSA seeks to improve treatment services for drug court clients. Through its Offender Reentry Program, SAMHSA supports screening, assessment, comprehensive treatment, and recovery support services for individuals re-entering the community from incarceration. Prevention for States Under the Prevention for States program, CDC supports state health departments in advancing their overdose prevention efforts in four areas: 1. making the best use of state prescription drug monitoring programs (PDMPs), 2. improving relevant practices of health systems and insurers, 3. evaluating policies, and 4. responding rapidly to emerging situations. Enhanced State Surveillance of Opioid-Involved Morbidity and Mortality Under the Enhanced State Surveillance of Opioid-Involved Morbidity and Mortality program, CDC awards cooperative agreements to states to improve surveillance of fatal and non-fatal opioid overdoses by increasing timeliness of reporting, disseminating findings, and sharing data with CDC. Data-Driven Prevention Initiative Under the Data-Driven Prevention Initiative, CDC supports state efforts to address the opioid crisis by increasing their capacity to collect and analyze data about opioid use disorder and overdose, developing strategies to change behaviors driving opioid use disorder, and collaborate with communities to develop more comprehensive programs. Rural Health Opioid Program Under the Rural Health Opioid Program, HRSA supports the development of community consortiums to respond comprehensively to the opioid epidemic in their (rural) communities through the combined efforts of health care providers and other entities (e.g., social service organizations and law enforcement). Supported activities include outreach, care coordination, and recovery support services, among others. Substance Abuse Treatment Telehealth Network Grant Program Under the Substance Abuse Treatment Telehealth Network grant program, HRSA supports the use of telehealth programs and networks to provide substance use disorder treatment in rural, frontier, and underserved communities. As a secondary purpose, the program also supports the use of such programs to treat common chronic conditions (e.g., diabetes) in order to make the most of the investment in telehealth. Which Department of Justice (DOJ) agencies address opioid abuse? Several agencies within DOJ address opioid abuse through administrative efforts, research, grants, and enforcement of drug laws. DOJ agencies, primarily the DEA, enforce federal controlled substances laws in all states and territories. The Offices of the U.S. Attorneys are responsible for the prosecution of federal criminal and civil cases, which include cases against illicit drug traffickers, doctors, pharmaceutical companies, and pharmacies. The Office of Justice Programs (OJP), primarily through the National Institute of Justice (NIJ) and the Bureau of Justice Assistance (BJA), addresses opioid abuse through research and grant support. What is the Drug Enforcement Administration's (DEA) role in addressing opioid abuse? The DEA is a federal law enforcement agency that also has a regulatory function. While it conducts traditional law enforcement activities such as investigating drug trafficking (including trafficking of heroin and other opioids), it also regulates the flow of controlled substances in the United States. The Controlled Substances Act (CSA) requires the DEA to establish and maintain a closed system of distribution for controlled substances; this involves the regulation of anyone who handles controlled substances, including exporters, importers, manufacturers, distributors, health care professionals, pharmacists, and researchers. Unless specifically exempted by the CSA, these individuals must register with the DEA. Registrants must keep records of all transactions involving controlled substances, maintain detailed inventories of the substances in their possession, and periodically file reports with the DEA, as well as ensure that controlled substances are securely stored and safeguarded. The DEA regulates over 1.5 million registrants. The DEA uses its criminal, civil, and administrative authorities to maintain a closed system of distribution and prevent diversion of drugs, such as prescription opioids, from legitimate purposes. Actions include inspections, order form requirements, education, and establishing quotas for Schedule I and II controlled substances. More severe administrative actions include immediate suspension orders and orders to show cause for registrations. Which DOJ programs may be used to address opioid abuse? Below is a list of programs that have a direct or possible avenue to address opioid abuse. This list provides examples of such programs, and should not be considered exhaustive. Many DOJ programs have broad purpose areas for which funds can be used. While some focus on broad crime reduction strategies that might include efforts to combat drug-related crime, others are more focused on drug threats more specifically—the selected programs have purpose areas that are clearly linked to drug threats more specifically. Comprehensive Opioid Abuse Program Section 201 of the Comprehensive Addiction and Recovery Act of 2016 (CARA; P.L. 114-198 ) authorized the Comprehensive Opioid Abuse Grant Program for states, units of local government, and Indian tribes. These grants are intended to provide services primarily relating to opioid abuse, including (1) treatment alternatives to incarceration programs, (2) collaboration between criminal justice and substance abuse agencies, (3) training and resources for first responders to administer opioid overdose reversal drugs, (4) investigation of illicit activities related to unlawful distribution of opioids, (5) medication-assisted treatment programs used by criminal justice agencies, (6) prescription drug monitoring programs, (7) programs to prevent and address opioid abuse by juveniles, (8) programs that utilize technology to secure containers for prescription drugs, (9) prescription drug take-back programs, and (10) a comprehensive opioid abuse response program. BJA administers this new grant program, and in FY2017 the bureau released two grant solicitations for it. Of note, the Harold Rogers Prescription Drug Monitoring Program (PDMP) was incorporated into the Comprehensive Opioid Abuse Grant Program. The Harold Rogers PDMP is a discretionary, competitive grant program administered by BJA. It was created to help law enforcement, regulatory entities, and public health officials analyze data on prescriptions for controlled substances. Law enforcement uses of PDMP data include (but are not limited to) investigations of physicians who prescribe controlled substances for drug dealers or abusers, pharmacists who falsify records in order to sell controlled substances, and people who forge prescriptions. These grants are for states and territories. COPS Anti-Heroin Task Force Program The Anti-Heroin Task Force program is a "competitive grant program designed to advance public safety by providing funds to investigate illicit activities related to the distribution of heroin or unlawful distribution of prescriptive opioids, or unlawful heroin and prescription opioid traffickers through statewide collaboration." Funds are distributed to state law enforcement agencies in states with high rates of primary treatment admissions for heroin and other opioids. Funding under the program must be used for investigative purposes, including activities related to the distribution of heroin or unlawful distribution or diversion of prescription opioids. The Edward Byrne Memorial Justice Assistance Grant (JAG) Program79 The Edward Byrne Memorial Justice Assistance Grant (JAG) program provides funding to state, local, and tribal governments for state and local initiatives, technical assistance, training, personnel, equipment, supplies, contractual support, and criminal justice information systems in eight program purpose areas. These purpose areas are (1) law enforcement programs; (2) prosecution and court programs; (3) prevention and education programs; (4) corrections and community corrections programs; (5) drug treatment and enforcement programs; (6) planning, evaluation, and technology improvement programs; (7) crime victim and witness programs (other than compensation); and (8) mental health and related law enforcement and corrections programs, including behavioral programs and crisis intervention teams. Given the breadth of the program, funds could be used for opioid abuse programs, but state and local governments that receive JAG funds are not required to use their funding for this purpose. Drug Court Discretionary Grant Program80 The Drug Court Discretionary Grant program is meant to enhance drug court services, coordination, and substance abuse treatment and recovery support services. It is a discretionary grant program that provides resources to state, local, and tribal courts and governments to enhance drug court programs for nonviolent substance-abusing offenders. Drug courts are designed to help reduce recidivism and substance abuse among nonviolent offenders and increase an offender's likelihood of successful rehabilitation through early, continuous, and intense judicially supervised treatment, mandatory periodic drug testing, community supervision, appropriate sanctions, and other rehabilitation services. The program doesn't specifically address opioid abuse, but drug-involved offenders, including opioids abusers, may be processed through drug courts where they receive treatment for drug addiction. Juvenile Justice and Delinquency Prevention Act (JJDPA) Formula Grants82 The JJDPA authorizes the Office of Juvenile Justice and Delinquency Prevention (OJJDP) to make formula grants to states that can be used to fund the planning, establishment, operation, coordination, and evaluation of projects for the development of more-effective juvenile delinquency programs and improved juvenile justice systems. Funds provided to the state may be used for a wide array of juvenile justice related programs, such as substance abuse prevention and treatment programs, among many purpose areas. None of the program purpose areas deal specifically with combating opioid abuse, but they are broad enough that they could be used for this purpose. JJDPA Title V Incentive Grants Program The JJDPA authorizes OJJDP to make discretionary grants to the states that are then transmitted to units of local government in order to carry out delinquency prevention programs for juveniles who have come into contact with, or are likely to come into contact with, the juvenile justice system. Purpose areas include (but are not limited to) alcohol and substance abuse prevention services, educational programs, and child and adolescent health (as well as mental health) services. None of the program purpose areas deal specifically with combating opioid abuse, but they are broad enough that they could be used for this purpose. How does the Office of National Drug Control Policy (ONDCP) address opioid abuse? The ONDCP is located in the Executive Office of the President and is responsible for creating policies, priorities, and objectives for the federal Drug Control Program. ONDCP's mission focuses on reducing the use, manufacturing, and trafficking of illicit drugs and the reduction of drug-related crime, violence, and drug-related health consequences. The director of ONDCP is responsible for developing a comprehensive National Drug Control Strategy (Strategy) to direct the nation's anti-drug efforts; developing a National Drug Control Budget (Budget) to implement the Strategy, including determining the adequacy of the drug control budgets submitted by contributing federal Drug Control Program agencies; and evaluating the effectiveness of the Strategy implementation by the various agencies contributing to the Drug Control Program. In response to the opioid epidemic, the Trump Administration has requested increases for certain drug control measures in the FY2018 Budget. In addition, President Trump created the President's Commission on Combatting Drug Addiction and the Opioid Crisis. In coordination with ONDCP, this commission issued a draft interim report recommending several executive actions to address the opioid epidemic. A final report was due on October 1, 2017, but the status of this report is unknown. Which ONDCP programs may be used to address opioid abuse? High Intensity Drug Trafficking Areas (HIDTA) Program87 This program provides assistance to law enforcement agencies—at the federal, state, local, and tribal levels—that are operating in regions of the United States that have been deemed by ONDCP (in consultation with other agencies) as critical drug trafficking regions. The program aims to reduce drug production and trafficking through four means: 1. promoting coordination and information sharing between federal, state, local, and tribal law enforcement; 2. bolstering intelligence sharing between federal, state, local, and tribal law enforcement; 3. providing reliable intelligence to law enforcement agencies so that they may be better equipped to design effective enforcement operations and strategies; and 4. promoting coordinated law enforcement strategies that rely upon available resources to reduce illegal drug supplies not only in a given area, but throughout the country. The HIDTA program does not focus on a specific drug threat, such as heroin trafficking; instead, funds can be used to support the most pressing problems in a region. As such, when countering trafficking of heroin and other opioids is a top priority in a HIDTA region, funds may be used to support it. There are 28 HIDTAs, encompassing approximately 18% of U.S. counties and over 65% of the U.S. population. While this program is administered by ONDCP, the DEA plays a major role, with 600 authorized special agent positions dedicated to it. Drug Free Communities Support Program90 ONDCP manages the Drug Free Communities Support program, which provides grants to coalitions to implement comprehensive, long-term plans and programs to prevent and treat substance abuse among youth. These grants fund community-based coalitions made up of community leaders across 12 sectors, including businesses, law enforcement, and schools. Currently, there are 698 DFC-funded coalitions. Other ONDCP Programs Under its Other Federal Drug Control Programs account, ONDCP offers drug court training and technical assistance grants, as well as support for other initiatives that may be used to combat opioid abuse. Where can opioid-related grant funding data for states be found? HHS — For relevant state-specific HHS grants and funding data, see the grant web pages for SAMHSA, CDC, and HRSA. OJP— For state-specific data on grants and funding from OJP, see the OJP Award Data web page and search data by location. ONDCP — ONDCP grant data are not currently available online. To view the HIDTA program map, see the DEA site for the HIDTA program. What are the sources of national survey data on opioid abuse?99 National Survey on Drug Use and Health (NSDUH) SAMHSA funds the NSDUH, which focuses primarily on the use of illegal drugs, alcohol, and tobacco (and also includes several modules that focus on other health issues). Each year, the NSDUH surveys approximately 68,000 non-institutionalized U.S. civilians, 12 years or older, including approximately 51,000 adults (aged 18 or older) and 17,000 adolescents (aged 12 to 17). The NSDUH is conducted in both English and Spanish. Participants are interviewed in their homes using a combination of personal interviewing and audio computer-assisted self-interviewing, which offers more privacy in order to encourage honest reporting of sensitive topics such as illicit drug use. The sample does not include homeless persons not living in a shelter, individuals in institutions (such as jails or hospitals), those who speak a language other than English or Spanish, or military personnel on active duty; these exclusions limit the generalizability of findings based on the NSDUH. Monitoring the Future Survey NIDA funds the Monitoring the Future survey, which focuses primarily on secondary school students', college students', and young adults' drug-related beliefs, attitudes, and behavior. Each year, Monitoring the Future surveys approximately 50,000 U.S. students in the 8 th , 10 th , and 12 th grades in about 400 public and private schools. Participants complete questionnaires that are distributed in their normal classrooms and are self-administered. Each year, a random sample of the 12 th grade students is selected to receive a follow-up questionnaire by mail every two years. Recent Legislation What recent federal laws have been enacted that address the opioid epidemic? Federal legislation has taken a public health approach (i.e., focusing on prevention and treatment) towards addressing the nation's opioid crisis. Two major laws were enacted in the 114 th Congress that address the opioid epidemic—the Comprehensive Addiction and Recovery Act (CARA, P.L. 114-198 ) and the 21 st Century Cures Act (Cures Act; P.L. 114-255 ). CARA focused primarily on opioids and also addressed broader drug abuse issues. The Cures Act authorized state opioid grants (in Division A) and included more general substance abuse provisions (in Division B) as part of a larger effort to address health research and treatment. Further, Congress appropriated funds to specifically address opioid abuse in FY2017 appropriations. What programs authorized by CARA may be used to address opioid abuse? Below are authorizations of appropriations in CARA, by administering agency and title/section of CARA. All dollar amounts below are rounded to the nearest million. Although CARA is generally discussed in the context of the opioid epidemic, a few of the authorizations of appropriations are not specific to opioids, but are related to substance use disorders more generally. These instances are noted with "( not specific to opioids)." Most of the authorizations of appropriations in CARA are annual (e.g., "$10 million annually for FY2017-FY2021"); however, two are for a period of years (e.g., "$5 million for the period FY2017-FY2021"). HHS Programs Title I, §107. Reducing Overdose Deaths: $5 million for the period FY2017-FY2021. Title I, §109. Reauthorization of NASPER (National All Schedules Prescription Electronic Reporting) ( not specific to opioids): $10 million annually for FY2017-FY2021 ($50 million for the entire period). Title I, §110. Opioid Overdose Reversal Medication Access: $5 million for the period FY2017-FY2019. Title II, §202. First Responder Training for Emergency Treatment of Known or Suspected Opioid Overdose: $12 million annually for FY2017-FY2021 ($60 million for the entire period). Title III, §301. Evidence-Based Prescription Opioid and Heroin Treatment and Interventions Demonstration: $25 million annually for FY2017-FY2021 ($125 million for the entire period). Title III, §302. Building Communities of Recovery [ not specific to opioids]: $1 million annually for FY2017-FY2021 ($5 million for the entire period). Title V, §501. Reauthorization of Residential Treatment Program for Pregnant and Postpartum Women ( not specific to opioids): $17 million annually for FY2017-FY2021 ($85 million for the entire period). Title VI, §601. State Demonstration Grants for Comprehensive Opioid Abuse Response: $5 million annually for FY2017-FY2021 ($25 million for the entire period). ONDCP Program Title I, §103. Community-based Coalition Enhancement Grants to Address Local Drug Crises ( not specific to opioids): $5 million annually for FY2017-FY2021 ($25 million for the entire period). DOJ Program Title II, §201. Comprehensive Opioid Abuse: $103 million annually for FY2017-FY2021 ($515 million for the entire period). What opioid-related provisions were included in FY2017 appropriations? FY2017 Appropriations for CARA-Authorized, Opioid-Related Programs The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) provided $20 million for CARA-authorized HHS-administered programs. This included two programs that were opioid-specific and two that were not opioid-specific. The two opioid-specific programs are First Responder Training for Emergency Treatment of Known or Suspected Opioid Overdose ($12 million) and Opioid Overdose Reversal Medication Access ($1 million). The two non-opioid-specific programs are Building Communities of Recovery ($3 million) and Pregnant & Postpartum Women (with a $4 million increase over FY2016). Under DOJ, State and Local Law Enforcement Assistance account, Congress provided $103 million for "comprehensive opioid abuse reduction activities" that address opioid abuse consistent with underlying program authorities including those programs authorized by CARA—this is broken down in another section as most programs are not authorized by CARA. Under the Department of Veterans Affairs, $50 million was provided for "continued implementation of the Jason Simcakoski Memorial and Promise Act [enacted as Title IX of CARA] and to bolster opioid and substance abuse prevention and treatment." Of note, CARA did not explicitly authorize funding for this program, but rather authorized the program activities of the Jason Simcakoski Memorial and Promise Act. FY2017 Appropriations for Cures-Authorized, Opioid-Specific Programs The second continuing resolution for FY2017 ( P.L. 114-254 ) appropriated full-year FY2017 funding for the sole opioid-specific grant program authorized by Section 1003 of the Cures Act. The appropriated amount is $500 million, the same as the authorization. FY2017 Appropriations for Other Opioid-Related Activities Some programs and activities for which opioid abuse is not the primary focus (as authorized in statute) may spend some portion of their funding on opioid-related activities. For example, programs focused on substance abuse generally may address opioid abuse as part of the larger effort. CRS generally does not have a means for determining the proportion of funding for general substance abuse programs that ultimately goes toward opioid abuse. In some cases, however, the joint explanatory statement accompanying the Consolidated Appropriations Act, 2017, specifies the amount of funding to be used to address opioid abuse. For example, the statement specifies $56 million for SAMHSA's Medication Assisted Treatment for Prescription Drug and Opioid Addiction (MAT-PDOA) program, a component within a more general program called Targeted Capacity Expansion. Opioid-specific appropriations for HHS are not limited to SAMHSA. For example, the explanatory statement specifies that, within the total amount appropriated for the Centers for Disease Control and Prevention's (CDC's) Center for Injury Prevention and Control, $112 million is to address prescription opioid overdose and $14 million is to address illicit opioid use risk factors. Within the total amount appropriated for the Health Resources and Services Administration (HRSA) for Primary Health Care, the explanatory statement indicates that "not less than [$50 million] shall be awarded for services related to the treatment, prevention, and awareness of opioid abuse." As mentioned, under DOJ, the Consolidated Appropriations Act provided $103 million under the State and Local Law Enforcement Assistance account for "comprehensive opioid abuse reduction activities"; however, most of the funding for these activities was not new. Rather, part of the funding for the initiative came from the following programs: Drug Courts ($43 million), Veterans Treatment Courts ($7 million), Residential Substance Abuse Treatment ($14 million), Prescription Drug Monitoring ($14 million), and programs to address individuals with mental illness in the criminal justice system ($12 million). Additionally, under the DOJ, Community Oriented Policing Services (COPS) account, $10 million was provided for competitive grants to statewide law enforcement agencies in states with high rates of primary treatment admissions for opioids. These funds must be used for "investigative purposes to locate or investigate illicit activities, including activities related to the distribution of heroin or unlawful distribution of prescription opioids, or unlawful heroin and prescription opioid traffickers through statewide collaboration." Opioid Abuse and State Policies What have the states done to combat opioid abuse? States have enacted laws that increase access to naloxone (an opioid overdose reversal drug), provide immunity from prosecution for those who seek assistance related to an overdose, enhance prescription drug monitoring programs, and broaden access to substance abuse treatment, among other things. Over the last few years, several state governors have declared the opioid problem to be a "state of emergency" or "public health emergency." Doing so has allowed governors to take swift, coordinated action to combat it. In Massachusetts, for example, then-Governor Deval Patrick utilized his emergency power to allow first responders to carry and administer naloxone, in addition to other actions. States are also developing opioid-related education initiatives. For example, in December 2014 Ohio enacted a law that required the health curriculum of each Ohio school district to include instruction in prescription opioid abuse prevention. In June 2017, Governor Wolf of Pennsylvania announced support for a bill that would establish a mandatory school-based substance abuse prevention and intervention program for all students in every grade from kindergarten through grade 12. State officials have been involved in a number of national initiatives including the drafting of coordinated policies and recommendations from the National Governors Association (NGA), reports on state legislation to increase access to treatment for opioid overdose from the National Association of State Alcohol and Drug Abuse Directors (NASADAD), and participation in the President's Commission on Combating Drug Addiction and the Opioid Crisis. How have different states adapted their justice systems to deal with the opioid crisis? Across the country, states have adapted elements of their criminal justice responses—including police, court, and correctional responses —in a variety of ways due to the opioid epidemic. While this section does not provide a state-by-state analysis, it highlights several examples of how states' justice systems have responded to the opioid crisis. Many states are increasing law enforcement officer access to naloxone, an opioid overdose reversal drug. Officers receive training on how to identify an overdose and administer naloxone, and they carry the drug so they can respond immediately and effectively to an overdose. As of December 2016, over 1,200 police departments in 38 states had officers that carry naloxone. In addition, most states that have expanded access to naloxone have also provided immunity to those who possess, dispense, or administer the drug. Generally, immunity entails legal protections (for civilians) from arrest or prosecution and/or civil lawsuits for those who prescribe or dispense naloxone in good faith. Another criminal justice adaptation is the enactment of what are known as "Good Samaritan" laws to encourage individuals to seek medical attention (for themselves or others) related to an overdose without fear of arrest or prosecution. In general, these laws prevent criminal prosecution for illegal possession of a controlled substance under specified circumstances. While these laws vary by state as to what offenses and violations are covered, as of June 2017, 40 states and the District of Columbia have some form of Good Samaritan overdose immunity law. Most states have drug diversion or drug court programs for criminal defendants and offenders with substance abuse issues, including opioid abuse. Some states view drug courts as a tool to address rising opioid abuse and have moved to further expand drug court options in the wake of the opioid epidemic. In August 2016, representatives from several states that have been confronted with high opioid overdose death rates convened for the Regional Judicial Opioid Summit. Part of these states' action plans to address opioid abuse was to expand drug courts and other court diversion and sentencing options that provide substance-abuse treatment and alternatives to incarceration. Further, in April 2017 NGA announced that eight states would participate in a "learning lab" to develop best practices for dealing with opioid abuse treatment for justice-involved populations—including the expansion of opioid addiction treatment in drug courts. In recent years, several states have also enacted legislation increasing access to medication-assisted treatment for drug-addicted offenders who are incarcerated or have recently been released.

Over the last several years, there has been growing concern among the public and lawmakers in the United States about rising drug overdose deaths, which more than tripled from 1999 to 2014. In 2015, more than 52,000 people died from drug overdoses, and approximately 63% of those deaths involved an opioid. Many federal agencies are involved in efforts to combat opioid abuse. The primary federal agency involved in drug enforcement, including diversion control efforts for prescription opioids, is the Drug Enforcement Administration (DEA). The primary agency supporting drug treatment and prevention is the Substance Abuse and Mental Health Services Administration (SAMHSA). The federal government also has several programs that may be used, or are specifically designed, to address opioid abuse. These range from law enforcement assistance in combatting drug trafficking to assistance for states in developing a coordinated response to address opioid abuse. These programs span across several departments, including (but not limited to) the Department of Justice (DOJ), the Department of Health and Human Services (HHS), and the Office of National Drug Control Policy (ONDCP). Federal and state lawmakers have addressed opioid abuse as a public health concern in enacting legislation that focuses heavily on prevention and treatment. During the 114th Congress, the Comprehensive Addiction and Recovery Act of 2016 (CARA; P.L. 114-198) was enacted in the summer of 2016 and aimed to address the problem of opioid addiction in the United States. Further, the government enacted the 21st Century Cures Act (Cures Act; P.L. 114-255)—a broader law that authorized new funding for medical research, amended the Food and Drug Administration (FDA) drug approval process, and authorized additional funding to combat opioid addiction, among other things. Of note, CARA also addressed broader drug abuse issues, and the Cures Act largely addressed cures and treatment research. Congress also provided funds to specifically address opioid abuse in FY2017 appropriations. This report answers common questions that have arisen as drug overdose deaths in the United States continue to increase. It does not provide a comprehensive overview of opioid abuse as a public health or criminal justice issue. The report is divided into the following sections: Overview of Opioid Abuse; Overview of Opioid Supply; Select Federal Agencies and Programs that Address Opioid Abuse; Recent Legislation; and Opioid Abuse and State Policies.

Introduction and Background The Federal Communications Commission (FCC or Commission) has released for public comment 10 economic research studies on media ownership that it had commissioned to provide data and analysis to support the policy debate on what ownership limitations are in the public interest. These studies also provide data and analysis useful to the on-going policy debates on how best to foster minority ownership of broadcast stations and on tiered vs. à la carte pricing of multichannel video program distribution (MVPD) services, such as cable and satellite television. The FCC's media ownership rules are intended to foster the three long-standing U.S. media policy goals of diversity of voices, localism, and competition. The current rules place certain limits on the number of media outlets that a single entity can own nationally and the number and type of media outlets that a single entity can own locally. In Section 202 of the 1996 Telecommunications Act, Congress instructed the FCC to eliminate several of its media ownership rules and to modify others, in some cases setting explicit numerical limits itself, in other cases instructing the FCC to conduct a rulemaking proceeding to determine whether to retain, modify, or eliminate existing limitations. Congress also instructed the FCC to perform periodic reviews of its media ownership rules to determine if they are "necessary in the public interest as the result of competition," and to modify or repeal any regulation it determines to be no longer in the public interest. The loosening of the media ownership restrictions has led to significant consolidation of ownership in the media sector. As part of its periodic review and in response to rulings by the U.S. Court of Appeals for the District of Columbia Circuit, the FCC adopted an order on June 2, 2003 that modified five of its media ownership rules and retained two others. The new rules, most of which would have further loosened ownership restrictions, proved to be controversial, were challenged in court, and have never gone into effect. On June 24, 2004, the United States Court of Appeals for the Third Circuit (Third Circuit), in Prometheus Radio Project vs. Federal Communications Commission , upheld the FCC's findings that it would be in the public interest to further loosen many of the media ownership restrictions, but found: The Commission's derivation of new Cross-Media Limits, and its modification of the numerical limits on both television and radio station ownership in local markets, all have the same essential flaw: an unjustified assumption that media outlets of the same type make an equal contribution to diversity and competition in local markets. We thus remand for the Commission to justify or modify its approach to setting numerical limits.... The stay currently in effect will continue pending our review of the Commission's action on remand, over which this panel retains jurisdiction. The Third Circuit also found: In repealing the FSSR [Failed Station Solicitation Rule] without any discussion of the effect of its decision on minority station ownership (and without ever acknowledging the decline in minority ownership notwithstanding the FSSR), the Commission "entirely failed to consider an important aspect of the problem," and this amounts to arbitrary and capricious rulemaking.... For correction of this omission, we remand. The FCC adopted on June 21, 2006, and released on July 24, 2006, a Further Notice of Proposed Rulemaking that sought "comment on how to address the issues raised by the opinion of the U.S. Court of Appeals for the Third Circuit in Prometheus v. FCC and on whether the media ownership rules are necessary in the public interest as the result of competition." The Further Notice also initiated a comprehensive quadrennial review of all of its media ownership rules, as required by statute. The Further Notice did not present specific new rules for public comment. Rather, it discussed each rule that was remanded (the local television ownership limit, the local radio ownership limit, the newspaper-broadcast cross-ownership ban, and the radio-television cross-ownership limit) plus two additional rules (the dual network ban and the UHF discount on the national television ownership limit), and then invited comment on how to address the issues remanded by the court. It also asked commenters to address "whether our goals would be better addressed by employing an alternative regulatory scheme or set of rules." In addition, the Further Notice sought comment on, but did not discuss, the proposals to foster minority ownership that had been submitted by the Minority Media and Telecommunications Council (MMTC) in the 2002 biennial review proceeding that the Third Circuit had taken the Commission to task for failing to address in its June 2, 2003 Order. Two of the commissioners dissented in part from the order adopting the Further Notice, criticizing the lack of discussion of proposals to foster minority ownership, and the absence of specific proposed rules. On November 22, 2006, the FCC announced that it had commissioned (or had begun conducting internally) 10 economic studies as part of its review of the media ownership rules. The two commissioners who had dissented in part from the order adopting the Further Notice each issued statements raising questions about the transparency of the process by which the contractors were selected and the peer review process that would be used. On July 31, 2007, the FCC released the 10 studies, making them available on its website, and giving the public 60 days to submit comments (and then 15 additional days to submit reply comments). These studies consist of hundreds of pages of text and very large data sets. Concurrent with the public comment period, the studies underwent a peer review process that is required by the Office of Management and Budget (OMB) of all "influential scientific information" on which a federal agency relies in a rulemaking proceeding. The two dissenting commissioners issued a joint statement criticizing the shortness of the public comment period and raising questions about the peer review process. On September 5, 2007, the FCC released the peer reviews of these studies. On August 1, 2007, the FCC adopted a Second Further Notice of Proposed Rule Making that briefly described, and sought comment on, the proposals of the MMTC submitted in the 2002 biennial review proceedings, several additional informal MMTC suggestions, and the proposals by the Advisory Committee on Diversity for Communications in the Digital Age to foster minority and female ownership. On October 22, 2007, Consumers Union, Consumer Federation of America, and Free Press (Consumer Commenters) submitted to the FCC very detailed comments on the 10 FCC-commissioned media ownership studies. The Consumer Commenters identify a number of alleged specification errors—some raised by the peer reviewers, some by the Consumer Commenters themselves—in the major statistical studies commissioned by the FCC, and then present statistical results from re-running the models in those studies, applying the same empirical data to models revised to correct for the alleged specification errors. These revised models yield very different statistical results that, according to the Consumer Commenters, demonstrate that loosening the media ownership rules would not be in the public interest. The Studies and the Peer Reviews In aggregate, the ten economic studies relating to media ownership commissioned by the FCC perform two functions—data collection and data analysis. Systematic data collection is needed because the Third Circuit decision requires "the Commission to justify or modify its approach to setting numerical limits" but there has been a dearth of systematic data available on which to base a justification of any specific proposed rule. The 10 FCC-commissioned studies, their peer reviews, and the critiques and revised models submitted by the Consumer Commenters, in aggregate provide a significant body of data and analysis on ownership characteristics and programming needed to perform the analysis required by the Third Circuit. Unfortunately, the databases on minority ownership and programming remain far less complete and clean, despite a heroic effort by an FCC staffer to construct a time series database for 2001-2005 from existing sources. The data analyses performed in the ten studies tend not to reach strong policy conclusions. Typically, the analyses attempt to determine whether there is a statistical relationship between particular aspects of media ownership in a market (such as newspaper-broadcast cross-ownership) and particular market outcomes (such as the quantity of local news or local public affairs programming), holding other variables that might affect the market outcomes constant. Often, a statistically significant relationship between two variables is found with one particular model specification, but if a small change is made in the way the model is specified the relationship is no longer found to be statistically significant. This led many of the researchers and peer reviewers to emphasize that the statistical findings were not robust. Where relationships are identified, the researchers tend to emphasize that these demonstrate correlation, not causality. A few of the studies seek to test for such statistical relationships without holding other variables constant, thus overstating the magnitude of any relationships they find. Three of the studies had findings suggesting that non-ownership variables, such as the demographics or commute time in a market, were better predictors of the amount or type of programming aired than were ownership characteristics. This led some researchers to suggest that media ownership characteristics may not be significant determinants of programming. None of the studies presents statistical analysis of the relationship between ownership characteristics and minority programming. Although Study 2 collected data on many types of programming, including minority programming, and those data were used in Study 3 to analyze the relationships between various ownership characteristics and different types of programming, no results are shown for minority programming—though results are shown for Spanish language programming. The two studies directly addressing minority ownership—Study 7 and Study 8—do not address minority programming at all. Perhaps what is most noteworthy about these 10 studies is that they highlight the large number of variables that may be relevant to a full analysis of media ownership issues. The following is a partial list of variables that the researchers identified as relevant to their analyses: station ownership and affiliation characteristics, such as whether the station is owned by or affiliated with a major broadcast network, owned by a large station group that does not also own a network, affiliated with a non-major broadcast network, co-owned with one or more broadcast stations in its local market, cross-owned with a newspaper in its local market, cross-owned with a cable system in its local market, owned by a provider of a cable program network, locally owned, owned by a minority, or owned by a female. local market characteristics, such as the number of broadcast stations (television or radio) in the market, the size of the market in terms of population or advertising revenues generated, market concentration, the number of co-owned stations in the market, the number of cross-owned media entities in the market, demographic factors (such as age, race, ethnicity, English as a second language, income, and education levels), or the average commute time (for radio). quantitative measures of programming, at both the station and the market level, such as the amount of prime-time and non-prime-time local news programming (including and excluding sports and weather), local public affairs programming, national news programming, national public affairs programming, minority programming, female programming, children's programming, violent programming, adult programming, general interest programming, or Spanish language programming. measures of program quality, such as program ratings and the amount of advertising shown on the programming (which one researcher identified as a negative measure of quality). broadcast network programming sources, such as whether the programming was produced by an affiliate of the broadcast network, by an affiliate of a competing broadcast network, or by an independent studio. cable network programming sources, such as whether the programming was produced by an affiliate of the cable or satellite operator, by an affiliate of a major media company that does not have cable or satellite systems, or by an independent program producer. the cable tiers on which program networks are placed. regulatory variables, such as whether a particular network is covered by must-carry and retransmission consent requirements. The studies showed that not all of these variables can be unambiguously defined and that, at times, data are not available to directly measure these variables, so proxy measures must be used. The following is a brief snapshot of each study and its peer review. Study 1: "How People Get News and Information," by Nielsen Media Research, Inc. This study consists of a telephone survey that provides estimates of Internet and media usage patterns, opinions, and attitudes among adults in the United States. A sample of 141,324 phone numbers was selected, with survey data collection conducted from May 7-27, May 29-31, and June 1-3, 2007. There were 3,101 completed interviews, or 2.2% of the total sample; each of those completed interviews elicited responses to 43 questions. The questions included: In an average week, how much time do you spend, in total, watching or listening to broadcast television channels? In an average week, how much time do you spend, in total, watching or listening to broadcast television channels to get information on news, current affairs, and local happenings? Which of the following types of information do you get from broadcast television channels—emergencies, classified ads or economic opportunities, local cultural events, local news or local current affairs, national or international news, opinion or commentary on news and current affairs, sports, weather and traffic? The same or similar questions were asked with respect to cable or satellite television channels, the Internet, daily local newspapers, weekly local newspapers, daily national newspapers, and broadcast radio. In addition, respondents were asked which one source they considered the most important, and which source they considered the second most important, for breaking news, for more in-depth information on specific news and current affairs topics, for local news and current affairs, and for national news and current affairs. Respondents also were asked for information on their highest level of schooling completed, household income, urban/suburban/rural location, race, age, and gender. In addition, respondents were asked, "If you would be reimbursed, are there any channels you would be interested in dropping from your [cable] service? If yes, which channels would you be interested in dropping from your service if you could receive a reduction in the cost of your service?" and "Are there any channels that you would like to receive, but do not currently subscribe to because you would have to subscribe to a larger package of channels? If yes, which channels would you like to receive, but do not currently subscribe to because you would have to subscribe to a larger package of channels?" These questions do not relate to the media ownership proceeding, but could generate information that would be relevant to proposals by FCC Chairman Kevin Martin to allow cable television subscribers to selectively drop channels from tiered cable packages and have their bills reduced by the per-subscriber fees that the cable operator pays for those channels or to allow subscribers to purchase all cable channels on an à la carte basis. Nielsen presents the data collected in the survey, but does not attempt to analyze the data or reach conclusions. Rather, it provides a very large data set that is available for researchers in and outside the Commission to use in their own analyses. Some of the findings are presented in Table 1 . The peer reviewer, John B. Horrigan, Associate Director for Research at the Pew Internet & American Life Project, concludes that the Nielsen study represents a credible effort, but raises "two significant issues worthy of note." First, the low response rate to the survey as well as certain survey design concerns may have generated a sample that is more reflective of the behaviors and attitudes of well-educated and higher-income Americans than of the public at large. "Because high levels of income and education are positively correlated with interest in news and current affairs, this may have substantive consequences on the survey's result." Second, according to Horrigan, inclusion in the questionnaire of a question eliciting the specific Internet news sites watched, but not of analogous questions eliciting information on the specific broadcast, cable, or satellite news channels watched or the specific local or national newspapers read, may constrain the usefulness of the survey data to address questions that may be relevant for the media ownership proceeding. For example, he claims the survey design may limit the ability of analysts to explore whether the Internet is a substitute or complement to traditional media. Study 2: "Ownership Structure and Robustness of Media," by Kiran Duwadi, Scott Roberts, and Andrew Wise, with an appendix entitled "Minority and Women Broadcast Ownership Data," by C. Anthony Bush The main purpose of this study, which was performed by members of the FCC staff, was to assemble the most comprehensive possible data set concerning media ownership. These data were used by researchers to perform some of the other studies. The data cover the period 2002-2005, and update a 2002 Commission study that examined media ownership of various types (cable, satellite, newspaper, radio, and television) for 10 radio markets in 1960, 1980, and 2000, and expands upon that study by adding data on the availability and penetration of Internet access and by examining all designated market areas (DMAs), not just 10 markets. The focus of the study is data collection, not data analysis, although the effort generated many data tables that can provide the empirical basis for analysis. The researchers' primary task was to combine multiple data sets and then consolidate these "metadatasets" to the DMA level. Data were collected on more than 1,700 television stations, 13,500 radio stations, 7,800 cable systems, and 1,400 newspapers across four years, for a total of more than 100,000 observations and more than 13 million data points. The authors provide the caveats that they were unable to know with certainty the accuracy of every observation and that the final results could only be as accurate as the underlying data sets that they combined. They believe the collected data give an accurate description of the various media for the four-year period. The authors list five findings: Media ownership was fairly stable over the 2002-2005 period, in contrast to earlier periods, which were characterized by substantial consolidation across most forms of media, especially following enactment of the 1996 Telecommunications Act. Multichannel video (cable and satellite) penetration has continued to grow since the previous report; in 2005, cable and satellite operators combined served 83.5% of television households, up from 80.3% in 2002. For broadcast television, the data reveal a slight increase in the number of stations and a slight decrease in the number of owners. The number of locally owned stations remained fairly constant. The number of co-owned television and radio stations increased by more than 20%. Minority-owned television stations fell by three stations, from 20 in 2002 to 17 in 2005 (out of more than 1,700 television stations). Female-owned television stations fluctuated slightly but ended in 2005 with the same number, 26, as in 2002. For broadcast radio, the number of stations increased moderately. The number of owners decreased about 5%, and the number of locally owned stations fell 3.7%. Co-owned radio/television combinations increased 19%. Minority-owned radio stations increased less than 1%, while female-owned stations fell 6.9%. The number of daily newspapers decreased slightly, the number of newspaper owners decreased by about 8%, and locally owned newspapers decreased by about 5%. The number of same-city newspaper-broadcast combinations stayed the same. The appendix uses aggregate data from the FCC Form 323 on broadcast ownership to construct a time series for 2001 through 2005. The data show that for that period: There was no substantial growth or decline in minority ownership of commercial radio stations (increasing from 376 to 390, then falling to 371, and finally increasing to 378 over those years). There was a decline in minority ownership of commercial television stations (from 20 to16 and then increasing to 17). But the author of the appendix raises concerns about the reliability of the minority ownership data, which were constructed from "noisy" or incomplete data bases. In 2003, the biennial filing deadlines became staggered, tied to the anniversary date of each station's renewal application filing date, so the data no longer contain a single "snapshot" of minority and female ownership for all stations in the industry that could be used a benchmark for measuring industry ownership trends. In addition, stations whose licensees are sole proprietorships or partnerships comprised entirely of natural persons (rather than corporate or business entities) are exempt from the biennial filing requirement and need only submit such information voluntarily if they choose. Moreover, in the initial years of filing the new biennial forms, many stations failed to complete their forms correctly, resulting in their responses to a relevant question being omitted from an electronic ownership database. Review of station filings for 2001 suggests that the filings are not complete with respect to ownership information. Furthermore, review of the ownership report data from all periods and the literature suggests that these data contain significant errors. There is no verification of Form 323 data or quality control over the data. The author concludes that Form 323 data are inadequate for the purpose at hand, but these data could be used to augment more reliable data. "At best, we have extensive samples or a virtual census of minority and female broadcast ownership data. We do not have an actual census, although perfect information on transactions and a perfect base year ... would result in a census. We do not have statistical random samples. In summary, the data contain noise due to errors in the databases that were used to construct the data." Nonetheless, he compares the Form 323 data to data collected in the Census Bureau's Survey of Business Owners (SBO) for 2002. In doing so, he finds "that, for 2002, 95% confidence intervals contain our estimate of 184 Black owned commercial radio stations, our estimate of 36 Asian owned commercial radio stations, our estimate of 145 Hispanic owned commercial radio stations, our estimate of 6 Native American owned commercial radio stations, and our estimate of 5 Native Hawaiian owned commercial radio stations.... In light of the SBO data our estimate of the number of Minority owned TV stations is reasonable." The peer reviewer, Robert Kieschnick, Associate Professor and Finance and Managerial Economics Area Coordinator at the University of Texas at Dallas, commends the authors "for the work that they expended in putting these data together as the source data are diverse and in some cases incomplete or subject to error." He finds the methodology and assumptions employed are reasonable and technically appropriate, the data used are reasonable, and the conclusions about the pattern of changes in media ownership appear to follow from the data. Study 3: "Television Station Ownership Structure and the Quantity and Quality of TV Programming," by Gregory S. Crawford, Assistant Professor, Department of Economics, University of Arizona27 This study analyzes the relationship between the ownership structure of television stations and the quantity and quality of certain television programming in the United States between 2003 and 2006. It focuses on seven types of programming—local news and public affairs, minority, children's, family, indecent, violent, and religious—identifying alternative definitions used for each of these programming types. It also uses two definitions of programming quality: the number of households who choose to watch a program as a share of households that have access to that programming (a market rating definition) and the number and length (in minutes and seconds) of advertisements included on the program, using the assumption that households do not like advertising and that program quality therefore decreases as the amount of advertising increases. The study uses the ownership data developed in Study 2. The major findings of the study are: Broadcast television provides more news, religious, and violent programming than cable television. Cable television provides more public affairs, children's, and adult programming than broadcast television. Niche, or special interest, programming (minority, adult, religious) is less widely available than general interest programming (news, children's, family). Program production and/or availability is falling across time for network news (though not local news), public affairs, family, and religious programming, and rising across time for Latino, children's, adult, and more violent programming. News and violent programming are the most highly rated programming types, with Latino/Spanish-language, children's, and family programming substantially lower, and non-Latino minority and religious programming lower still. The relative quality (in terms of ratings) of news programming is declining, as is the relative quality of certain measures of children's programming, but more violent programming is gaining. Affiliates of the four major broadcast television networks provide more advertising minutes at higher prices than do other broadcast television stations and this advantage appears to be increasing over time. From the perspective of viewers, this represents a decline in program quality. The strongest finding with respect to ownership structure relates to local news: television stations owned by a parent that also owns a newspaper in the area offer more local news programming. By some methods, television stations owned by corporate parents with larger annual revenue also offer more local news, but by other methods they offer less. Local ownership is correlated with more public affairs and family programming. Although there are differences in the amount of violent programming across network affiliates, it does not appear to be correlated in an economically or statistically significant way with ownership structure. Effects of ownership structure on other programming types or on outcomes in the advertising market are either economically insignificant, statistically insignificant, or differ in their predicted effects according to the method of analysis. The peer reviewer, Lisa M. George, Assistant Professor of Economics at Hunter College of the City University of New York, finds that, "Overall, the study considers an interesting question with appropriate data and methods and should ultimately prove useful for policy purposes." But she has three general comments. With respect to the robustness of the analytical results, "While the regressions in the analytic portion of the study are consistent with standard econometric methods, the paper does not include specifications that would demonstrate the robustness, or reveal the fragility, of regression results." With respect to the relationship between the empirical estimates and conclusions, "the empirical analysis does not include cable television, yet the paper discusses cable television at great length. Similarly, the paper includes text and tables concerning viewership and ratings, yet no ratings data are included in the regressions. The regressions also consider only prime-time hours, yet this caveat is rarely mentioned." With respect to the theoretical assumptions about advertising, the peer reviewer claims "the assumption that advertising is inversely related to quality cannot be justified in light of existing economic theory. An important idea in the economics literature on two-sided markets is that advertising in media markets functions like a price. In other words, viewers "pay" for broadcast television with advertising minutes. Just as a better steak costs more than a lesser cut and thus commands a higher price, a better television program typically costs more than a weaker program and would be expected to command more not less advertising time." Study 4: "News Operations," a Study with Four Sections, by FCC Staff This study, which is divided into four sections, each of which was performed by a member of the FCC staff, collects data on the size and scope of the news operations of radio and television stations and newspapers. It also analyzes the relationship between the nature of news operations and market characteristics, including ownership structure. Section I: "The Impact of Ownership Structure on Television Stations' News and Public Affairs Programming," by Daniel Shiman This section of the study examines the relationship between the ownership characteristics of broadcast television stations and the quantity of news and public affairs programming they broadcast, based on the scheduled news and public affairs programming of almost all full-power broadcast analog television stations in the U.S. for two weeks in each year, over the four-year period 2002-2005. It uses modeling techniques to control for unobserved market-specific, broadcast network-specific, and time-specific factors, and also to check for robustness of statistical results. This section finds that certain ownership characteristics have a statistically significant impact on the quantity of news programming provided by stations, but most ownership characteristics do not have a statistically significant impact on the provision of public affairs programming. Specifically: Television-newspaper cross-ownership is associated with 18 additional minutes (11%) per day in news programming. Television stations that are owned and operated by one of the four major broadcast networks are associated with 22 additional minutes (13%) per day of news programming. Television stations that have a co-owned television station in a market are associated with 24 additional minutes (15%) per day of news programming. For stations that are owned by large stations groups, but not by the four major networks, each additional co-owned station nationally tends to have a quarter minute less of news programming per day. Local ownership of a television station is associated with six minutes (4%) less news programming per day. Televison-radio cross-ownership does not have a statistically significant impact on the amount of news programming provided, but is associated with an additional 3 minutes (15%) of public affairs programming. Most of the ownership characteristics studied do not have a statistically significant impact on the provision of public affairs programming. However, higher parent revenues for a station are associated with the provision of less public affairs programming. The author provides several caveats about the analysis. First, despite the use of more than 6,700 observations for more than 1,700 stations, the effective sample sizes are rather small for some of the variables of interest—for example, only 30 television stations are jointly owned with a newspaper (for 120 observations). Second, the analysis does not include cable channels and Internet news programming. The constant availability of news, weather, and sports programming on such cable channels as CNN, Fox News, MSNBC, the Weather Channel, and ESPNews, as well as Internet news programming, is likely to affect the audience interested in local broadcast stations' news shows, most likely reducing it. Third, the analysis does not distinguish between local and non-local news programming, even though the supply and demand factors involved may differ. Fourth, the analysis addresses the quantity of news programming, not its quality. Individual stations might choose to respond to demand for news programming by increasing the quality of programming provided, rather than the quantity. The peer reviewer, Philip Leslie, associate professor of economics and strategic management, Stanford Graduate School of Business, identifies some "noteworthy strengths" of the data—there are a large number of observations, the panel structure allows for the use of various fixed effects to control for other factors that affect programming, and there is a high level of detail on programming and ownership. He also identifies "a few important limitations to the data," most of which are acknowledged in the study. He concludes that the data are valuable and should be taken seriously, but that while the limitations do not undermine the analysis, "they do lead me to question the broader relevance of the findings." One limitation that he identifies is the data include no information on the number of viewers for each station (or each television program), and consequently each station is weighed equally in the analysis. "Since we ultimately care about the impact on consumers, and some stations are more important to consumers than others, this presents a limitation on the data." Section II: "Ownership Structure, Market Characteristics and the Quantity of News and Public Affairs Programming: An Empirical Analysis of Radio Airplay," by Kenneth Lynch This section of the study examines the extent to which there is a relationship between the ownership characteristics of a radio station and the quantity of informational (news and public affairs) programming it broadcasts, using data from a sample of more than 1,000 radio stations and appropriate control variables. Airplay data were collected for six 20-minute segments for each station. The econometric technique used produces two sets of results that must be considered jointly: the change in the likelihood of airing news (or public affairs) programming, and the change in the amount of news (or public affairs) programming that is aired if the station airs news (or public affairs) programming at all. It is noteworthy that market characteristics, such as market size, length of commute time, the audience share that is male, the audience share that is minority, income levels, education levels, age distribution, etc. explain a greater amount of variation in the quantity of news and (especially) public affairs programming aired than station ownership variables. The findings related to station ownership include: As owners expand their radio operations by acquiring more radio stations (either in- or out-of-market), the stations they own are more likely to air at least some news programming, but the quantity of news aired on each station may fall such that the overall quantity of news is not significantly affected. These relationships hold whether looking at all news programming or only local news programming. The geographic distance between the parent and the station does not significantly affect the quantity of news aired by stations in the group that might air news, but it has a negative and significant effect on the probability stations air any news at all. These relationships hold whether looking at all news or only local news. While it appears that stations that received a waiver of FCC rules covering radio-newspaper combinations are significantly more likely to air news and public affairs programming, only three of the 1,013 stations in the sample required such a waiver and thus "any inferences drawn from the parameter estimates for this covariate are essentially anecdotal." A radio station cross-owned with an in-market television station is less likely to air news programming than are other radio stations, but if it does air news the quantity aired will be relatively larger than that of stations that are not cross-owned. The overall marginal effect is that in-market television cross-ownership increases the expected quantity of news programming by about 110 seconds (31%). These relationships are not statistically significant when looking only at local news. As owners expand their radio operations by acquiring more radio stations (either in- or out-of-market), the stations they own are more likely to air at least some public affairs programming, and the quantity of public affairs programming aired on each station is likely to increase; although neither of these relationships are statistically significant on their own, the combined effects are significant. Since only 8% of the stations in the sample aired local public affairs programming during the six 20-minute segments for which airplay data were collected, the ability to draw meaningful inferences from those data is limited. There are too few instances of radio cross-ownership with newspapers in the sample to draw meaningful inferences. The peer reviewer, Scott Savage, assistant professor of economics at the University of Colorado, deems the methodology and assumptions reasonable and generally consistent with accepted theory and econometric practices, but "would like to see a much stronger justification for the important ownership variables of interest in the model and a clearer description of their expected signs. This would also help make the results discussion clearer." He finds "the dataset would have to be augmented by other measures of market concentration if the study really wanted to make concrete conclusions about economies of scope and market power effects. For example, does it necessarily follow that a 'large owner' with many in-market stations has more market share and market power than a 'small owner' with a single in-market station? More importantly, 'number of in-market stations' and 'total number of stations' may be endogenous when they depend on the unobserved preferences of radio listeners. Ultimately, more discussion and/or evidence is required to make causal claims." Section III: "Factors that Affect a Radio Station's Propensity to Adopt a News Format," by Craig Stroup This section examines whether ownership structure affects a radio station's propensity toward adopting a news format, using Arbitron data on the format choices of about 8,000 radio stations between 2002 and 2005 and employing the fixed effects regression technique to take into account non-observable factors that influence radio stations' format choices. Instead of examining actual radio broadcasts (as does section II of this study), this section considers a station's format and assumes that news format radio stations broadcast more news than stations with other formats. This allows the researcher to collect data over time and to observe the format ramifications of stations that undergo ownership changes. The format definitions used do not distinguish between local news programming and other news programming. Some of the findings of this section are: Although 65% of all full-power radio stations broadcast in FM, rather than AM, only about 25% of news stations broadcast in FM. Holding other factors constant, AM stations are six times more likely to be news stations than FM stations. This is not surprising since AM service offers sound-quality that is inferior to that of FM and therefore is more likely to be used for non-music formats. A radio station that is cross-owned with a newspaper in the same market is four to five times more likely to be a news station than a radio station that is not cross-owned. A radio station that is cross-owned with a television station in the same market is about twice as likely to be a news station than a non-cross-owned station. Commercial stations are only about 25% as likely to adopt a news format as noncommercial stations. Stations with a local marketing agreement (LMA)—the sale by the licensee of discrete blocks of time to a "broker" who supplies the programming to fill that time and sells the commercial spot announcements in it—may be less likely to be news stations. A review of this relationship for stations that newly enter an LMA, however, suggests that entering into an LMA may make a station more likely to be a news station, but news stations may be less likely to enter into LMAs. Having a sibling news radio station in the market appears to increase a station's propensity to adopt a news format by about 50%. Radio stations with owners in the same DMA appear to be no more likely to be news stations than others. But radio stations with owners in the same state appear to be significantly more likely to be news stations. The peer reviewer, Scott Savage, assistant professor of economics at the University of Colorado, finds the methodology and assumptions reasonable and generally consistent with accepted theory and econometric practices and the data of sufficient quality for the econometric model employed. But he finds that the study would benefit from a more explicit description of the model, more economic discussion of the choice of independent variables and their a priori expectations, and a discussion of the potential economic mechanisms that underlie the relationships uncovered in the data. Section IV: "The Effect of Ownership and Market Structure on [Newspaper] News Operations," by Pedro Almoguera This section studies the effect of ownership characteristics on the news operations of newspapers, based on a sample of 134 newspapers in the largest 60 designated market areas (DMAs) for 14 randomly chosen days (with the constraint that each day of the week is included twice) in 2005. The local market is defined as the Metropolitan Statistical Area (MSA), rather than DMA, because the latter is geographically narrower and therefore more closely coincides with the circulation area of newspapers. The absolute amount of space allocated for news in the "general news" section of the newspaper is used as a quantity measure of news operations. Some of the findings of this section are: There is no observable relationship between a newspaper's news operations and cross-ownership with a television station or radio station in the same market. Newspapers that are co-owned with other newspapers within the same Metropolitan Statistical Areas are associated with a 5% decrease in the absolute amount of news provided. But co-owned newspapers outside the market have no effect on news operations. The level of newspaper concentration in the market (as measured by the Herfindahl-Hirshman Index) has no effect on news operations. Belonging to a joint operating agreement with another newspaper in the market has no effect on a newspaper's news operations. The peer reviewer, Philip Leslie, associate professor of economics and strategic management, Stanford Graduate School of Business, finds that although the data come from multiple sources they are "mainly well explained," though focused on larger markets and thus not representative of all newspapers in the United States. Professor Leslie finds it "unclear how exactly the identity of which newspapers compete in which markets is assigned." He indicates that although restricting the definition of news operations to the quantity of news in the general news section of a newspaper is "potentially troublesome ... since it can arbitrarily exclude valid news content in other parts of the newspaper," nonetheless "there is no obviously right approach." He proposes that there be "some robustness checks on this issue." He also states that since the data do not include a source of exogenous variation in ownership structure, "it is less clear whether the analysis uncovers a causal effect or a mere correlation." Finally, Professor Leslie indicates that the data provided show a positive relationship between co-ownership of newspapers in the same market and the percentage of total newspaper space (news plus advertising) taken up by news, which he believes is "at odds with" the negative relationship between newspaper co-ownership and the absolute amount of news. But he provides no explanation why, a priori, one should consider these results at odds. Study 5: "Station Ownership and Programming in Radio," by Tasneem Chipty, CRA International, Inc. This very large study evaluates the effects of ownership structure on numerous different measures of program content, advertising prices, and listenership for (non-satellite) broadcast radio, using both descriptive and regression analyses. It relies on data from a number of different sources, including the database on radio station programming that the FCC commissioned Edison Media Research to construct in 2005 (Edison Database), station characteristic and demographic data from BNA Financial Network (BNA fn ), ratings data from Arbitron, advertising cost data from SQAD, and additional demographic data from the U.S. Census Bureau. It performs analysis using market-level averages, station-level averages, and station-pair analysis. As a result, it has literally thousands of statistical results that researchers can cull through. Most of the regressions do not show statistically significant relationships between the ownership variables and programming variables being tested, which is not surprising given the breadth of variables covered. Among the study findings are the following. If market size is not taken into account, markets with greater ownership concentration offer fewer formats and have more pile-up (multiple stations with the same format). But smaller markets have (by definition) fewer stations and have greater ownership concentration (because the FCC's media ownership rules permit owners to own a larger fraction of stations in smaller markets, relative to bigger markets). Controlling for the number of stations and the interaction effects between number of stations and concentration, concentration has no statistically significant effect on the number of available formats. However, the results suggest that stations are more spread out across existing formats in more concentrated markets—concentrated markets have significantly less pile-up, as measured by less format concentration. These results are robust. Also, markets with more stations have more formats and less pile-up. Cross-ownership of radio stations with local newspapers and/or local television stations does not appear to have a noticeable effect on the number of formats or on format pile-up. Markets with a large number of radio stations owned by large national radio companies appear to have more formats and less pile-up. Commonly owned stations in the same market are 5% more likely to have the same format than stations owned by different owners. However, this pattern is reversed when looking only at pairs of FM stations. Station ownership characteristics are less good predictors than market demographic factors of whether stations in a market will offer the same format. Commonly owned stations in different markets are more likely than other stations to have the same format. In large markets, consolidation of ownership has no statistically significant effect on any of the format measures. In small markets, consolidation is associated with fewer formats. Operating in a market with other commonly owned stations does not have a statistically significant effect on how a station is programmed. Newspaper-radio cross-ownership is associated with longer blocks of uninterrupted talk in the morning drive time slot and longer blocks of uninterrupted news programming in the evening. Stations that have large national owners offer more syndicated programs and spend a greater percentage of airtime on network/syndicated programming. National ownership is associated with a statistically significant negative effect on length of an uninterrupted block of music in the evening. Commonly owned stations in different markets are programmed more similarly than separately owned stations in different markets. There appears to be minimal association between radio-newspaper or radio-television cross-ownership in a market and radio programming. Analysis of more than 10 programming content variables yields only rare examples of statistically significant relationships, and those are small in magnitude. Local radio consolidation is associated with 4% less music, 3% less local programming, 3% less live programming, and 18% less news programming in the evening (though this last effect is estimated from a sample of only FM stations). All else equal, radio stations in concentrated markets offer substantially longer segments of uninterrupted sports programming in the evening. The pattern of results suggests that this expanded offering is offset with shorter segments of news programming in the evening. Commonly-owned news stations in the same market overlap in 14%-22%of their programming and commonly-owned news stations in different markets overlap in 8%-14% of their programming, depending on the measure of overlap. Commonly-owned sports stations in the same market have no overlap in their programming, and commonly-owned sports stations in different markets have overlap in 5%-9% of their programming. The overlap in programming across commonly-owned news stations is statistically significant and there may be more overlap within markets than across markets. There is no statistically significant overlap in sports programming for commonly-owned stations, either within or across markets. This result likely reflects practices in the underlying sports broadcast rights market, where a live (often local) sporting event typically is broadcast by a single radio station within a radio market. Consolidation in local radio markets has no statistically significant effect on advertising prices. Advertising prices decrease as the number of stations in the market increases. National ownership of radio stations has a statistically significant negative effect on advertising prices. Radio cross-ownership with television in a market has a statistically significant positive effect on advertising prices in large markets across a number of specifications, but not in small markets. Consolidation in local radio markets has no statistically significant effect on average listening to radio. Listeners served by large radio groups, as measured by the number of commercial stations owned nationally by in-market owners, listen more. All else equal, concentration in large markets is associated with lower average station ratings, suggesting that listeners in large markets are not tuning in as much as listeners in small markets. Stations operating in markets with other commonly owned stations achieve higher ratings than independent stations. Cross-ownership of radio stations with local newspapers has a statistically significant positive effect on listenership. There are no other statistically significant effects of ownership structure on listenership. The peer reviewer, Andrew Sweeting, assistant professor of economics at Duke University, finds the econometric analysis simple and the specifications explained in a transparent way that should make the results straight-forward to replicate. He offers one general caveat—these results reflect correlations in the data between ownership and programming and there is no direct evidence of causal effects. Professor Sweeting also offers several specific caveats: When a coefficient is identified as being statistically significant at the 5% level, that means that if there was really no statistical correlation between the outcome variable and the explanatory variable, one would nonetheless expect to see a "t-statistic" as large as the one reported less than 5% of the time. Thus when seeing thousands of coefficients one should expect some of them to be statistically significant even when there is no true correlation. Therefore, at a minimum, reviewers of the data results should attach importance to patterns that are robust across several specifications, as these are more likely to indicate true correlations. Although many of the regressions are repeated with and without controls for market demographics, since those demographics may provide a reason for differences in programming (for example, one would expect fewer urban and gospel stations in markets with smaller African-American populations), the results that do not take into account the demographics should be ignored. For the analysis based on station-pairs, when creating pairs the number of observations tends to increase dramatically, which tends to lead conventionally-calculated standard errors to fall and the coefficients to appear to be more significant than they may actually be. Thus one has to be careful when discussing statistical significance. In the Edison data base, different stations were monitored on different days and this could give misleading impressions of programming overlap. For example, some common owners switch syndicated shows across stations in the same market, so that they might appear in the data base as being offered on both stations even though they were never available on both stations on the same day (which seems the more relevant criterion for overlap). The study presents many different measures of programming, but some may be more relevant for policy than others. For example, it may be important to know how ownership affects the number of commercials played or the amount of local news programming, but it is less clear that the balance of music and DJ banter or whether the banter comes in long or short blocks matters. Study 6: "The Effects of Cross-Ownership on the Local Content and Political Slant of Local Television News," by Jeffrey Milyo, Hanna Family Scholar, University of Kansas School of Business, and Associate Professor, Department of Economics and Truman School of Public Affairs, University of Missouri This study examines whether cross-ownership of a newspaper and television station influences the content or slant of local television news broadcasts, by comparing the late evening local news broadcasts of 29 cross-owned television stations located in 27 different markets with those of their major network-affiliated competitors in the same market, for three evenings in the week prior to the November 2006 election. In total, 312 late evening local newscasts were recorded for a total of 104 stations, and these recordings were coded and analyzed for local news content and political slant. The study findings include: Local television stations broadcast approximately 26 minutes of total news coverage, with about 80% of this time devoted to local stories. However, a fair amount of local news is devoted to sports and weather. Local news excluding sports and weather accounts for less than half of total broadcast news time. State and local political coverage averages just less than three minutes per newscast during the week under study. The newscasts of television stations that are cross-owned with newspapers are associated with one or two more minutes of total news coverage (4%-7%) than those of non-cross-owned stations. But radio cross-ownership and other ownership and network characteristics (such as network affiliation or parent company household coverage) are not significant determinants of total news coverage. The newscasts of television stations that are cross-owned with newspapers are associated with 80 to100 seconds (6%-8%) more local news coverage (including sports and weather) than those of non-cross-owned stations. After accounting for time-slot effects, none of the other ownership variables are significant, although the affiliates of old-line networks (NBC, CBS, and ABC) offer several minutes more of local news than the affiliates of newer networks (Fox, CW, and MyNetwork). The pattern of results is very similar for local news coverage excluding sports and weather, except that the positive association between television-newspaper cross-ownership and the amount of local content is largely mitigated. These results suggest that television stations cross-owned with newspapers offer significantly more sports and weather coverage than their non-cross-owned counterparts, but no less of other local news. Television-newspaper cross-ownership is positively, but not significantly, associated with the amount of state and local political coverage in newscasts. But television-radio cross-ownership is significantly associated with an 80 to 100 second reduction—about a 50% reduction—in the amount of state and local political coverage in newscasts. Parent companies with greater household coverage also provide significantly more state and local political news, as do Fox network affiliates. The amount of time allotted to state and local political candidates speaking for themselves is about 10 seconds (40%) greater on the newscasts of television stations that are cross-owned with newspapers than on the newscasts of non-cross-owned stations. Similarly, cross-owned television stations offer about 20 seconds (30%) more coverage of state and local political candidates than non-cross-owned stations, while Fox affiliates show between 30 to 45 seconds more candidate coverage. Other ownership or network controls are not significantly associated with these measures of political coverage. The amount of time allotted to the coverage of partisan issues (the author identifies 12 issues that he categorizes as Democratic issues and 10 issues that he categorizes as Republican issues, based on examining party and candidate websites in the week before the general election) does not vary by cross-ownership status, nor does the amount of time allotted to covering the results of political opinion polls, however both CBS and NBC affiliates devote substantially less time to opinion polls compared to other networks. Based on four measures of partisan slant—differences in speaking time allowed to candidates of each party, differences in time spent covering the candidates of each party, differences in time spent covering issues identified as Republican or Democratic, and differences in time spent on opinion polls favoring one party or the other—it appears that both cross-owned and non-cross-owned stations allocate political coverage fairly evenly. On every measure though, the cross-owned stations exhibit a slight and insignificant Republican-leaning slant. However, Professor Milyo provides the caveat that there is no baseline for determining whether coverage is appropriately balanced or not and therefore no inferences about balance should be made based upon the absolute value of any of these measures. For three of the four measures of partisan slant, there appears to be a significant positive association between the Democratic voting preferences in the local electorate in 2004 (as measured by the vote percentage in the 2004 presidential election for John Kerry) and Democratic slant in the 2006 newscasts of the local stations. This result implies that partisan slant is determined at least in part by demand market forces—stations catering to the voting preference of viewers in their newscasts. The study cannot identify market-wide effects, for example, whether cross-owned stations have some impact on their market as a whole. The peer reviewer, Matthew Gentzkow, assistant professor of economics at the University of Chicago Graduate School of Business, finds the author's multiple regression analysis methodology reasonable, but initially was unable to replicate the results because of what was determined, after discussion with the author, to be two errors in the coding of the data set used to produce the original results. After correcting for these errors, the peer reviewer still could not replicate some of the results. He nonetheless concludes that "my impression from having worked with the data is that the corrections are unlikely to change either the direction or the statistical significance of the coefficients of primary interest." Professor Gentzkow states "the data collected for this study represent a significant advance. The data give a rich, fine-grained picture of the news coverage of local television stations unlike anything that was available before. The sample selection criteria make sense, and maximize the power of the within-market comparisons the author makes. An obvious caveat is that the data cover only three days in November 2006. The differences found may or may not be similar to differences that would be found in other periods. The author acknowledges this issue clearly...." Professor Gentzkow explains that coding the content of a news broadcast is challenging and inherently subjective, but states that the author focused primarily on measures such as minutes of news in particular categories that are well-defined, easy to interpret, and potentially replicable, though the procedure for identifying the partisan issues used to measure political slant was more subjective than some of the other measures. Professor Gentzkow raises one concern with the results as reported. All of the specifications of primary interest include both a main effect of the newspaper-cross-ownership variable and an interaction between this variable and the radio-cross-ownership variable. The conclusions as reported are based on the main effect coefficients without taking account of the interaction. This means that the reported differences apply only to the subset of stations that are not cross-owned with radio rather than to the sample as a whole. Study 7: "Minority and Female Ownership in Media Enterprises," by Arie Beresteanu, Assistant Professor, Duke University Department of Economics, and Paul B. Ellickson, Assistant Professor, Duke University Department of Economics This study examines the data collected in the 2002 Survey of Business Owners (SBO) to identify the extent of female and minority ownership in the radio, television, and newspaper industries in the United States, and to provide a direct comparison with the broader universe of U.S. businesses. It also makes a few recommendations regarding how the FCC should proceed in analyzing minority and female ownership of media enterprises. The authors emphasize that, due to the nature and quality of the available data, they are not able to reach strong conclusions, so their recommendations should be viewed more as points of discussion than prescriptive for policy. The study finds: Based on the most complete data source available (the 2002 SBO), minorities and females are under-represented in the three industries relative to their proportion of the U.S. population, though these patterns hold across the broad run of industries, as well. Approximately 51.1% of the U.S. population is female, but women own only 14.01% of radio stations, 13.68% of television stations, 20.25% of newspapers, and 17.74% of all non-farm businesses. Approximately 13.40% of the U.S. population is Hispanic, but Hispanics own only 3.71% of radio stations, 6.04% of television stations, 1.58% of newspapers, and 3.85% of all non-farm businesses. Approximately 12.68% of the U.S. population is Black, but Blacks own only 4.35% of radio stations, 4.89% of television stations, 2.44% of newspapers, and 1.82% of all non-farm businesses. Approximately 1.22% of the U.S. population is American Indian, but American Indians own only 0.17% of radio stations, no television stations, 1.00% of newspapers, and 0.47% of all non-farm businesses. Approximately 4.41% of the U.S. population is Asian, but Asians own only 2.27% of radio stations and 3.24% of newspapers. Asians own 6.03% of television stations and 6.21% of all non-farm businesses. The figures listed above are for non-publicly-traded enterprises. If publicly-traded companies were included, the ownership shares of women, Hispanics, Blacks, American Indians, and Asians would be slightly lower. Since the observed ownership asymmetries are economy-wide, they are undoubtedly linked to broad systematic factors not specific to these particular industries. While a full accounting of the causes of these systematic trends is beyond the scope of this analysis, it appears that access to capital is a primary cause of under-representation for minorities. This is suggested by a review of the market shares of the top 4, top 8, top 20, and top 50 firms in a full set of industries for which data are available. The concentration ratios in the information category, and specifically in radio and television broadcasting, are very high, which is indicative of high barriers to entry, most likely in the form of capital requirements. A review of the Survey of Consumer Finances, conducted every three years by the U.S. Federal Reserve, shows that the ratio of median net worth between whites and nonwhites was about 6.6, and the average ratio of mean net worth between whites and nonwhites was 3.5. Thus, minorities on average have significantly less personal capital at their command to meet the capital requirements of a media enterprise. Deeper analysis with more data would be needed to address the position of females. The data currently being collected by the FCC is extremely crude and subject to a large enough degree of measurement error to render it essentially useless for any serious analysis. The author makes the following recommendations: The FCC should take steps to improve its data collection process. Strong effort should be made to ensure a full, consistent, and accurate reporting of ownership status and its composition, as a long run endeavor. Information on minority and female ownership should be carefully tracked and integrated into the main firm database in a coherent fashion. Currently, the FCC simply flags as minority- or female-owned any firm with greater than 50% female or minority ownership. This information is maintained as a separate and incomplete spreadsheet that is not linked to the broad census of firms. Firms should be classified not only by race and gender, but also by whether the company is publicly traded or privately owned. Efforts also should be made to track the demographics of minority as well as majority stakeholders. More broadly, the FCC should further examine the rationale behind this exercise. The Commission should ask whether there are quantifiable benefits to increasing minority and female ownership and how ownership policies affect change; to what extent media content is driven by demand (that is, consumer preferences for certain types of programming or for slanted news coverage) rather than supply (that is, owner preferences); whether owner preference can only be imposed through a controlling interest rather than a minority interest; whether publicly-traded firms feel pressure to be broadly representative in their programming; how non-traditional media, such as the Internet, change the debate. The peer reviewer, B.D. McCullough, Professor of Decision Sciences at Drexel University, states that "The FCC should have contracted with the authors to do a full-blown study of the problem rather than simply conduct a small and perfunctory analysis." He states this issue requires sophisticated analysis that might show the extent to which the ownership disparity is explained by such relevant variables as education and industry experience. In the absence of such analysis, all the disparity is incorrectly attributed to the single factor of race or gender. Moreover, the minority categories are too aggregated—for example, Hispanics "lumps together Puerto Ricans, Mexicans, and Cubans, despite overwhelming evidence that these groups are remarkably dissimilar in terms of mean education, income, health, etc." Professor McCullough questions the authors' claim that lack of access to capital is a primary cause of under-representation for minorities, since the analysis "does not include education, work experience, or any of a host of other variables." The actual assertion of "a link between race and access to capital would require a great deal of [additional] work." With respect to the authors' recommendation that the FCC track and integrate information on minority and female into the main firm database, Professor McCullough states the authors "should have offered their considered opinion on how to define the variables they want collected." Study 8: "The Impact of the FCC's TV Duopoly Rule Relaxation on Minority and Women Owned Broadcast Stations 1999-2006," by Allen S. Hammond, IV, Professor, Santa Clara University School of Law, with Barbara O'Connor, Professor of Communications, California State University at Sacramento, and Tracy Westin, Professor, University of Colorado The purpose of this study is to ascertain the impact of the relaxation of the television duopoly rule on minority and female ownership of television broadcast stations. In 1996, that rule was amended to allow the ownership of two television stations in certain markets, provided only one of the two was a VHF station, the overlapping signals of the co-owned stations originated from separate (though contiguous) markets, and the acquired station was economically "failing" or "failed" or not yet built. Because the FCC did not begin collecting data on the race and gender of broadcast station owners until 1998, the period studied was 1999 to 2006. The study does not provide econometric analysis. Rather, it (1) identifies the transactions resulting in television duopolies that could not have occurred before the rule change and (2) determines the number of commercial broadcast television stations that were purchased or sold by minority or women owners in markets in which a television duopoly was introduced that could not have existed before the rule change. The study finds: From 1999 to 2006, the relaxation of the duopoly rule did not appear to have a positive impact on minority and female ownership of television stations; instead, the major beneficiaries were the largest 25 television broadcast station owners. The relaxation of the duopoly rule codified the existing contractual relationship (local management agreements or LMAs) between group station owners and the stations they managed. LMAs allowed television broadcasters (that were not allowed to be jointly owned) to combine their operations to reduce their costs by sharing staff and/or programming, to expand their market reach by combining signal coverage, to increase their advertising revenue shares by controlling access to a larger percentage of a desirable market segment and/or providing more opportunities to air programming. Some group station owners leveraged their control of LMAs into control of access to attractive syndicated programming as well as access to programming affiliated with emerging networks. The broadcast group owners that benefitted from the relaxation of the duopoly rule were primarily the largest broadcast group owners (those in the top 25 based on revenue, national market reach, and/or number of stations owned). As of 2005, they accounted for 83 of the 109 (76%) duopolies identified. Many of the group owners that managed "sister" (LMA) stations acquired those stations outright once the duopoly rule was relaxed. Only one minority-owned duopoly was created. It has since been dissolved. Since there were no preexisting minority-owned duopolies, there were no surviving minority-owned duopolies. Across all markets in which minority-owned television stations operated between 1999 and 2006, the number of minority-owned television stations dropped by 27%. Within markets entered and/or occupied by television duopolies, the number of minority-owned stations dropped by more than 39%. By contrast, in non-duopoly markets the number of minority-owned stations dropped by 10%. The duopolies created in markets in which female-owned television stations operated were non-female owned. Since there were no pre-existing female-owned duopolies, there were no female-owned television duopolies. 36% of the female-owned stations operating in duopoly markets were sold. All of the stations were sold to non-female, non-minority owners. Female-owned stations were more likely to be found in non-duopoly markets. In addition, the study presents, but does not analyze, a number of hypotheses about the relationship between the revised duopoly rule and minority/female ownership that have some logical appeal but remain untested and unproven. For example, it presents an argument made in 1992 by a minority broadcaster who was concerned that increasing ownership caps or loosening duopoly rules would reduce opportunities for minority ownership. That broadcaster claimed that relaxation of ownership rules in 1985 caused an increased demand for stations that were attractive as second television properties in a market, and the resulting sharp increase in station prices placed minority-owned stations in "double jeopardy"—they couldn't afford to trade up to the better facilities and the stations against which they were competing were rapidly becoming parts of large broadcast groups capable of bringing significant economies of scale to the market. This argument, on its face, appears reasonable, but on its own does not demonstrate how significant the relationship is between the dual ownership rule and minority ownership. During the time period cited by the minority broadcaster, the FCC's old minority tax certificate program was in place and appeared to be successfully fostering the sale of broadcast properties to minority owners. The dual ownership rule was loosened in 1996, just one year after Congress eliminated the tax certificate program. The authors found that minority ownership has fallen significantly since 1999 (the first year that data on minority- and women-ownership were available). But they do not perform analysis that helps determine how much of that decline is attributable to the loosened dual ownership rule, how much to the elimination of the tax certificate program, and how much to other factors. The peer reviewer, B.D. McCullough, Professor of Decision Sciences at Drexel University, states "This report is fatally flawed by a fundamental logical error that pervades every aspect of the analysis." Referring to a finding in the study that minority-owned stations were four times more likely to be sold in duopoly markets than in non-duopoly market, Professor McCullough states In the context of their report, their obvious implication is that the existence of duopoly is the reason that minority stations were observed to be sold more frequently in duopoly markets rather than in the non-duopoly markets. This could only be logically inferred if the duopoly and non-duopoly markets were identical in all other respects, which the authors did not show because they could not show this. Since the markets are not identical, some effort must be made to control for the differences between the duopoly and non-duopoly markets.... There exists a wide variety of statistical and econometric techniques to control for these differences, yet the authors employ not a single one.... The authors had access to the BIA database and could easily have made some effort to control for confounding variables. That the authors did not bother to control for confounding variables completely vitiates their analysis of minority-owned stations. The same is true for the "women-owned" portion of their report. The authors do document that the number of minority- and/or women-owned broadcast stations changed during this time. Their error is to attribute this change solely to the relaxation of the duopoly rule, without consideration of any simultaneously occurring economic or demographic phenomena. It may well be true that the Duopoly Rule relaxation was the cause of the decline in the number of minority-owned and/or women-owned broadcast stations, but the authors have not provided any evidence thereof. There was another economic study addressing the television duopoly rule submitted in the proceeding. In its reply comments, the National Association of Broadcasters (NAB) included a December 2006 study entitled "The Declining Financial Position of Television Stations in Medium and Small Markets," which provides financial data to support its contention that "a relaxation of this rule to permit co-ownership of television stations in smaller markets would provide needed financial relief to television broadcasters, and allow television stations to compete more effectively with cable operators and other multichannel video programming distributors." The study examines the profitability of television stations in markets 51-175 for the data years 1997, 2001, 2003, and 2005. It finds: profit margins are already at risk today, especially for the lower rated affiliated stations. It is clear that overall these stations show declining profitability in the years examined. Furthermore, those stations located in the smallest of markets are also now at a stage where the average low rated station experienced actual losses. Declining network compensation coupled with increasing news expenses adds to the tenuous financial situation of these small market stations. It concludes that: "As this study demonstrates, a relaxation of the television duopoly rule to permit common ownership of two stations in smaller markets would provide needed relief for these struggling stations, thereby increasing the strength of local television." The NAB study is based on a selective choice of data. It uses only the financial data for odd-numbered years, omitting the data for even-numbered years when political advertising generally adds to the revenues of television stations without imposing comparable costs. Television station profitability tends to be higher in even-numbered years. Given that station revenues and profitability follow a relatively predictable cyclical pattern, it is appropriate to analyze data that incorporates the entire cycle, not just the predictably lower performance period in the cycle, to determine the real financial health of the industry. The NAB study therefore appears to be biased. Study 9: "Vertical Integration and the Market for Broadcast and Cable Television Programming," by Austan Goolsbee, Robert P. Gwinn Professor of Economics, University of Chicago Graduate School of Business, American Bar Foundation, and National Bureau of Economic Research This study examines the prevalence of vertical integration in television programming, presenting findings relating to whether integrated producers systematically discriminate against independent content in favor of their own content. It separately addresses prime-time broadcast programming and cable network carriage. Its focus is on the impact of vertical integration on independent programmers—whether broadcast networks discriminate against programming they do not have an ownership stake in and whether cable and satellite operators discriminate against cable networks they do not have an ownership stake in. It attempts to measure this by performing regression analysis on the ratings of, and advertising revenues generated by, in-house and independent programming carried by vertically integrated broadcast networks. If the ratings for and/or advertising revenues generated by their in-house programming is consistently lower than those of the independently produced programming that they carry, that would suggest that they favor their own programming, even when it is less sought out by viewers. Similar analysis is performed for cable networks, focusing on the number of subscribers and viewers of and on subscriber fees and advertising revenues generated by the vertically integrated and independent cable networks carried by MVPDs. This study does not address another issue related to vertically integrated cable or satellite providers—whether they use their position strategically by refusing to make their in-house "must have" programming available to competing distributors. The principal findings of the study are: Using four different measures of vertical integration, in each case the data document that a large fraction—typically the majority—of the programming on any broadcast network during prime-time was made "in-house." The distribution of independently produced programs—those with no affiliation with a network company at all—is fairly evenly spread across the networks, while the programs produced by production companies that have an ownership tie with a network are "overwhelmingly more likely" to be broadcast on their affiliated network. From the perspective of how many people watch a particular program, on the margin, there is little evidence that independently produced prime-time broadcast programming differs from in-house programming in the same time slot. Just as many people watch one as watch the other. But from the perspective of a program's total advertising revenue, vertically integrated prime-time broadcast programs perform worse than independent ones. Independent shows in the same time slot and the same season must have 16% greater advertising revenues to get on the air. Even controlling for the demographic characteristics of the audience, the advertising revenues on the margin are significantly lower for the vertically integrated shows than for independent programming, consistent with them being held to a lower standard than the independents. The non-in-house programming aired by a broadcast network can be produced by an entirely independent program producer or by a program producer that has an ownership affiliation with another broadcast network. When this distinction is taken into account, on the margin the vertically integrated programs have 25% less advertising revenues and the fully independent programs have 23% less than programs made by production companies with ownership ties to rival broadcast networks. This result suggests that a cost-based efficiency explanation for vertical integration—that networks apply a lower standard to their own programs because they can make them more cheaply—probably will not suffice. Those efficiencies would not exist when the programming is truly independently produced, and thus one would expect the networks to require independent programming to generate more advertising revenues than in-house programming to gain network carriage. That the networks appear to demand approximately the same amount of advertising revenue generation suggests that efficiencies from in-house production is small. It is possible that the differential in advertising revenues generated by truly independent programming and programming produced by companies with ownership affiliations with rival networks may reflect that rival networks have more bargaining power over syndication revenue (revenues generated by the programming when it is no longer aired on prime-time network television). If a broadcast network can't get part of the syndication profits from the program's producer, it may require that show to generate higher advertising revenue to put it on the air. With respect to cable program networks, there are network-level data on the performance of channels nationally and system-level information about what networks a system carries, but there are not system-level data on network performance, so the evidence is more suggestive than the evidence available on the broadcast networks. The concentration, on a national basis, of the largest MVPDs has grown over time with the considerable consolidation of cable and the rapid growth of DBS. On a market-by-market basis, however, the opposite has occurred. Each market has gone from a virtual monopoly for the local cable franchise to a market where the cable franchise shares the market with the two major DBS providers (and now there is beginning to be entry in some markets from the two major telephone companies, AT&T and Verizon). Of the top 15 cable networks, as measured by the size of their prime-time audience, the share of vertically integrated networks—defined as networks that have an ownership affiliation with an MVPD (but excluding networks that have an ownership affiliation with a major media company that does not own an MVPD, such as Disney or Viacom)—has been falling over time, from eight in 1997 to four in 2005. The share of cable networks owned at least in part by an MVPD fell from 40% in 1996 to 20% in 2005. But many of the cable networks without any MVPD ownership are owned by giant media companies. "It is difficult to find a single major cable network owned by someone other than a major media conglomerate." There is a very small negative effect of vertical integration on the number of subscribers a cable channel has. When a channel goes from being independent to being owned by an MVPD, it loses subscribers. But there is a small positive effect of vertical integration on the subscriber growth rate. When a channel goes from being independent to being owned by an MVPD, its subscriber growth rate increases by a small amount. Looking at the subset of networks where there are data on the number of viewers as well as the number of subscribers, holding the number of subscribers constant, the number of viewers actually watching the channel falls when it becomes vertically integrated. Looking at the impact of becoming vertically integrated on the amount of license revenue the cable network gets from the distribution systems and the amount of advertising revenue it generates (that is, the two sources of revenues for the programming) and the amount spent on programming (that is, the cost of providing the programming), there is very little evidence that vertical integration of a channel has any noticeably beneficial impact on revenues or costs. The same network performs exactly as well before and after it is vertically integrated. Since some of the economics literature suggests that the efficiencies of vertical integration flow only to start-up networks, not to well established ones, analysis also was performed for the subset of networks that were started since 1997. Results for these younger networks showed no major differences from the results for all networks. There is no evidence that when new networks become vertically integrated it increases subscribers or changes their subscriber growth rates. Excluding the major vertically integrated cable network that are carried on virtually all major cable systems, and focusing instead on 11 wholly or partially vertically integrated basic cable networks that have carriage rates between 5% and 90%, nine of those cable networks showed evidence that cable systems are significantly more likely to carry the cable network if they have an ownership interest in the network. But for nine of the 11 networks, the higher the DBS share in the local market, the more attenuated that relationship becomes. For those nine, the interaction of vertical integration with the DBS share has a significant negative coefficient. This evidence suggests, perhaps, an explanation for vertical integration rooted in competitive pressures rather than efficiencies. The DBS share that makes the vertical integration effect equal to zero averages around 20%-25%. Thus for at least a subset of the networks there is evidence consistent with the view that DBS competition reins in the ability of cable systems to use a vertically integrated position to promote their own channels. At the network level, there is little evidence that vertically integrated cable networks attract more subscribers, grow faster, raise more advertising revenues or licensing fees, or have lower programming costs. The peer reviewer, David Waterman, Professor, Indiana University Department of Telecommunications, generally finds the regression analysis used in the broadcast portion of the study to be a valid methodology. But he states, "the results of this regression must be regarded as suggestive rather than conclusive, at least in the absence of a more detailed vetting of the results' robustness to alternative model specifications. As the report acknowledges, program profits [rather than revenues] are the desired measure and meaningful cost measures are not available." He indicates that "there are large differences in prime-time program costs by program format (e.g., sitcom, variety, drama) as well as by network, that may not be captured by the model, and could thus bias or invalidate the results." With respect to the cable portion of the study, Professor Waterman notes that "the overwhelming majority of 'independent' cable networks successfully launched in the period of the study are owned by affiliates of large media conglomerates who do not have cable system interests ... which implies that the financial resources or bargaining leverage in common to the large corporations which also own numerous other established networks, rather than vertical integration itself, may be the most significant advantage that successful cable network suppliers now have." He states that the study uses regression techniques that show vertical integration to have little or no positive effect on cable network performance. But "[i]n my opinion, this regression analysis, while interesting and suggestive, employs a methodology that makes interpretation of the results questionable." The primary measure of vertical integration in the study—the ratio of the total national subscriber base of the MVPD that owns the network to the network's national total of subscribers—has some desirable characteristics, but it is difficult to interpret because it combines in one functional form three separate aspects of vertical integration's potential effects: the fact of integration itself, the influence of MVPD size, and the variations of influence that integration may have over a network's life cycle. It therefore is difficult to understand the effects of integration per s e. Professor Waterman finds the models and estimation methods used in the analysis of the 11 basic cable networks with between 5% and 90% national market penetration are valid and the author's conclusions are reasonable. But he states that the study does not address the effects of vertical integration on the carriage of independently owned networks and does not consider whether the various integrated networks (or their non-integrated rivals) are carried on basic tiers or on generally less accessible digital tiers. Study 10: "Review of the Radio Industry, 2007," by George Williams, Senior Economist, Media Bureau, Federal Communications Commission This is the FCC's fifth review of the radio industry. It is primarily a data collection exercise, presenting data on changes in the industry since passage of the 1996 Telecommunications Act, including trends in ownership consolidation at the national and local levels, ownership diversity, format diversity, satellite radio, radio industry financial performance, radio listenership, and radio advertising rates. It presents some hypotheses, such as the impact of radio ownership consolidation on radio advertising rates, but does not reach conclusions. Among its findings and hypotheses are: From March 1996 to March 2007, the number of commercial radio stations in the United States increased by 6.8%, to 10,956. During the same time period, the number of owners declined 39%, from 5,133 to 3,121. The decline in the number of owners reflects a continuation of the consolidation of the commercial radio industry that has occurred since passage of the 1996 Act; however most of the consolidation occurred in the years immediately following passage in 1996. From 1996 to 2000, on average 18.5% of radio stations changed hands each year; from 2001 to 2006, the annual average fell to 7.8%. From 1996 to 2002, the number of radio station owners with 20 or more stations doubled from 25 to 50; in the last five years that figure has increased to 60, a change of only 20%. The two largest radio group owners in 1996 owned fewer than 65 radio stations each. In March 2002, the two largest radio group owners owned 1,156 and 251 radio stations, while the third, fourth, and fifth largest held 206, 184, and 100 respectively, representing a substantial shift in consolidation. As of March 2007, the two largest radio group owners consisted of 1,134 and 302 radio stations, while the third, fourth, and fifth largest held 226, 159, and 110, respectively. And the largest group owner, Clear Channel Communications, in November 2006 announced plans to restructure itself and sell 448 stations. Thus, consolidation has increased only slightly since 2002 and appears to be about to decrease. Approximately 60% of all commercial radio stations are licensed to communities in the 299 radio markets delineated by Arbitron; more than three-fourths of the U.S. population resides in these markets. In the 50 largest markets, on average, the top firm holds 34% of market revenue, the second firm holds 24%, and firms three and four split an additional 26%. For the 100 smallest markets, on average, the first firm holds 54%, the second firm holds 30%, and the next two firms split 13%. Overall, in 189 of the 299 Arbitron radio markets (over 60% of the markets), one entity controls 40% or more of the market's total radio advertising revenue, and in 111 of these markets the top two entities control at least 80% of market revenue. Although there has been an historical trend toward greater concentration in local radio markets, this trend has substantially tapered off over time, with no substantial change in four-firm concentration ratios between March 2002 and March 2007. The decline in the number of radio owners nationally reflects a general trend across Arbitron markets, and not simply consolidations in a few large or small markets. In March 2007, the average number of owners across all Arbitron markets was 9.4, with a range of 6.5 in the smallest markets (ranks 101-299) to a high of 23.9 in the 10 largest markets. In March 2006, the average number of owners in an Arbitron market was 13.5. The average number of radio formats available in an Arbitron market has been about 10 over the March 1996-March 2007 period, with no trend in either direction. The smallest markets have offered an average of nine formats; the 10 largest markets have offered an average of 16 formats. The number of formats declines as the market gets smaller. However, while the average number of formats nationwide has held steady, the number of formats has declined slightly in some of the larger markets while increasing in most of the smaller markets. The Report states that the chosen measure of format, based on format categories in the BIA Radio Database, may not be the best proxy for capturing the diversity of programming. The growth in subscriptions to the two satellite radio services—Sirius and XM—has been dramatic, increasing more than 100-fold since 2002, to more than 14.5 million subscribers. The earnings before interest and taxes margin (EBIT margin), defined as the ratio of a firm's earnings (before subtracting out interest and taxes) to the firm's total sales, represent the gross profit margin of a company. Before 2001, the quarterly gross profit margins of the publicly traded radio broadcast companies were greater than the gross profit margins of the S&P 500 companies for 15 out of 21 quarters. The median EBIT margin for the study sample of radio companies fell below the median S&P 500 companies during 2001, but the radio companies have consistently outperformed the S&P 500 median since the first quarter of 2002. Throughout the period, the gross margins of the radio companies show a strong seasonality, with gross margins generally highest during the second and third quarters of the year. The net profit margin, defined as the ratio of a firm's net income to its sales, reflects the operating performance of the firm after netting out interest and taxes from the EBIT margin. While radio companies are realizing greater gross profits than the typical S&P company, they are netting less than the benchmark S&P company. New profit margins for radio companies remained substantially below those for the typical S&P company during 2001 and the first quarter of 2002. After the first quarter of 2002, the trend for net profit margins for radio companies appears to have risen, while the trend for the median S&P 500 company appears to have risen slightly. The overall pattern of radio companies realizing larger gross profits but netting less than the typical S&P firm suggests that radio companies either are paying more in taxes than other firms are, or are paying more in interest than other firms (that is, using more debt to finance operations). Debt as a percentage of total capital represents a measure of a firm's debt load and is the typical measure of a firm's relative use of debt capital vs. equity capital. The publicly traded radio companies have generally used more debt than the typical S&P 500 company to finance operations and growth. Therefore, the radio companies' lower net profit margins result, at least in part, from the greater interest expense of these companies. Another effect of the greater debt loads (leverage) is the increase in the volatility of radio-sector earnings compared to the less-leveraged S&P 500 companies. This increase in volatility is seen by comparing the variability of the radio-sector median EBIT Margin and net profit margin values with those of the S&P 500 firms. Publicly traded radio companies' debt as a percentage of capital declined over time until the third quarter of 2004, approaching the debt load of a typical S&P 500 company. However, since then, the ratio of debt to total capital for publicly traded radio companies has increased significantly and remains well above the S&P benchmark. Fixed charge coverage after taxes is a measure of a firm's ability to pay its interest expense out of its net income. This is measured as the ratio of quarterly net income (before extraordinary items) divided by interest expense, from which 1 is subtracted. The ratio measures how many times the interest expense is "covered" by the company's net income, which provides a sense of the company's ability to manage its debt load. While not generating the same level of net income to interest expense as other companies, the publicly traded radio companies appear to be generating enough cash flow to meet their interest obligations. Fixed charge coverage for radio stations remains positive for all quarters except the first and third quarters of 2001 and the first quarter of 2002. Fixed charge coverage rose substantially after the first quarter of 2002 for the radio sample and after the first quarter of 2003 for the S&P 500. The market to book ratio is defined as the ratio of a firm's market value of equity, which is the accounting value that remains of a firm's assets after the firm pays off its creditors. The market to book ratio is a useful measure of the market's assessment of that firm's future prospects. Until the year 2000, the market placed higher valuations on radio properties and operations than those of other companies, such as those reflected in the S&P 500 median market to book values. The market to book ratios of the radio companies exceeded those of the S&P 500 companies in all 17 quarters before 2000. However, in the first quarter of 2000, the median market to book ratio for the study sample of radio companies dropped below that of the median S&P company, and has remained below the S&P level ever since. This seems to suggest that the market value of radio companies relative to book value had declined relative to the S&P 500. Quarterly stock market returns of the publicly traded radio and S&P 500 companies are calculated by including their cash dividends in the return calculation. This return measure reflects both stock price appreciation and the return of cash in the form of dividends to shareholders. While the typical radio company's returns have varied more than those of the typical S&P company, radio company stocks overall outperformed the broader market, as reflected in the S&P 500 median stock returns, in most quarters, until the year 2000. The greater volatility of the radio companies' stock market returns is related to the greater leverage of (greater use of debt by) these companies. But stock returns for radio companies declined sharply throughout 2000 and 2001. Beginning in 2002, radio companies' stock market returns bounced back relative to the S&P 500, even exceeding it in some quarters. Since 2004, the radio companies seem to have underperformed the S&P 500. The decline in stock returns in 2000 and 2001 likely was the result of the slowing economy during that time. Revenues in radio depend exclusively on advertising, and a firm's willingness to advertise is highly sensitive to how much consumers are buying. The percent change in retail sales and food services (adjusted for inflation) fell sharply beginning in the second quarter of 2000. Retail sales growth rates, while somewhat volatile, have rebounded from the 2001 trough, but have not reached the peak growth rates of 1999. A possible source for radio's stock decline may be the slowing of the radio industry's consolidation. As opportunities for increased profit through radio acquisitions have dwindled, investors' have placed a lower value on the radio industry, depressing the value of the radio industry's stock. The trend in the average number of listeners to radio per quarter hour has continued to fall since 2002. From autumn 1998 to autumn 2006, Arbitron reports that the average number of listeners per quarter hour has fallen from approximately 19.7 million to 18.4 million, a drop of 6.6%. While listenership declined slightly between autumn 1998 and autumn 2000, listener ratings held steady between the summer of 2000 and the early portion of 2005. During 2005, however, radio listenership appears to have taken another substantial dip. Between autumn 1998 and autumn 2006 the average annual decline in the average number of listeners per quarter hour is 0.82%. Average radio advertising prices have increased since September 1996. From 1996 to 2002, radio advertising prices increased steadily in excess of the consumer price index (CPI). Radio advertising prices dipped between 2002 and 2004 before continuing to increase. The dip in prices was probably a lagged response to the sharp decline in growth in retail sales. Overall, it appears that the cost of radio advertising has nearly doubled since the 1996 Act was passed. By contrast, the CPI increased 29% during the same period. In other words, the CPI increased approximately 3% per year during this time period, while the annual growth rate in radio advertising prices was approximately 10%. Radio consolidation may have an effect on radio advertising prices if advertisers have fewer radio owners to bargain with over prices. Consolidation in the radio industry may allow radio companies to exercise market power in local markets or possibly nationally. The peer reviewer, George Ford, Chief Economist of the Phoenix Center for Advanced Legal and Economic Public Policy Studies, found the discussion of the descriptive statistics relies on established techniques and theoretical concepts. He found the study's interpretation of the trends in the financial indicators to be consistent with standard professional practice. "While others may have different interpretations of the trends, those used in this study are sensible and consistent with professional standards." He stated the data sources used are generally viewed as reliable and their use for this study is reasonable. Dr. Ford has one substantive criticism: "In my opinion, the statistics do not support the argument that consolidation has slowed (though they are consistent with the argument). Consolidation need not be the consequence of stations sales; concentration arises only when such sales reflect a purchase by entities that already own radio stations." The Filing by the Consumer Commenters The Consumers Union, Consumer Federation of America, and Free Press jointly submitted a 321-page document that, among other things, presents detailed criticisms of the 10 FCC-commissioned studies and provides the results of their own econometric models. These models were constructed by revising some of the econometric models in the FCC-sponsored studies to "correct for" perceived mis-specifications that either had been identified by the peer reviewers or by the Consumer Commenters themselves and were run using the data from the FCC studies. The Consumer Commenters state that "One of the positive externalities of the 10 studies is the creation of a usable data set for the public to use to conduct policy analysis of its own." But once they perform their own analysis, the Consumer Commenters claim that: Once definitions are corrected and policy relevant variables included in properly specified statistical models, there is no support in the FCC data to relax media ownership limits. In fact, the FCC's data show the opposite result. Newspaper-broadcast cross-ownership results in a net loss in the amount of local news that is produced across local markets by broadcast stations. The Commission has studied the impact of these mergers only at the station level, rather than at the market level. At the market level, cross-ownership results in the loss of an independent voice as well as a decline in market-wide news production. This finding obliterates the conclusions of the recent studies on cross-ownership as well as the basis for the Commission's argument for relaxing the rule in the Prometheus case. The Consumer Commenters' studies were submitted during the comment period in the proceeding. The public was given 15 days to submit reply comments responding to the comments. Media General, Inc., submitted reply comments that included an appendix by Dr. Harold Furchtgott-Roth, entitled "Econometric Review," that raised methodological issues with, and challenged the conclusions of, the Consumer Commenters' studies but did not provide regression analysis of its own. The Consumer Commenters' Criticisms of the FCC Studies The Consumer Commenters present a number of criticisms of the FCC studies. Some of these involve relatively narrow technical matters of model specification that are unrelated to whether the models address the right policy issues but may have significant implications for the statistical analysis. These criticisms should be addressed by expert econometricians capable of vetting their seriousness. Other criticisms raise fundamental questions about whether the models in the FCC-commissioned studies address the right policy issues or are constructed in a fashion that allows the statistical results to be unambiguously interpreted. Here are a few of the Consumer Commenters' policy-related criticisms. Analysis should be performed at the market level, not at the level of individual stations The Consumer Commenters' most fundamental criticism is that, with the exception of Study 5 on radio ownership, the FCC-sponsored studies address the effect of cross-ownership on the local news output of the cross-owned stations, rather than the effect on the local news output in the entire market: From the standpoint of the individual citizen, it is the total amount of available news and the diversity of independent voices offering that news in the entire market that matters. While in some cases there may be an increase in news output at the individual cross-owned station (although much of this is sports and weather), examining the question at the market level reveals a decline in the total output of local news for the market as a whole. It is possible for cross-ownership to lead to increased local news programming by the cross-owned station, but decreased local news programming for the overall market. For example, cross-ownership might reduce the news production costs or increase the advertising revenues of the cross-owned station, thus fostering more spending by that cross-owned station on local news programming, but at the same time reduce the advertising revenues and news audience for competing stations, thus discouraging them from providing local news programming. The latter effect could be greater than the former, resulting in less total local news programming. Analysis of cross-ownership should distinguish between cross-owned television stations that had been grandfathered in 1975 and those created subsequently by waiver of the rules The Consumer Commenters claim that there are two very different types of stations that make up the category of television stations cross-owned with newspapers—those that were grandfathered at the time the cross-ownership rule was first adopted in 1975 and those that have been created subsequently through the waiver process. TV-newspaper combinations with waivers involve the recent entry of a TV station into a cross-ownership situation. The owners bought the news operation, they did not create it. To claim that the behavior of the acquired stations reflects the effects of cross-ownership is simply incorrect—in the form of an error of confusing correlation with causation. Cross-ownership did not create the behavior. Since the grandfathered situations have been in place for a long period of time, it is much more reasonable to argue that the behavior of the TV stations in those combinations reflects the long-term effect of cross-ownership. The waived cross-ownership situations have been created recently, primarily by the merger of highly rated TV stations in large, competitive markets with dominant newspapers. The acquired stations produced more news before they merged and, lacking time series data, the analysis claim, "benefits" of cross-ownership that just reflect the acquisition of a station that already did more news.... The stations that entered into cross-ownership combinations in recent years, subject to waiver, were in less concentrated, larger markets with higher market shares. The newly minted TV-newspaper combinations are also likely to behave differently for another reason.... [B]ecause they are subject to a waiver, they are likely to be on their best behavior. If the waivers are made permanent by a change in the policy, their behavior may change, perhaps in the direction of the grandfathered stations. One key study inappropriately addresses all news programming and all public affairs programming rather than local news programming and local public affairs programming The Consumer Commenters argue that since localism is one of the three primary goals of U.S. media policy, the FCC studies should focus on the impact of media ownership characteristics on local news and public affairs programming. But one key study, Study 4, Section I, "The Impact of Ownership Structure on Television Stations' News and Public Affairs Programming," does not address local news programming or local public affairs programming, but rather looks at the impact of media ownership characteristics on all news programming and all public affairs programming. Some of the FCC-commissioned models fail to account for key station and market characteristics The Consumer Commenters, based in part on comments made by the peer reviewers, claim that some of the FCC-commissioned models fail to account and control for key station and market characteristics that may affect programming. These include: the existence of a television duopoly in the market/whether a particular station was part of a duopoly. the existence of Local Marketing Agreements in the market/whether a particular station was part of an LMA. market concentration, as measured by the Herfindahl-Hirschman Index (HHI) used by the antitrust authorities. The three long-standing goals of United States media policy are localism, diversity of voices, and competition. Market concentration is a measure of competition. whether the television station is owned and operated by, or affiliated with, one of the four major television networks (ABC, CBS, Fox, and NBC). These tend to be larger stations, with higher revenues, and might be able to provide more local news programming. the age of the television station and/or whether it is a VHF or UHF station. (These two variables are highly correlated because television was first offered over the VHF spectrum and only later offered over UHF spectrum.) VHF signals are stronger and their reception tends to be better, so, other things equal, VHF stations tend to have larger reach and greater revenues, which might increase their ability to provide local news programming. They also are more likely to be owned and operated by, or affiliated with, one of the four major television networks, again influencing revenues and perhaps programming. The FCC has failed to adequately account for the true level of female and minority ownership or to analyze the impact of relaxing ownership limits on minority ownership The Consumer Commenters fault the FCC for failing to create an accurate census of the gender and race of broadcast licensees based on its own data and for allegedly commissioning two last-minute studies (Studies 7 and 8) in the absence of usable data on minority ownership. They state that the Commission's flawed data on minority and female ownership infected all of the major statistical studies of the broadcast media (Studies 3, 4.1, and 6) and claim that closer examination of corrected data shows that relaxation of media ownership limits reduces minority ownership. The Consumer Commenters claim (at p. 14) that the authors of the two external studies of minority issues commissioned by the FCC "abandoned the FCC's data base and were forced to resort to other data bases. Our own efforts to construct an accurate census of minority ownership suggest that the FCC has missed between two-thirds and three-quarters of the stations that are minority/female owned." According to the Consumer Commenters, the "main issue [with the two studies of minority issues] is the absence of usable data." The authors of Study 7 relied on a Bureau of Census count of firms to estimate minority ownership. But the Consumer Commenters claim that the authors should have counted stations, not firms, since on average minority-owned firms have fewer stations than majority-owned firms, so data on minority-owned broadcast firms as a share of all broadcast firms will overstate the actual representation of minorities in broadcast ownership. The Consumer Commenters state that the authors of Study 8, which analyzes the impact of the FCC's duopoly rules on minority ownership, sought to build an accurate data base, but did not achieve that goal. Nonetheless, the Consumer Commenters state "the study is supportive of our independent findings. It finds that sales of minority stations were twenty times higher in duopoly markets than in non-duopoly markets. This corroborates the conclusion in our analysis that relaxation of ownership limits has already reduced minority ownership." But the Consumer Commenters do not explain why they appear to have more confidence in the findings of Study 8, with which they themselves find fault, than in the findings of the other FCC-commissioned studies, other than that the Study 8 findings are in agreement with their own findings. That confidence appears to be misplaced for several reasons: The Consumer Commenters themselves admit the authors of Study 8 were not able to build an accurate minority ownership database. The Consumer Commenters claim that the FCC database missed between two-thirds and three-quarters of the stations that are minority/female owned. Did the database constructed by the authors of Study 8 capture many of those missing, and thus uncounted, minority and female owners? If not, depending on whether the undercount was more pronounced in the earlier or later years of the 1999-2006 period, the findings of Study 8 might understate or overstate the actual reduction in minority and female ownership. A further statement by the Consumer Commenters suggests that the database used in Study 8 failed to identify many of the minority and female owned stations that the Consumer Commenters identified. They state that Study 8 "estimates a large decline in the total number of minority owned stations, Free Press [one of the Consumer Commenters] did not identify such a large absolute decline, although it did see a relative decline." If Study 8 overstates the decline in minority-owned stations (especially in the later years of the study period), the Consumer Commenters may have misplaced its confidence in the Study 8 finding that sales of minority stations were twenty times higher in duopoly markets than in non-duopoly markets. As explained in the earlier discussion of Study 8, that study improperly attributes all the changes in minority ownership between 1999 and 2006 to the change in the duopoly rule, without controlling for any of the other factors at play during that time, such as the elimination of the minority tax certificate program. Thus, it likely overstates the impact of the change in the duopoly rule on minority ownership. The study on media ownership characteristics and media bias employs "contentless content analysis" that is flawed, and has other methodological problems In analyzing the relationship between media ownership and media bias, the author of Study 6 ascribes slant to a media outlet by defining certain words or issues as Democratic or Republican and then counting the number of times the word is used or the issue is covered by stations. What is actually said or shown about the issue is not analyzed. The Consumer Commenters call this "contentless content analysis" and claim that academics and professional journalists have identified four major concerns with the methodology: It fails to understand what it means for a reporter to cite a source and to distinguish between ideological opinion in news coverage and reporting. The selection of external referents to ascribe ideology to media outlets is inevitably biased. Selectivity in coverage of citations leads to bias and questions of unrepresentativeness of the data. The creation of single indices to represent complex concepts is flawed. The Consumer Commenters argue that counting references to phrases or issues does not reveal how those phrases were used or issues portrayed. For example, the study categorizes the Iraq war as a Democratic issue. But during the week covered by the study, President Bush visited 10 states to hold press conferences with local candidates or give major speeches, speaking frequently about the war. Under the methodology used, news coverage of those presidential speeches was likely categorized as having a Democratic slant. The Consumer Commenters also claim that, by choosing to analyze a single, special week—the week before the 2006 election—rather than the routine practice of building a database from randomly selected days to construct a two-week sample, the author risked using a non-representative sample that might be radically different from normal. Also, the methodology used in Study 6 is an extension of the methodology used in the research of the peer reviewer of Study 6, and the Consumer Commenters argue that the peer reviewer therefore cannot provide an objective review. The study on vertical integration ignores several fundamental characteristics of the industry and uses biased data The Consumer Commenters claim that Study 9 totally ignores several fundamental characteristics of the contemporary video industry, including: the relegation of the small number of independent programmers in prime-time to unscripted reality shows; the dominance of vertically integrated programming in pilots and syndication; the role of suites of cable program networks from dominant content providers that force carriage of those networks; program placement in cable tiers that discriminates against independent producers; the importance of broadcasters' must-carry/retransmission rights; and the resulting vertical integration into cable by the dominant broadcasters through the leveraging of these quasi-property rights. The Consumer Commenters also claim that the broadcast data set used in Study 9 is biased against a finding of barriers to carriage for independents in two fundamental ways. First, they claim that independents are particularly disadvantaged in the category of new shows and pilots, but the Study 9 data set does not include short-lived shows, thus missing the fact that vertically integrated shows are given many more opportunities to fail. The average ratings of vertically integrated shows are thus likely lower than they are depicted in the data set. The Consumer Commenters allege that this undercuts any analysis that claims that vertically integrated programming and independent programming have equal ratings. Second, Study 9 counts shows, not hours or time slots. Thus prime-time programming made up of two one-hour affiliated shows and two half-hour unaffiliated shows would be portrayed as equally divided between affiliated and non-affiliated, even though the affiliated programming was on-air twice as long. (The Consumer Commenters do not demonstrate, however, whether the unaffiliated programming tends to be shorter in length than the affiliated programming.) The Consumer Commenters also focus on a data limitation conceded by the author of Study 9 and addressed by the peer reviewer: that use of revenues data, rather than profits data, due to the lack of data on costs, could lead to bias. The Consumer Commenters argue that the author chose to exclude news programming from his analysis, because it tends to be less costly to produce than scripted programming and therefore would skew the results, but did not exclude reality programming, which also is less costly to produce than scripted programming. But "when we know that independent programmers in prime-time are delivering low-cost reality shows, rather than high-cost scripted entertainment, revenues are a bad measure of short term profits." The Consumer Commenters also have several criticisms of the cable programming carriage portion of Study 9—its failure to examine movies, which are an increasingly important component of cable programming; its failure to consider the tier on which programming is carried; and its failure to consider the role of broadcast networks, with must-carry/retransmission rights. They also question why the study excludes those cable networks that reach more than 90% or less than 5% of households. Summary of Data Collection and Analysis The 10 FCC-commissioned studies, the peer reviews, and the comments and analysis submitted by the Consumer Commenters, in aggregate, provide a huge quantity of data, as well as points of analytical agreement and disagreement, that are helpful in the public policy debate on media ownership. Despite the lack of consensus on many issues, it appears that the following general statements can be made about the status of the data collection and analysis available to policy makers. Large, systematic, detailed, and accurate data sets on media ownership characteristics, viewer/listener preferences, and programming are now available for analysts and policy makers. But several gaps remain in data collection. Most significantly the databases on minority and female ownership of broadcast and telecommunications properties are incomplete and/or inaccurate, and statistical analysis based on those data would not be reliable. In addition, since most programming has been made available to consumers either as "free" over-the-air programming or as part of a large bundled tier of programming, there is very little information on the intensity of demand—how much people value and would be willing to pay—for individual programs or channels. Also, although MVPDs increasingly offer their programming through multiple bundled tiers, the FCC does not appear to have collected data on the specific tiers on which programming is offered. Although the 10 FCC-commissioned studies present a large number of statistical findings, many of these relationships are not statistically significant across alternative model specifications. This has led the researchers and peer reviewers to offer disclaimers that the findings are not robust and where they find statistical relationships they demonstrate correlation, not causality. Some of the researchers found that demand variables (such as the preferences of viewers, or the length of commute time for radio listeners) have a stronger influence over programming decisions than supply variables (such as ownership characteristics). But the implications of this finding has been open to competing interpretations. Some researchers have suggested this implies that ownership limits have little impact on the goals of localism and diversity. But other researchers have suggested this shows that ownership limits ensure more diversity of voices without sacrificing local news and public affairs programming. Although several of the commissioned studies included lengthy discussions of cable ownership and programming as well as broadcast ownership and programming, only the study on vertical integration performed statistical analysis of the relationship between cable ownership and programming. The peer reviewers and the Consumer Commenters identified a number of possible technical problems in the econometric analyses performed in the 10 studies. The potentially most noteworthy criticism appears to be that all but one of the studies addressed the impact of media ownership characteristics on the programming provided by individual cross-owned stations, not on the total programming available to consumers in the local market, which arguably is the key public policy concern. No process is in place to determine whether the criticisms are valid and/or whether the study results are reliable. The Consumer Commenters claim that, when they modified the FCC-commissioned studies to take into account these criticisms, they obtained robust results demonstrating that loosening the media ownership limits harmed the public interest, though their results were not always consistent across model specifications. Their modified studies have not yet been subject to full review by others, though they were criticized in an econometric review by Harold Furchtgott-Roth that was appended to the reply comments of Media General. Public Policy Implications The 1996 Telecommunications Act instructs the FCC to periodically review its media ownership rules to determine whether they are still in the public interest, and to modify or eliminate the rules if appropriate. At the same time, the Prometheus decision requires the Commission to justify "with reasoned analysis" any explicit numerical limits in its rules. The 10 FCC-commissioned studies are intended to provide data and analysis that support such reasoned analysis. Those studies and the additional data collection and analysis performed by the Consumer Commenters collectively provide policy makers and interested parties with far more detailed and accurate media ownership, viewer/listener preference, and programming databases than were previously available. However, the FCC staff, commissioned researchers, peer reviewers, and commenting parties have identified continued gaps both in data collection and in data analysis, especially with respect to minority ownership. On one hand, those gaps may render the current record insufficient for the FCC to perform reasoned analysis of some of the media ownership rules. On the other hand, the data collection and analysis performed to date provide very useful insights that may help guide and direct the public policy discussion. There is one additional complication. The FCC is instructed to make a public interest determination, with diversity of voices one of the public interest goals, but there is no single understanding of what is meant by diversity of voices. Diversity might refer to, among other things, the number of different viewpoints on a particular subject, or the number of different issues that are addressed by media in a market, or the variety of programming offered in a market, or the number of different gatekeepers who determine what programming is provided, or some combination of these and other possible concepts of diversity. As will be discussed below, this could be of particular concern if FCC rules, particularly as they involve minority ownership, are reviewed by the courts. The FCC Has Failed to Collect Data Needed to Address the Impact of the Media Ownership Rules on Minority and Female Media Ownership Although three of the 10 FCC-commissioned studies attempted to collect data on minority and female ownership issues, and the Consumer Commenters attempted to supplement that data collection with their own effort, all the researchers (and the peer reviewers) agree that the FCC's databases on minority and female ownership are inaccurate and incomplete and their use for policy analysis would be fraught with risk. This may have significant policy implications. In its Prometheus decision, the Third Circuit instructed the FCC to consider the impact of changes in its media ownership rules on minority ownership. Without accurate data on minority (and female) ownership, it is impossible to perform such analysis. For example, one of the interesting hypotheses raised in Study 8 that merits serious analysis is that loosening the television duopoly rule reduced opportunities for minority ownership because it increased demand for stations that were attractive as second television properties in a market, and the resulting sharp increase in station prices placed minority-owned stations in "double jeopardy" because they could not afford to trade up to better facilities and the duopoly stations against which they were competing became parts of large broadcast groups capable of bringing significant economies of scale to the market. A related hypothesis is that further loosening of the duopoly rule would further reduce opportunities for minority ownership. Although Study 8 did not properly test this hypothesis because it failed to take into account concurrent changes that might have affected minority ownership (such as elimination of the minority tax certificate program), even if it had been constructed properly its results would have been suspect because they, by necessity, would have been based on the only available data on minority ownership, which is recognized by all to be inaccurate and incomplete. The same problem arises with respect to the impact of each and every media ownership rule on minority and female ownership. It is possible that the Third Circuit would not approve any FCC media ownership rule until the Commission has developed a minority ownership database of sufficient accuracy to allow for reliable testing of the impact of the rules on minority ownership. The FCC May Not Have Data on Program Diversity That the Courts May Require Congress and the FCC have long held that diversity of ownership fosters diversity of voices and have supported programs to foster minority ownership. However, any governmental measures to facilitate minority broadcast entry that are based on racial classification must satisfy the heightened constitutional standards that apply to governmental preferences for minorities under the Equal Protection Clause. The Supreme Court's ruling in Adarand Constructors, Inc. v. Peña requires that governmental measures based on racial classifications be analyzed using a "strict scrutiny" standard under which they would be deemed constitutional only if they are "narrowly tailored measures" that "further a compelling governmental interest." It is easier to meet these standards if race is but one of several criteria for program eligibility and not a definitive criterion. Proponents of measures to facilitate minority broadcast entry have been concerned, however, that broadening eligibility for such programs to include all small businesses might fail to foster diversity because focusing solely on economic disadvantage fails to take into account the social disadvantage suffered by certain groups. For example, the children of established business people might qualify under the small business criterion. Proponents therefore have proposed constructing a definition of socially and economically disadvantaged businesses (SDBs) that would grant eligibility to individuals with social disadvantages stemming either from individualized factors or from membership in a class (such as a racial group) for which discrimination has inhibited entry and financing. In its August 1, 2007 Second Further Notice, the FCC sought comment on how to define SDBs in a fashion that would satisfy constitutional standards. While it is not possible to predict what SDB definition would satisfy the courts, it is possible to review past court decisions and dissents to identify the type of information the courts might demand in support of any definition. For example, if a Supreme Court ruling were to follow the line of argument in a dissent, joined by two current Supreme Court Justices (Scalia and Kennedy), to the 1990 decision, Metro Broadcasting, Inc. v. Federal Communications Commission et al. , then any definition of SDBs that provides eligibility based on membership in a racial group, and not just on individual status, might require empirical evidence to demonstrate the nexus between membership in that group and the objective of the program. The dissent states: The FCC assumes a particularly strong correlation of race and behavior. The FCC justifies its conclusion that insufficiently diverse viewpoints are broadcast by reference to the percentage of minority-owned stations. This assumption is correct only to the extent that minority-owned stations provide the desired additional views, and that stations owned by individuals not favored by the preferences cannot, or at least do not, broadcast underrepresented programming. Additionally, the FCC's focus on ownership to improve programming assumes that preferences linked to race are so strong that they will dictate the owner's behavior in operating the station, overcoming the owner's personal inclinations and regard for the market. (at pp. 618-619) [O]ne particular flaw underscores the Government's ill fit of means to ends. The FCC's policies assume, and rely upon, the existence of a tightly bound "nexus" between the owners' race and the resulting programming.... Three difficulties suggest that the nexus between owners' race and programming is considerably less than substantial. First, the market shapes programming to a tremendous extent. Members of minority groups who own licenses might be thought, like other owners, to seek broadcast programs that will attract and retain audiences, rather than programs that reflect the owner's tastes and preferences.... Second, station owners have only limited control over the content of programming.... Third, the FCC had absolutely no factual basis for the nexus when it adopted the policies and has since established none to support its existence. (at pp. 626-627) If this view were to gain the support of the majority of the Supreme Court, it would appear that if the FCC implements programs that provide preferences to SDBs, and some entities qualify as SDBs as part of a socially disadvantaged racial group rather than a socially disadvantaged individual, the burden would be on the Commission to demonstrate the nexus between favoring that group and the compelling government interest in fostering diversity of voices. As discussed earlier, there is no single understanding of diversity of voices. One possible meaning could be the diversity of issues addressed in local news and public affairs programming. A second meaning could be diversity in programming in the sense of an identifiable target audience. Whatever meaning of diversity is used, the FCC would have the burden to show that the broadcast ownership by members of the socially disadvantaged minority group affects programming in a fashion that fosters diversity. But the FCC apparently has not collected the data needed to make such a showing. It does not have an accurate database on minority ownership. Nor, if diverse programming is a compelling government interest, has it established that diverse programming is not currently being sufficiently provided but could be expected to be provided in greater quantity by minority owners. The Courts might expect the FCC, for example, to have performed a survey to identify the types of issues that are of particular interest to socially and economically disadvantaged groups—perhaps issues of homelessness, housing, discrimination, lack of public transportation—and then to have collected data on the local news and public affairs programming of all broadcast stations to determine whether stations owned by the racial minorities included in the SDB definition adopted by the FCC offer significantly more programming that addresses those issues than non-minority-owned stations. No such data collection and analysis have been put forward. The Data Collection and Analysis Performed to Date Suggest That There May Be Public Interest Benefits to Employing Case-by-Case Reviews Rather than Bright-Line Ownership Limitations The FCC's media ownership rules are applied when an entity proposes to make an acquisition that would increase its media holdings nationally or locally. In its June 2, 2003 order, the FCC reviewed the advantages and disadvantages of implementing bright line rules that incorporate specific limits on the number of media outlets a company can own in a local market (without regard to the market-specific share of the post-merger company) vs. implementing flexible, yet quantifiable rules that would allow for case-by-case reviews that take into account market-specific and company-specific market shares and characteristics. The Commission chose the bright-line approach, in large part because it identified regulatory certainty as an important goal in addition to the three traditional goals of diversity, localism, and competition. It stated: Any benefit to precision of a case-by-case review is outweighed, in our view, by the harm caused by a lack of regulatory certainty to the affected firms and to the capital markets that fund the growth and innovation in the media industry. Companies seeking to enter or exit the media market or seeking to grow larger or smaller will all benefit from clear rules in making business plans and investment decisions. Clear structural rules permit planning of financial transactions, ease application processing, and minimize regulatory costs. After the Third Circuit remanded the FCC rules, then-chairman Powell reportedly stated in an interview that: It may not be possible to line-draw. Part of me says maybe the best answer is to evaluate on a case-by-case basis. The commission may end up getting more pushed in that direction. Given that the Third Circuit explicitly gave the FCC the opportunity "to justify or modify its approach to setting numerical limits," it did not signal a preference for a case-by-case approach vs. a bright-line rule. Currently, the FCC continues to use bright-line rules that set numerical limits. (Some of those limits are set by statute, not by FCC rulemaking.) But in its 2006 Further Notice, the Commission did ask, "whether our goals would be better addressed by employing an alternative regulatory scheme or set of rules." Several aspects of the data collection and analysis performed to date suggest that it might be difficult to construct bright-line numerical limits or that such numerical limits might not always be effective in fostering diversity, localism, and competition. Although literally thousands of regression analyses have been performed by multiple researchers in an effort to identify relationships between various media ownership characteristics and the amount or type of various programming aired, the researchers report very few strong findings. Often, a statistically significant relationship is found with one particular model specification, but not found if the model specification is changed. This led many of the researchers and peer reviewers to emphasize that the statistical findings were not robust. Where relationships are identified, the researchers tend to emphasize that these demonstrate correlation, not causality. Where relationships were found between an ownership characteristic and a programming objective, the studies were not structured to identify particular threshold ownership levels that could be used as the basis for setting numerical limits because moving beyond those levels might threaten policy goals. In her internal memorandum, former FCC chief economist Leslie Marx laid out a possible methodology for determining "the critical number of outlets" required to be reasonably sure that the goals of competition, diversity, and localism are met, as part of a basis for justifying relaxation of newspaper-broadcast cross-ownership restriction. But that analysis was at the drawing board stage, not complete, and it is not clear whether such models would generate statistical results sufficiently robust to justify particular numerical levels. Study 9 found robust empirical evidence that a large fraction—typically the majority—of the programming on any broadcast network during prime-time was made in-house. But the findings explicitly ruled out a cost-based efficiency explanation for that vertical integration of broadcast networks into program production. Nor did the study find an efficiency explanation for the vertical integration of cable systems into cable network production. The peer reviewer commented that "the overwhelming majority of 'independent' cable networks successfully launched in the period of the study are owned by affiliates of large media conglomerates who do not have cable system interests ... which implies that the financial resources or bargaining leverage in common to the large corporations which also own numerous other established networks, rather than vertical integration itself, may be the most significant advantage that successful cable network suppliers now have." It appears that the vertical integration that has decreased the diversity of program production sources is not driven by efficiency considerations. If that is the case, then a bright-line rule that treats a broadcast station that is owned and operated by a major broadcast network exactly the same as an independently owned station would fail to take into account the impact of vertical integration on diversity and might not be as effective as case-by-case analysis in determining the impact of acquisitions with vertical elements on one measure of diversity. The Consumer Commenters claim that the large media companies that own broadcast networks have been able to use their must-carry and retransmission consent rights to obtain broad MVPD carriage of their expanded suites of broadcast and cable networks, thus reducing the diversity of cable network program sources. The must-carry and retransmission consent rules were implemented in the early 1990s to protect broadcasters from cable companies that were monopsony purchasers of broadcast programming. Now that cable companies face competition from DBS providers and telephone companies, and broadcasters have the retransmission rights to "must-have" sports and local programming that cable companies need to carry or risk the loss of subscribers to those competing MVPDs that do carry the programming, the broadcasters enjoy a much stronger negotiating position (though the large cable companies that have created large regional clusters appear to have countervailing leverage). Currently, it is uncertain what must-carry and retransmission consent rights the broadcasters will have as they begin to transmit multiple digital signals over their licensed spectrum (that is, whether cable systems will be required to carry all of the local broadcast stations' signals or only the primary signal, which is the current requirement). The resolution of this regulatory issue would likely affect how much leverage the various parties would have over programming decisions in local markets. With such uncertainty about future must-carry and retransmission consent rules, there may be advantages to analyzing the public interest implications of proposed acquisitions on a case-by-case basis that can take into account changes in must-carry and retransmission consent rules rather than implementing bright-line numerical limits set under today's regulatory environment. All of these factors suggest that the FCC might want to use the extensive data it has collected to analyze more fully the advantages and disadvantages of the case-by-case and bright-line limit approaches to reviewing acquisitions that increase an entity's media holdings. The Data Collected to Date Suggest That Additional Information on Intensity of Demand May Be Needed to Analyze the Implications of Various À La Carte Proposals There have been a number of proposals to require program networks to be made available—at both the wholesale level and the retail level—on an à la carte basis as well as bundled (as part of a wholesale package or a retail tier). One variation on those proposals would allow retail subscribers to opt out of receiving certain channels on a tier, and get a price reduction for the channels not received. Proponents of à la carte pricing argue that the industry-wide practice of offering only large bundles of advertiser-supported cable networks forces consumers to purchase networks they are not interested in receiving in order to obtain the networks they want. They further argue that household price sensitivity is greater for individual programs than for a large tier of programs, so tiering makes it easier for MVPDs to raise their prices. In addition, they claim tiered pricing does not take into account the intensity of demand for individual channels in the tier, so it is possible that channels that are highly valued by niche audiences will not be carried while general interest channels that attract a larger audience but are not as highly valued will be carried. Proponents of tiering counter that tiering is the most cost-efficient way to offer programming and thus lowers retail prices, that it increases consumer benefits by allowing channel surfing, that it reduces the risks associated with introducing new cable networks, and that it helps support niche networks that could not generate sufficient revenues on their own. They claim that new, independent cable networks, in particular, would have an extremely difficult time making themselves known, and attracting an audience and advertisers, in an à la carte environment. The 10 FCC-commissioned studies collected some data that are relevant to the debate about these à la carte proposals: The Nielsen Survey (Study 1) asked questions about which channels MVPD subscribers would be interested in dropping from their service if they could receive a reduction in cost and which channels they would like to receive but do not currently subscribe to because they would have to subscribe to a larger package of channels. When asked to identify the channels they would be interested in dropping, in no case was a particular channel identified by as many as 5% of the respondents. This might suggest that most respondents could not immediately identify the specific channels they do not wish to receive and pay for or that most respondents are generally content to receive and pay for a large bundle of channels even if they actually watch only a small portion of the channels. When asked to identify which channels they would like to receive but do not currently subscribe to because to do so would require them to subscribe to a larger package, the only channels identified by more than 2% of the respondents were premium channels—HBO (8.9%), Showtime (3.6%), and Cinemax (3.0%)—not advertising-supported channels. Since most households subscribe to the enhanced basic tier, rather than a larger tier, this might suggest that most MVPDs already include most general interest channels on their enhanced basic tiers. The survey questions elicited information on consumer preferences, but did not generate any information on how sizeable a cost reduction consumers would demand to drop channels or how much additional they would be willing to spend to get additional channels. Nor did they generate data to help determine the intensity of demand for individual channels or for tiers of channels. Study 3 found, among other things, that niche, or special interest, programming (minority, adult, religious) is less widely available than general interest programming (news, children's, family) and that news and violent programming are the most highly rated programming types, with Latino/Spanish-language, children's, and family programming substantially lower, and non-Latino minority and religious programming lower still. It is not surprising that non-Latino minority and religious programming, which have low audience ratings, are not widely available. The public policy issue is how best to serve audiences for such niche programming, to further the goal of diversity. As explained earlier, tiered pricing does not take into account the intensity of demand for individual channels in the tier, so it is possible that channels that are highly valued by niche audiences will not be carried while general interest channels that attract a larger audience but are not as highly valued will be carried. MVPDs typically offer mostly general interest and other large audience programming on their expanded basic tiers and make less popular programming available either as part of larger tiers that are available at higher prices or on an à la carte basis (that could consist of a single channel or several closely related channels). But data are not available on subscribers' intensity of demand for individual channels, so it is not possible to determine whether the tendency toward serving general audiences on basic tiers, and niche audiences on other tiers, increases or decreases overall consumer welfare. It is possible, however, to investigate how the market appears to be operating today. The market shows that a small number of viewers can support programming if they are willing to pay enough for such programming. For example, although the audiences for non-Spanish foreign language programming, such as Korean language programming, are relatively small, as a result of the willingness of a threshold level of households to pay between $25 and $30 a month for a package of several Korean language channels, both DirecTV and DISH TV offer Korean language packages, as do some cable systems (though these offerings may not be available universally throughout the U.S.). The intensity of demand for non-Spanish foreign language programming appears to be relatively high in households that include members that speak little or no English or that have a strong desire to maintain cultural connections even as their children become more assimilated. It is not clear whether the intensity of demand for other niche programming, such as non-foreign language minority programming and religious programming, is sufficiently great to support such an à la carte solution. The FCC does not have data available on the intensity of demand for such niche programming. But the absence of à la carte options (in the form of individual channels or very small, specialized bundles) for such programming suggests that the MVPDs do not expect the intensity of demand to be sufficient to support such programming (especially when taking into account the opportunity cost of using scarce channel capacity to serve these niche audiences). Those niches programs are most likely available on larger, higher priced tiers. Subscribers to niche programming, such as Korean language programming, that is available as part of an à la carte option also must purchase the basic cable tier, because of the statutory requirement that all cable subscribers receive the local broadcast stations as well as any public, educational, and governmental channels required by the franchising authority. But they do not have to purchase any other cable networks. That is not the case for households that seek niche programming that is not available on an à la carte basis. Some critics of the current system complain that it is unfair to require audiences for niche programming that is not available as part of an à la carte option to purchase tiers that are larger and more expensive than the expanded basic tier in order to receive that niche programming. But absent data on the intensity of demand for the various niche and non-niche channels it is not possible to determine whether those niche channels could survive in an à la carte environment or to demonstrate consumer welfare loss from the current system. And even if the current system does impose a consumer welfare loss on niche audiences, it is not clear how a regulation could be implemented to identify and require carriage of such niche channels.

The Federal Communications Commission (FCC or Commission) has released for public comment 10 economic research studies on media ownership that it had commissioned to provide data and analysis to support the policy debate on what ownership limitations are in the public interest. These studies also provide data and analysis useful to the on-going policy debates on how best to foster minority ownership of broadcast stations and on tiered vs. à la carte pricing of multichannel video program distribution (MVPD) services, such as cable and satellite television. The FCC also has released peer reviews of these studies that are required by the Office of Management and Budget. In addition, Consumers Union, Consumer Federation of America, and Free Press (Consumer Commenters) jointly submitted to the FCC very detailed comments on the 10 FCC-commissioned studies that included statistical results from re-running the models in those studies, applying the same empirical data to models revised to correct for alleged specification errors. Despite the lack of consensus on many issues, it appears that the following general statements can be made about the status of the data collection and analysis available to policy makers: Large, systematic, detailed, and accurate data sets on media ownership characteristics, viewer/listener preferences, and programming are now available for analysts and policy makers. Several gaps remain in data collection, however. Most significantly the databases on minority and female ownership of broadcast and telecommunications properties are incomplete and inaccurate, and statistical analysis based on those data would not be reliable. Although the 10 FCC-commissioned studies present a large number of statistical findings, many of these relationships are not statistically significant across alternative model specifications. This has led the researchers and peer reviewers to offer disclaimers that the findings are not robust and where they find statistical relationships they demonstrate correlation, not causality. The peer reviewers and the Consumer Commenters identified a number of possible technical problems in the econometric analyses performed in the 10 studies. The potentially most noteworthy criticism appears to be that all but one of the studies addressed the impact of media ownership characteristics on the programming provided by individual cross-owned stations, not on the total programming available to consumers in the local market, which arguably is the key public policy concern. It has not yet been determined whether the criticisms are valid and/or whether the study results are reliable. The Consumer Commenters claim that when they modified the FCC-commissioned studies to take into account these criticisms, they obtained robust results demonstrating that loosening the media ownership limits harmed the public interest, though their results were not always consistent across model specifications. Their modified studies have not yet been subject to full review by others.

Major Developments On December 18, 2006, a private U.S. commercial television station in Florida began broadcasting some TV Marti programs on a daily basis. The Office of Cuba Broadcasting of the Broadcasting Board of Governors also contracted with a commercial radio station in Miami to broadcast some Radio Marti programming. On December 12, 2006, independent Cuban journalist Guillermo Fariñas Hernández received the 2006 Cyber Dissident award from the Paris-based Reporters Without Borders. Fariñas went on a seven-month hunger strike in 2006, demanding broader Internet access for Cubans. On December 6, 2006, the Cuban government released dissident Hector Palacios from prison for health reason. Palacios, who had been sentenced to 25 years in prison, was part of the group of 75 arrested in March 2003. Of the 75, 16 have been released for health reasons. Some 300 political prisoners in all remain jailed in Cuba. In a December 2, 2006, speech, Raúl reiterated an offer to negotiate with the United States, as long as it respected Cuba's independence and as long as the results were based on "equality, reciprocity, non-interference, and mutual respect." On November 15, 2006, the Government Accountability Office (GAO) issued a report examining U.S. democracy assistance for Cuba from 1996-2005 and concluded that the U.S. program had significant problems and needed better management and oversight. On August 23, 2006, Assistant Secretary of State for Western Hemisphere Affairs Thomas Shannon reiterated a U.S. offer to Cuba, first articulated by President Bush in May 2002, that the Administration was willing to work with Congress to lift U.S. economic sanctions if Cuba were to begin a political opening and a transition to democracy. On August 18, 2006, in an interview published in the Cuban daily Granma on August 18, 2006, Raúl Castro asserted that Cuba has "always been disposed to normalize relations on an equal plane," but he also expressed strong opposition to current U.S. policy toward Cuba, which he described as "arrogant and interventionist." On August 18, 2006, U.S. Director of National Intelligence John Negroponte announced the establishment of the position of Mission Manager for Cuba and Venezuela responsible for integrating collection and analysis on the two countries across the Intelligence Community. On August 13, 2006, Fidel's 80 th birthday, Cuba's newspaper Juventud Rebelde published the first photographs of Castro since his surgery, along with a message from Castro indicating that his recovery would not be short. On August 4, 2006, Secretary of State Condoleezza Rice, in a statement broadcast on Radio and TV Marti, encouraged "the Cuban people to work at home for positive change" and reiterated U.S. support. On August 3, 2006, President Bush issued a statement that "the United States is absolutely committed to supporting the Cuban people's aspiration for democracy and freedom." The President urged "the Cuban people to work for democratic change" and pledged U.S. support to the Cuban people in their effort to build a transitional government in Cuba. On July 31, 2006, Cuban President Fidel Castro provisionally ceded political power to his brother Raúl for several weeks in order to recover from intestinal surgery. As a result, Raúl Castro became First Secretary of the Communist Party, Commander in Chief of the Revolutionary Armed Forces (FAR), and President of the Council of State and Government. On July 27, 2006, the House Subcommittee on the Western Hemisphere held a hearing on the new report on the Committee for Assistance to a Free Cuba. On July 26, 2006, the Senate Appropriations Committee reported its version of the FY2007 Transportation/Treasury appropriations bill, H.R. 5576 ( S.Rept. 109-293 , with a provision (Section 846) that would prevent Treasury Department funds from being used to implement tightened restrictions on financing for U.S. agricultural exports to Cuba that were issued in February 2005. The provision is identical to one in the House version of the bill approved on June 14, 2006. On July 10, 2006, the inter-agency Commission for Assistance to Free Cuba issued its second report making recommendations to hasten political change in Cuba toward a democratic transition, including the provision of $80 million over two years for a variety of Cuba democracy projects. The Commission report received a mixed response from Cuba's dissident community. The full report is available at http://www.cafc.gov/rpt/ . (For further information, see section below on the " July 2006 Commission for Assistance to a Free Cuba Report .") On June 29, 2006, the House passed H.R. 5672 , the FY2007 Science, State, Justice, Commerce and Related Agencies appropriations bill, that would fund Cuba broadcasting under the International Broadcasting Operations account. The report to the bill ( H.Rept. 109-520 ) recommends $36.102 million for Cuba broadcasting, including $2.7 million to improve transmission capabilities via aerostat for broadcasting TV Marti. The Administration requested $36.279 for Cuba broadcasting (For further information, see " Radio and TV Marti " below). On June 22, 2006, the Senate Appropriations Committee reported its version of, H.R. 5384 ( S.Rept. 109-266 ), the FY2007 Agriculture appropriations bill, which contains a provision (Section 755) liberalizing travel to Cuba related to the sale of agricultural and medical goods. (Also see sections below on " Agricultural Exports " and " Travel and Private Humanitarian Assistance Restrictions .") On June 14, 2006, the House approved by voice vote H.Amdt. 1049 (Moran, Kansas) to the FY2007 Transportation/Treasury appropriations bill, H.R. 5576 , that would prevent Treasury Department funds from being used to implement tightened restrictions on financing for U.S. agricultural exports to Cuba that were issued in February 2005. The House also rejected two amendments that would have eased economic sanctions on Cuba: H.Amdt. 1050 (Rangel), defeated by a vote of 183-245, which would have prohibited funds from implementing the overall embargo, and H.Amdt. 1051 (Lee), defeated by a vote of 187-236, which would have prohibited funs from being used to implement the Administration's June 2004 tightened restriction on educational travel to Cuba. Another amendment, H.Amdt. 1032 (Flake), which would have prohibited the use of funds to amend regulations relating to travel for religious activities in Cuba, was withdrawn from consideration. On June 12, 2006, the State Department asserted the Cuban government had cut off electricity to the U.S. Interests Section in Havana beginning on June 5, 2006, as part of a campaign of harassment of U.S. diplomats. The mission was running on generators, but electricity was restored on June 13, 2006. On May 25, 2006, the Senate approved S.Res. 469 (Lieberman) by unanimous consent, which condemned the April 25, 2006, beating of Cuban dissident Martha Beatriz Roque. On March 14, 2006, the Bahamas released two Cuban dentists from a detention center into U.S. custody, whereupon they immediately traveled to the United States. The two had been held in the detention center for 10 months after being picked up at sea in Bahamian waters. The dentists had received U.S. visas while in Cuba, but the Cuban government had denied them exit visas. Several Members of Congress had sought the release of the two Cubans. On February 3, 2006, the Treasury Department's Office of Foreign Assets Control (OFAC) asked Starwood Hotels, the U.S. owner of the Sheraton Maria Isabel hotel in Mexico City, to expel a Cuban delegation that was meeting with U.S. oil executives at a privately-sponsored U.S.-Cuba energy conference. The hotel complied, but Mexican officials indicated that it could face fines under Mexican legislation that permits the government to fine any company in Mexico that complies with U.S. legislation governing economic sanctions imposed on Cuba. (Ultimately, Mexico announced on March 24, 2006, that it was fining the hotel $112,000.) U.S. economic sanctions prohibit financial transactions with Cuba, and this applies to U.S. companies and their subsidiaries anywhere in the world. While these prohibitions extend to the provision of services to Cuban nationals, this appears to be the first time that OFAC has used its authority to block retail services such as a hotel stay from Cuban nationals outside of the United States. On January 23, 2006, OFAC suspended a South Florida travel agency, La Estrella de Cuba, from booking travel to Cuba. The agency reportedly was one of the largest licensed travel agencies, booking some 300 to 500 passengers monthly. On January 20, 2006, OFAC issued a license to Major League Baseball allowing a Cuban team to participate in the World Baseball Classic tournament in the United States in March 2006. In mid-December 2005, OFAC had denied a license for Cuba's participation, reportedly because the Cuban government could have benefitted financially, but the license ultimately approved assures that any proceeds earned by the Cuban team would go to the victims of Hurricane Katrina. On January 9, 2006, the U.S. Coast Guard repatriated 15 Cuban migrants that had landed on a piling of an old bridge in the Florida Keys that does not connect to land. The case prompted some Members to call for a review of the "wet foot/dry foot" policy regarding Cuban migrants. On February 28, 2006, a U.S. federal judge in Miami ordered that the U.S. government make arrangements for the 15 Cubans to be brought back to the United States. On January 6, 2006, U.S. federal agents arrested a Florida International University professor and his wife, Carlos and Elsa Alvarez, for operating as covert agents for Cuba for decades. They pled not guilty at an arraignment in Miami federal court on January 17. Political Conditions Politically Cuba remains a hard-line communist state. Until he recently stepped down temporarily while recuperating from surgery, Fidel Castro ruled as head of state and government since the 1959 Cuban Revolution, which ousted the corrupt government of Fulgencio Batista. In April 1961, Castro stated that the Cuban Revolution was socialist, and in December 1961, he proclaimed himself to be a Marxist-Leninist. From 1959 until 1976, Castro ruled by decree. A Constitution was enacted in 1976 setting forth the Communist Party as the leading force in the state and in society (with power centered in a Political Bureau headed by Fidel Castro). The Constitution also outlined national, provincial, and local governmental structures. Executive power has been vested in a Council of Ministers headed by Fidel Castro as President of the Council. Legislative authority is vested in a National Assembly of People's Power, currently with 609 members, that meets twice annually for brief periods. When the Assembly is not in session, a Council of State acts on its behalf. As President of the Council of State until recently, Castro has served as head of state and head of government. Although Assembly members were directly elected for the first time in February 1993, only a single slate of candidates was offered. In October 1997, the Cuban Communist Party held its 5 th Congress (the prior one was held in 1991) in which the party reaffirmed its commitment to a single party state and reelected Fidel and Raúl Castro as the party's first and second secretaries. Direct elections for the National Assembly were again held in January 1998 and January 2003, but voters again were not offered a choice of candidates. For a number of years, Fidel's brother Raúl, as First Vice President of the Council of State, has been the officially designated successor and was slated to become head of state and head of government with Fidel's departure. Raúl—who turned 75 on June 3, 2006—also served as First Vice President of the Council of Ministers, as Minister of the Revolutionary Armed Forces (FAR), and as second secretary of the Communist Party. On July 31, 2006, Fidel provisionally ceded political power to his brother Raúl for several weeks in order to recover from intestinal surgery. As a result, in a proclamation signed by Fidel, Raúl Castro became First Secretary of the Communist Party, Commander in Chief of the FAR, and President of the Council of State and Government. At the same time, Fidel tapped six other high-ranking government officials on a provisional basis for key roles in health, education, and energy projects. He delegated the job of promoting public and international health projects to current Minister of Public Health Jose Ramon Balaguer Cabrera. On education, he designated Jose Ramon Machado Ventura and Esteban Lazo Hernandez, both members of the Political Bureau (Politburo) of the Communist Party and both Vice Presidents of the Council of State. On energy, he designated Carlos Lage, a Vice President of the Council of State and Executive Secretary of the Council of Ministers. Lage is known for orchestrating Cuba's economic recovery in the 1990s. Fidel also directed Lage, as well as Foreign Minister Felipe Perez Roque and Central Bank President Francisco Soberon Valdes, to form a commission to manage and prioritize funds for the health, education, and energy programs. Scenarios for Cuba after Fidel Castro Because of Fidel's recovery, celebrations for his 80 th birthday on August 13, 2006, were postponed until December 2, 2006 (the 50 th anniversary of the arrival of Fidel and his followers from Mexico on the boat Granma), but Castro was unable to appear at the celebration in December, fueling speculation that he is gravely ill and will not be returning to power. A number of observers maintain that Castro is suffering from cancer, although Cuban officials deny that he has cancer. Although many observers believe that the eventual demise of Cuba's communist government ultimately is inevitable, there is considerable disagreement over when or how this may occur. Some still predict that the regime will collapse when Fidel Castro permanently departs the political scene. Other observers stress that Fidel is still not out of the picture and that the Cuban government has a plan for the permanent succession of his brother Raúl. They point to Cuba's strong security apparatus and the extraordinary system of controls that prevents dissidents from gaining popular support. Before Fidel's recent surgery, observers discerned several potential scenarios for Cuba's future when Fidel either dies in office or departs the political scene because of age or declining heath. These fit into three broad categories: the continuation of a communist government; a military government; or a democratic transition or fully democratic government. According to most observers, the most likely scenario, at least in the short term, is a successor communist government led by Raúl Castro. This is true for a variety of reasons, but especially because of Raúl's designation by Fidel as successor in the party and his position as leader of the FAR. The FAR has been in control of the government's security apparatus since 1989 and has played an increasing role in Cuba's economy through the ownership of numerous business enterprises. The scenario of a military-led government is viewed by some observers as a possibility only if a successor communist government fails because of divisiveness or political instability. For many observers, the least likely scenario upon Fidel's death or departure is a democratic or democratic transition government. With a strong totalitarian security apparatus, the Castro government has successfully impeded the development of independent civil society, with only a small and tightly regulated private sector, no independent labor movement, and no unified political opposition. (For further information, see CRS Report RL33622, Cuba ' s Future Political Scenarios and U.S. Policy Approaches , by [author name scrubbed].) Human Rights Overview Cuba has a poor record on human rights, with the government sharply restricting freedoms of expression, association, assembly, movement, and other basic rights. It has cracked down on dissent, arrested human rights activists and independent journalists, and staged demonstrations against critics. Although some anticipated a relaxation of the government's oppressive tactics in the aftermath of the Pope's January 1998 visit, government attacks against human rights activists and other dissidents have continued since that time, with a severe crackdown on activists in 2003. As of early December 2006, 59 of the "group of 75" political prisoners held since a severe crackdown on dissidents in March 2003 remained in prison. The most recent release of the group of 75 was Hector Palacios, released for health reasons on December 6, 2006; Palacios had been sentenced to 25 years in prison in 2003. According to the State Department's human rights report for 2005, the Cuban government is one of the world's most systematic human rights violators, controlling all aspects of life through the Communist Party and state-controlled mass organizations. As noted in the report, the Cuban Commission on Human Rights and National Reconciliation maintained that the government held 333 documented political prisoners at the end of 2005, including 39 detainees held without formal charges, compared to an estimate of 300 political prisoners the previous year. The State Department report for 2005 asserted that the Cuban government continued to commit numerous serious abuses in 2005. These included arbitrary arrest and detention of human rights advocates and members of independent professional organizations; denial of the right to a fair trial, especially for political prisoners; abuse of detainees and prisoners; harsh and life-threatening prison conditions; denial of freedoms of speech, press, assembly, and association; and targeted "acts of repudiation" (organized public protests) against those who disagree with the government. The government maintained a pervasive system of surveillance through undercover agents, informers, neighborhood-based Committees for the Defense of the Revolution (CDRs). The government also continued to retaliate against those seeking peaceful political change, including supporters of the Varela Project, which proposes a national referendum to bring about political and economic reform. In 2005, although the government allowed some opposition gatherings to take place, most notably the May 20-21 meetings of the Assembly to Promote Civil Society, it continued to suppress other dissent through harassment, threats, intimidation, and detention. According to Amnesty International, more than 50 Cubans were detained for their role in organizing or participating in demonstrations on July 13 and 22, 2005. In early August, three of those arrested in July—René Gomez Manzano, Oscar Mario González, and Julio César López—were informed that they would be tried on charges of working to undermine the government. On October 26, 2005, a Cuban human rights group known as the Ladies in White ( Damas de Blanco ) received the Sakharov Prize for Freedom of Thought from the European Parliament. The group, formed after Cuba's March 2003 crackdown, consists of wives, mothers, and sisters of dissidents who conduct peaceful protests calling for the unconditional release of political prisoners. On December 12, 2006, independent Cuban journalist Guillermo Fariñas Hernández received the 2006 Cyber Dissident award from the Paris-based Reporters Without Borders. Fariñas went on a seven-month hunger strike in 2006, demanding broader Internet access for Cubans. Severe Crackdown in 2003 In March 2003, the Cuban government began a massive crackdown on independent journalists and librarians, leaders of independent labor unions and opposition parties, and other democracy activists, including those supporting the Varela Project. Human rights activist Elizardo Sanchez, head of the Cuban Commission for Human Rights and National Reconciliation, called the crackdown "the most intense wave of repression in the history of Cuba." Some 75 activists were arrested, subjected to summary trials and prosecutions, and sentenced to prison terms ranging from 6 to 28 years. Foreign journalists and diplomats were excluded from the trials. Among the activists were 27 independent journalists, including Raúl Rivero and Oscar Espinosa Chepe, sentenced to 20 years, and Omar Rodríguez Saludes, sentenced to 27 years. Other sentenced democracy activists included economist Marta Beatriz Roque (who had been imprisoned from July 1997 until May 2000), who received 20 years; Hector Palacios, a leader of the Varela Project, who received 25 years; and Luis Enrique Ferrer García of the Christian Liberation Movement, who received 28 years. Another prominent political prisoner, Oscar Elías Biscet, (who had been arrested in December 2002 after three years in prison) was also tried in April 2003 and sentenced to 25 years in prison. In a further deterioration of the human rights situation, the Cuban government executed three men on April 11, 2003, who had hijacked a ferry in Havana in an attempt to reach the United States. The men were executed by firing squads after summary trials that were held behind closed doors; four other ferry hijackers received life sentences while another received 30 years in prison. Analysts see a variety of potential reasons for the 2003 crackdown on democracy activists. The Cuban government asserts that the crackdown was justified because the defendants were supported by the U.S. government and that U.S. diplomats in Cuba, most notably the head of the U.S. Interests Section in Havana, James Cason, often met with the dissidents. Some analysts believe that the crackdown was a clear message by the Cuban government that it will not tolerate the U.S. government's active and open support for the opposition movement. Other analysts emphasize that the crackdown was an effort by Castro to strengthen the regime's political control in light of a faltering economy and dim economic prospects ahead. According to this view, an increasingly assertive opposition movement could become a national security threat to the Castro regime in the tough economic times ahead. Along these lines, some analysts see the crackdown as a way for the regime to clear away any potential opposition in order to ensure that the eventual succession of Raúl Castro to power will be smooth. Some observers maintain that the Cuban government's willingness to jeopardize the possibility of eased U.S. trade and travel restrictions as an indication that it currently views the dissident movement as a serious security threat. Others, however, believe that the Cuban government judged that there would not be any movement to ease the embargo under the Bush Administration under any circumstances, and felt that it had little to lose in cracking down on the opposition movement. Finally, a view often heard when Castro takes harsh action that jeopardizes an improvement in relations with the United States is that Castro actually is opposed to any further opening to the United States because it could threaten his regime's control. According to this view, the crackdown against the opposition blocks any potential easing of U.S. policy. Release of Several Prisoners in 2004 In 2004, the Cuban government released 14 of the 75 arrested in March 2003, and 4 other political prisoners, for health reasons. In the first half of the year, seven prisoners were released for health reasons, including noted economist and democracy activist Marta Beatriz Roque, who was released in April. From late November until early December 2004, the Cuban government released seven prisoners: Oscar Espinosa Chepe, Margarito Broche, and Marcelo Lopez on November 29; Raúl Rivero, and Oswaldo Alfonso Valdes on November 30; Edel José Garcia on December 2; and Jorge Olivero Castillo on December 6. Many observers maintain that the releases were aimed at improving Cuba's relations with Europe. The prisoners were only released on parole ( licencia extrapenal ) so that they could be incarcerated again at any time. Human rights groups like Human Rights Watch and Amnesty International have expressed concerns that the prisoners were not released unconditionally. Varela Project and the National Dialogue Named for the 19 th century priest, Felix Varela, who advocated independence from Spain and the abolition of slavery, the Varela Project has collected thousands of signatures supporting a national plebiscite for political reform in accordance with a provision of the Cuban Constitution. The referendum, if granted, would call for respect for human rights, an amnesty for political prisoners, private enterprise, and changes to the country's electoral law that would result in free and fair elections. The initiative is organized by Oswaldo Payá, who heads the Christian Liberation Movement, and it is supported by other notable Cuban human rights activists. On May 10, 2002, organizers of the Varela Project submitted 11,020 signatures to the National Assembly calling for a national referendum. This was more than the 10,000 required under Article 88 of the Cuban Constitution. Former President Jimmy Carter noted the significance of the Varela Project in his May 14, 2002 address in Havana that was broadcast in Cuba. Carter noted that "when Cubans exercise this freedom to change laws peacefully by a direct vote, the world will see that Cubans, and not foreigners, will decide the future of this country." In response to the Varela Project, the Cuban government orchestrated its own referendum in late June 2002 that ultimately led to the National Assembly amending the Constitution to declare Cuba's socialist system irrevocable. The Varela Project has persevered despite the 2003 human rights crackdown, which included the arrest of 21 project activists. On October 3, 2003, Oswaldo Payá delivered more than 14,000 signatures to Cuba's National Assembly, again requesting a referendum on democratic reforms. Since December 2003, Payá has been involved in another project known as the National Dialogue with the objective of getting Cubans involved in the process of discussing and preparing for a democratic transition. According to Payá, thousands of Cuban have met in dialogue groups to discuss a working document covering such themes as economic change, political and institutional change, social issues, public health and the environment, public order and the armed forces, media, science and culture, reconciliation and reuniting with the exile community. The next step will be the drafting of a transition program document to be presented to Cubans for discussion and to help prepare for a future transition. Assembly to Promote Civil Society Led by three prominent Cuban human rights activists—Marta Beatriz Roque, Rene Gomez Manzano, and Felix Bone—the Assembly to Promote Civil Society held two days of meetings in Havana on May 20-21, 2005, with some 200 participants. The date was significant because May 20 is Cuba's independence day. Many observers had expected the government to prevent or disrupt the proceedings. The Cuban government did prevent some Cubans and foreigners from attending the conference, but overall the meeting was dubbed by its organizers as the largest gathering of Cuban dissidents since the 1959 Cuban revolution. The Assembly issued a ten-point resolution laying out an agenda for political and economic change in Cuba. Among its provisions, the resolution called for the release of all political prisoners, demanded respect for human rights, demanded the abolition of the death penalty, and endorsed a 1997 dissident document entitled the "Homeland Belongs to Us All" on political and economic rights. Legislative Initiatives In the 109 th Congress, four resolutions were approved regarding Cuba's human rights situation. H.Con.Res. 81 (Menendez), passed by the House on April 27, 2005, expresses the sense of Congress regarding the two-year anniversary of the human rights crackdown in Cuba. The resolution demanded that Cuba release all political prisoners; legalize all political parties, labor unions, and press; and hold free and fair elections. It further calls for all UN members to vote against Cuba's membership on the United Nations Commission on Human Rights (UNCHR). Two resolutions— H.Res. 193 (Diaz-Balart, Mario), approved by the House on May 10, 2005, and S.Res. 140 (Martinez), approved by the Senate on May 17—express support of the organizers and participants of the May 20, 2005, meeting in Havana of the Assembly to Promote Civil Society. The resolutions also urge the international community to support the Assembly and its mission to bring democracy to Cuba. H.Res. 388 (Diaz-Balart, Lincoln), approved by the House on September 29, 2005, expresses the sense of the House regarding the Cuban government's crackdown against dissidents in July 2005. The measure also calls on the European Union to reexamine its current policy toward the Cuban regime and calls on the U.S. Permanent Representative to the United Nations and other international organizations to work with member countries of the UNCHR to ensure a strong resolution on Cuba at the 62 nd session of the UNCHR in 2006. S.Res. 469 (Lieberman), approved by the Senate on May 25, 2006, condemns the April 25, 2006, beating and intimidation of Cuban dissident Martha Beatriz Roque. Roque, who was imprisoned from 1997 until 2000, and again from March 2003 until April 2004, is one of the leaders of the Assembly to Promote Civil Society. In terms of oversight, two subcommittees of the House International Relations Committee (Western Hemisphere and Africa, Global Human Rights, and International Organizations) held a March 3, 2005, hearing on the second anniversary of Cuba's human rights crackdown, featuring testimony by the State Department, human rights organizations, and political dissidents in Cuba. In addition to resolutions on, and oversight of, Cuba's human rights situation, Congress funds democracy and human rights projects for Cuba in annual Foreign Operations and Commerce, Justice, and State appropriations measures. For more details, see " U.S. Funding to Support Democracy and Human Rights ," below. Economic Conditions8 With the cutoff of assistance from the former Soviet Union, Cuba experienced severe economic deterioration from 1989-1993, with estimates of economic decline ranging from 35-50%, but there has been considerable improvement since 1994. From 1994-2000, economic growth averaged 3.7% annually, with a high of 7.8% in 1996. In 2001 and 2002, economic growth slowed in the aftermath of the effects of Hurricane Michelle and the September 11, 2001, terrorist attacks in the United States. The terrorist attacks severely affected Cuba's tourist industry, with reports of some hotels closing and restaurants being empty. Hurricane Michelle damaged some 45,000 homes and severely hurt the agricultural sector. Economic growth in 2004 measured 4.2%, and was affected negatively by a drought in eastern Cuba, the worst in 40 years, that severely damaged agricultural crops. Hurricanes Charley and Ivan also caused significant damage and flooding in western Cuba. In 2005, despite the widespread damage caused by Hurricane Dennis that struck in July and Hurricane Wilma that struck in October, economic growth still registered an impressive 9.5%. Hurricane Dennis killed 16 people and resulted in $1.4 billion in damages to housing, infrastructure, and agriculture. The storm damaged some 120,000 homes as well as Cuba's national power grid causing significant electrical outages. Hurricane Wilma caused significant flooding in Havana, with more than $700 million in damage according to the Cuban government. On the positive side, economic growth benefitted from the growth of the tourism, nickel, and oil sectors. Cuba is also benefitting from a preferential oil agreement with Venezuela, which provides Cuba with 90,000 barrels of oil a day. Promises of substantial Chinese investment could further boost Cuba's nickel production. Economic growth for 2006 is forecast to be 7.5%. Cuba has expressed pride for the nation's accomplishments in health and education. The World Bank estimates that in 2004, the adult literacy rate was 97% and life expectancy was 77 years. The under-5 years of age mortality rate was 9 per 1,000, the lowest rate in Latin America and comparable to the rate of the United States. When Cuba's economic slide began in 1989, the government showed little willingness to adopt any significant market-oriented economic reforms, but in 1993, faced with unprecedented economic decline, Cuba began to change policy direction. Beginning in 1993, Cubans were allowed to own and use U.S. dollars and to shop at dollar-only shops previously limited to tourists and diplomats. Self-employment was authorized in more than 100 occupations in 1993, most in the service sector, and by 1996 that figure had grown to more than 150 occupations. Other Cuban economic reforms included breaking up large state farms into smaller, more autonomous, agricultural cooperatives (Basic Units of Cooperative Production, UBPCs) in 1993; opening agricultural markets in September 1994 where farmers could sell part of their produce on the open market; opening artisan markets in October 1994 for the sale of handicrafts; allowing private food catering, including home restaurants ( paladares ) in June 1995 (in effect legalizing activities that were already taking place); approving a new foreign investment law in September 1995 that allows fully owned investments by foreigners in all sectors of the economy with the exception of defense, health, and education; and authorizing the establishment of free trade zones with tariff reductions typical of such zones in June 1996. In May 1997, the government enacted legislation to reform the banking system and established a new Central Bank (BCC) to operate as an autonomous and independent entity. Despite these measures, the quality of life for many Cubans remains difficult—characterized by low wages, high prices for many basic goods, shortages of medicines, and power outages—and the government has backtracked on some of its reform efforts. Regulations and new taxes have made it extremely difficult for many of the nation's self-employed. Some home restaurants have been forced to close because of the regulations. Some foreign investors in Cuba have also begun to complain that the government has backed out of deals or forced them out of business. In April 2004, the Cuban government limited the use of dollars by state companies for any services or products not considered part of their core business. Some analysts viewed the measure as an effort to turn back the clock on economic reform measures. On October 25, 2004, Fidel Castro announced that U.S. dollars no longer would be used in entities that currently accept dollars (such as stores, restaurants, and hotels). Instead, Cubans would need to exchange their dollars for "convertible pesos," with a 10% surcharge for the exchange. Cubans could exchange their dollars or deposit them in banks with the surcharge until November 14. Dollar bank accounts will still be allowed, but Cubans will not be able to deposit new dollars into the accounts. Beginning on April 9, 2005, convertible pesos were no longer on par with the U.S. dollar, but instead were linked to a basket of foreign currencies. This reduced the value of dollar remittances sent to Cuba and provides more hard currency to the Cuban government. U.S. Policy Toward Cuba In the early 1960s, U.S.-Cuban relations deteriorated sharply when Fidel Castro began to build a repressive communist dictatorship and moved his country toward close relations with the Soviet Union. The often tense and hostile nature of the U.S.-Cuban relationship is illustrated by such events and actions as U.S. covert operations to overthrow the Castro government culminating in the ill-fated April 1961 Bay of Pigs invasion; the October 1962 missile crisis in which the United States confronted the Soviet Union over its attempt to place offensive nuclear missiles in Cuba; Cuban support for guerrilla insurgencies and military support for revolutionary governments in Africa and the Western Hemisphere; the 1980 exodus of around 125,000 Cubans to the United States in the so-called Mariel boatlift; the 1994 exodus of more than 30,000 Cubans who were interdicted and housed at U.S. facilities in Guantanamo and Panama; and the February 1996 shootdown by Cuban fighter jets of two U.S. civilian planes operated by the Cuban American group, Brothers to the Rescue, which resulted in the death of four U.S. crew members. Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating the island nation through comprehensive economic sanctions. These sanctions were made stronger with the Cuban Democracy Act (CDA) of 1992 ( P.L. 102-484 , Title XVII) and with the Cuban Liberty and Democratic Solidarity Act of 1996 ( P.L. 104-114 ), often referred to as the Helms/Burton legislation. The CDA prohibits U.S. subsidiaries from engaging in trade with Cuba and prohibits entry into the United States for any vessel to load or unload freight if it has engaged in trade with Cuba within the last 180 days. The Helms/Burton legislation, enacted in the aftermath of Cuba's shooting down of two U.S. civilian planes in February 1996, combines a variety of measures to increase pressure on Cuba and provides for a plan to assist Cuba once it begins the transition to democracy. Among the law's sanctions is a provision in Title III that holds any person or government that traffics in U.S. property confiscated by the Cuban government liable for monetary damages in U.S. federal court. Acting under provisions of the law, however, both President Clinton and President Bush have suspended the implementation of Title III at six-month intervals. Another component of U.S. policy, a so-called second track, consists of support measures for the Cuban people. This includes U.S. private humanitarian donations, medical exports to Cuba under the terms of the Cuban Democracy Act of 1992, U.S. government support for democracy-building efforts, and U.S.-sponsored radio and television broadcasting to Cuba. In addition, the 106 th Congress approved the Trade Sanctions Reform and Export Enhancement Act of 2000 ( P.L. 106-387 , Title IX) that allows for agricultural exports to Cuba, albeit with restrictions on financing such exports. The Clinton Administration made several changes to U.S. policy in the aftermath of the Pope's January 1998 visit to Cuba, which were intended to bolster U.S. support for the Cuban people. These included the resumption of direct flights to Cuba (which had been curtailed after the February 1996 shootdown of two U.S. civilian planes), the resumption of cash remittances for the support of close relatives in Cuba (which had been curtailed in August 1994 in response to the migration crisis with Cuba), and the streamlining of procedures for the commercial sale of medicines and medical supplies and equipment to Cuba. In January 1999, President Clinton announced several additional measures to support the Cuban people. These included a broadening of cash remittances to Cuba, so that all U.S. residents (not just those with close relatives in Cuba) could send remittances to Cuba; an expansion of direct passenger charter flights to Cuba from additional U.S. cities other than Miami (direct flights later in the year began from Los Angeles and New York); and an expansion of people-to-people contact by loosening restrictions on travel to Cuba for certain categories of travelers, such as professional researchers and those involved in a wide range of educational, religious, and sports activities. Bush Administration Policy Overview The Bush Administration essentially has continued the two-track U.S. policy of isolating Cuba through economic sanctions while supporting the Cuban people through a variety of measures. However, within this policy framework, the Administration has emphasized stronger enforcement of economic sanctions and has moved to further tighten restrictions on travel, remittances, and humanitarian gift parcels to Cuba. There was considerable reaction to the Administration's June 2004 tightening of restrictions for family visits and to the Administration's February 2005 tightening of restrictions on payment terms for U.S. agricultural exports to Cuba. Administration Actions: 2001-2003 President Bush made his first major statement on his Administration's policy toward Cuba on May 18, 2001. He affirmed that his Administration would "oppose any attempt to weaken sanctions against Cuba's government ... until this regime frees its political prisoners, holds democratic, free elections, and allows for free speech." He added that he would "actively support those working to bring about democratic change in Cuba." In July 2001, President Bush asked the Treasury Department to enhance and expand the enforcement capabilities of the Office of Foreign Assets Control. The President noted the importance of upholding and enforcing the law in order to prevent "unlicenced and excessive travel," enforce limits on remittances, and ensure that humanitarian and cultural exchanges actually reach pro-democracy activists in Cuba. On May 20, 2002, President Bush announced a new initiative on Cuba that included four measures designed to reach out to the Cuban people: 1) facilitating humanitarian assistance to the Cuban people by U.S. religious and other non-governmental organizations (NGOs); 2) providing direct assistance to the Cuban people through NGOs; 3) calling for the resumption of direct mail service to and from Cuba; and 4) establishing scholarships in the United States for Cuban students and professionals involved in building civil institutions and for family members of political prisoners. While the President said that he would work with Congress to ease sanctions if Cuba made efforts to conduct free and fair legislative elections and adopt meaningful market-based reforms, he also maintained that full normalization of relations would only occur when Cuba had a fully democratic government, the rule of law was respected, and human rights were fully protected. The President's initiative did not include an explicit tightening of restrictions on travel to Cuba that some observers had expected. The President did state, however, that the United States would "continue to enforce economic sanctions on Cuba, and the ban on travel to Cuba, until Cuba's government proves that it is committed to real reform." On October 10, 2003, the President announced three initiatives "to hasten the arrival of a new, free, democratic Cuba." First, the President instructed the Department of Homeland Security to increase inspections of travelers and shipments to and from Cuba in order to more strictly enforce the trade and travel embargo. Second, the President announced that the United States would increase the number of new Cuban immigrants each year, improve the method of identifying refugees, redouble efforts to process Cubans seeking to leave Cuba, initiate a public information campaign to better inform Cubans of the routes to safe and legal migration to the United States. Third, the President announced the establishment of a "Commission for Assistance to a Free Cuba," that would help plan for Cuba's transition from communism to democracy and help identify ways to help bring it about. Tightened Sanctions in 2004 and 2005 The Bush Administration took several measures in 2004 to tighten U.S. sanctions against Cuba. In February, President Bush ordered the Department of Homeland Security to expand its policing of the waters between Florida and Cuba with the objective of stopping pleasure boating traffic. In March, the State Department announced that it would deny visas to those Cubans who participated in the "show trials" of dissidents in March 2003, an action that will reportedly cover some 300 Cubans. On May 6, 2004, President Bush endorsed the recommendations of a report issued by the inter-agency Commission for Assistance to a Free Cuba, chaired by then Secretary of State Colin Powell. The Commission made recommendations for immediate measures to "hasten the end of Cuba's dictatorship" as well as longer-term recommendations to help plan for Cuba's transition from communism to democracy in various areas. The President directed that up to $59 million be committed to implement key recommendations of the Commission, including support for democracy-building activities and for airborne broadcasts of Radio and TV Marti to Cuba. The report's most significant recommendations included a number of measures to tighten economic sanctions on family visits and other categories of travel and on private humanitarian assistance in the form of remittances and gift parcels. Subsequent regulations issued by the Treasury and Commerce Departments in June 2004 implemented these new sanctions. (The full Commission report is on the State Department website at http://www.state.gov/p/wha/rt/cuba/commission/2004/ .) In 2005, the Administration continued to tighten U.S. economic sanctions against Cuba by further restricting the process of how U.S. agricultural exporters may be paid for their sales. In July 2005, Secretary of State Condoleezza Rice appointed Caleb McCarry as the State Department's new Cuba Transition Coordinator to direct U.S. government "actions in support of a free Cuba." Secretary Rice reconvened the Commission for Assistance to a Free Cuba in December 2005 to identify additional measures to help Cubans hasten the transition to democracy and to develop a plan to help the Cuban people move toward free and fair elections. July 2006 Commission for Assistance to a Free Cuba Report On July 10, 2006, the inter-agency Commission for Assistance to Free Cuba issued its second report making recommendations to hasten political change in Cuba toward a democratic transition. The full report is available at http://www.cafc.gov/rpt/ . The Commission called for the United States to provide $80 million over two years for the following: to support Cuban civil society ($31 million); to fund education programs and exchanges, including university training in Cuba provided by third countries and scholarships for economically disadvantaged students from Cuba at U.S. and third country universities ($10 million); to fund additional efforts to break the Cuban government's information blockade and expand access to independent information, including through the Internet ($24 million); and to support international efforts at strengthening civil society and transition planning ($15 million). According to the Cuba Transition Coordinator, this assistance would be additional funding beyond what the Administration is already currently budgeting for these programs. Thereafter, the Commission recommended funding of not less than $20 million annually for Cuba democracy programs "until the dictatorship ceases to exist." This would roughly double the amount currently spent on Cuba democracy programs. The report also set forth detailed plans of how the U.S. government, along with the international community and the Cuban community abroad, could provide assistance to a Cuba transition government to help it respond to critical humanitarian and social needs, to conduct free and fair elections, and to move toward a market-based economy. The report also outlined a series of preparatory steps that the U.S. government can take now, before Cuba's transition begins, so that it will be well prepared in the event that assistance is requested by the new Cuban government. These included steps in the areas of government organization, electoral preparation, and anticipating humanitarian and social needs. The Commission report received a mixed response from Cuba's dissident community. Although some dissidents, like former political prisoner Vladimiro Roca, maintain that they would welcome any U.S. assistance that helps support the Cuba dissident movement, others expressed concerns about the report. Dissident economist and former political prisoner Oscar Espinosa Chepe stressed that Cubans have to be the ones to solve their own problems. According to Chepe, "We are thankful for the solidarity we have received from North America, Europe, and elsewhere, but we request that they do not meddle in our country." Miriam Leiva, a founding member of the Ladies in White, a human rights organization consisting of the wives, mothers, and sisters of political prisoners, expressed concern that the report could serve as supposed evidence for the government to imprison dissidents. Leiva also faulted the Commission's report for presuming what a Cuban transition must be before U.S. recognition or assistance can be provided. According to Leiva, "Only we Cubans, of our own volition ... can decide issues of such singular importance. Cubans on the island have sufficient intellectual ability to tackle a difficult, peaceful transition and reconcile with other Cubans here and abroad." U.S. Reaction to Fidel's Ceding of Power In response to Fidel Castro's announcement that he was ceding power to his brother Raúl, President Bush issued a statement on August 3, 2006, that "the United States is absolutely committed to supporting the Cuban people's aspiration for democracy and freedom." The President urged "the Cuban people to work for democratic change" and pledged U.S. support to the Cuban people in their effort to build a transitional government in Cuba. U.S. officials indicated that there are no plans for the United States to "reach out" to the new leader. Secretary of State Condoleezza Rice reiterated U.S. support for the Cuban people in an August 4, 2006, statement broadcast on Radio and TV Marti. According to Secretary Rice, "All Cubans who desire peaceful democratic change can count on the support of the United States." Although there was some U.S. concern that political change in Cuba could prompt a migration crisis, there has been no unusual traffic since Castro ceded power temporarily to his brother. The U.S. Coast Guard has plans to respond to such a migration crisis, with support from the Navy if needed. In her August 4, 2006, message to the Cuban people, Secretary of State Rice encouraged "the Cuban people to work at home for positive change." Department of Homeland Security officials also announced several measures to discourage Cubans from risking their lives on the open seas. U.S. officials also discouraged those in the Cuban American community wanting to travel by boat to Cuba to speed political change in Cuba. Raúl Castro asserted in an August 18, 2006, published interview that Cuba has "always been disposed to normalize relations on an equal plane," but at the same time he expressed strong opposition to current U.S. policy toward Cuba, which he described as "arrogant and interventionist." In response, Assistant Secretary of State for Western Hemisphere Affairs Thomas Shannon reiterated a U.S. offer to Cuba, first articulated by President Bush in May 2002, that the Administration was willing to work with Congress to lift U.S. economic sanctions if Cuba were to begin a political opening and a transition to democracy. According to Shannon, the Bush Administration remains prepared to work with Congress for ways to lift the embargo if Cuba is prepared to free political prisoners, respect human rights, permit the creation of independent organizations, and create a mechanism and pathway toward free and fair elections. In a December 2, 2006 speech, Raúl reiterated an offer to negotiate with the United States. He said that "we are willing to resolve at the negotiating table the longstanding dispute between the United States and Cuba, of course, provided they accept, as we have previously said, our condition as a country that will not tolerate any blemishes on its independence, and as long as said resolution is based on the principles of equality, reciprocity, non-interference, and mutual respect." In the aftermath of Fidel's ceding of power to his brother, the Bush Administration established five interagency working groups to manage U.S. policy toward Cuba. The State Department is leading working groups on diplomatic actions, to build international support for U.S. policies; strategic communications, to ensure that Cubans understand U.S. government positions; and democratic promotion. The Commerce Department is leading a working group on humanitarian aid, in the event that a democratic transition government requests assistance. The Department of Homeland Security and the National Security Council are heading a working group on migration. In addition to these working groups, U.S. Director of National Intelligence John Negroponte announced in mid-August 2006 the establishment of the position of Mission Manager for Cuba and Venezuela responsible for integrating collection and analysis on the two countries across the Intelligence Community. Issues in U.S.-Cuban Relations Debate on the Overall Direction of U.S. Policy Over the years, although U.S. policymakers have agreed on the overall objective of U.S. policy toward Cuba—to help bring democracy and respect for human rights to the island—there have been several schools of thought about how to achieve that objective. Some advocate a policy of keeping maximum pressure on the Cuban government until reforms are enacted, while continuing current U.S. efforts to support the Cuban people. Others argue for an approach, sometimes referred to as constructive engagement, that would lift some U.S. sanctions that they believe are hurting the Cuban people, and move toward engaging Cuba in dialogue. Still others call for a swift normalization of U.S.-Cuban relations by lifting the U.S. embargo. In general, those advocating a loosening of the sanctions-based policy toward Cuba make several policy arguments. They assert that if the United States moderated its policy toward Cuba—through increased travel, trade, and diplomatic dialogue—that the seeds of reform would be planted in Cuba, which would stimulate and strengthen forces for peaceful change on the island. They stress the importance to the United States of avoiding violent change in Cuba, with the prospect of a mass exodus to the United States and the potential of involving the United States in a civil war scenario. They argue that since Castro's demise does not appear imminent, the United States should espouse a more realistic approach in trying to induce change in Cuba. Supporters of changing policy also point to broad international support for lifting the U.S. embargo, to the missed opportunities to U.S. businesses because of the embargo, and to the increased suffering of the Cuban people because of the embargo. Proponents of change also argue that the United States should be consistent in its policies with the world's few remaining communist governments, including China, and also maintain that moderating policy will help advance human rights. On the other side, opponents of changing U.S. policy maintain that the current two-track policy of isolating Cuba, but reaching out to the Cuban people through measures of support, is the best means for realizing political change in Cuba. They point out that the Cuban Liberty and Democratic Solidarity Act of 1996 sets forth a road map of the steps Cuba that needs to take in order for the United States to normalize relations, including lifting the embargo. They argue that softening U.S. policy at this time without concrete Cuban reforms would boost the Castro regime politically and economically, and facilitate the survival of the communist regime. Opponents of softening U.S. policy argue that the United States should stay the course in its commitment to democracy and human rights in Cuba; that sustained sanctions can work; and that the sanctions against Cuba have only come to full impact with the loss of large subsidies from the former Soviet bloc. Opponents of loosening U.S. sanctions further argue that Cuba's failed economic policies, not the U.S. embargo, are the causes of the economy's rapid decline. Fidel Castro's July 31, 2006, announcement that he was ceding political power to his brother Raúl temporarily in order to recover from surgery could foster a re-examination of U.S. policy. In this new context, there are two broad policy approaches to contend with political change in Cuba: a stay-the-course or status-quo approach that would maintain the U.S. dual-track policy of isolating the Cuban government while providing support to the Cuban people; and an approach aimed at influencing the Cuban government and Cuban society through increased contact and engagement. (For additional information, see CRS Report RL33622, Cuba ' s Future Political Scenarios and U.S. Policy Approaches .) Helms/Burton Legislation Major Provisions and Implementation The Cuban Liberty and Democratic Solidarity Act ( P.L. 104-114 ) was enacted into law on March 12, 1996. Title I, Section 102(h) , codifies all existing Cuban embargo executive orders and regulations. No presidential waiver is provided for any of these codified embargo provisions. This provision is significant because of the long-lasting effect on U.S. policy options toward Cuba. In effect, the executive branch is circumscribed in any lifting of the embargo until certain democratic conditions are met. Title III , controversial because of the ramifications for U.S. relations with countries investing in Cuba, allows U.S. nationals to sue for money damages in U.S. federal court those persons who traffic in property confiscated in Cuba. It extends the right to sue to Cuban Americans who became U.S. citizens after their properties were confiscated. The President has authority to delay implementation for six months at a time if he determines that such a delay would be in the national interest and would expedite a transition to democracy in Cuba. Beginning in July 1996, President Clinton used this provision to delay for six months the right of individuals to file suit against those persons benefitting from confiscated U.S. property in Cuba. At the time of the first suspension on July 16, 1996, the President announced that he would allow Title III to go into effect, and as a result liability for trafficking under the title became effective on November 1, 1996. According to the Clinton Administration, this put foreign companies in Cuba on notice that they face prospects of future lawsuits and significant liability in the United States. At the second suspension on January 3, 1997, President Clinton stated that he would continue to suspend the right to file law suits "as long as America's friends and allies continued their stepped-up efforts to promote a transition to democracy in Cuba." He continued, thereafter, at six-month intervals, to suspend the rights to file Title III lawsuits. President Bush has continued to suspend implementation of Title III at six-month intervals, most recently on July 16, 2006, by determining that it "is necessary to the national interests of the United States and will expedite a transition to democracy in Cuba." When President Bush first used his authority to suspend Title III implementation in July 2001, he cited efforts by European countries and other U.S. allies to push for democratic change in Cuba. In testimony before the House Government Reform Committee's Subcommittee on Human Rights and Wellness on October 16, 2003, Assistant Secretary of State Roger Noriega justified the continued suspension of Title III implementation by noting numerous examples of countries condemning Cuba for its human rights crackdown in 2003. Title IV of the law denies admission to the United States to aliens involved in the confiscation of U.S. property in Cuba or in the trafficking of confiscated U.S. property in Cuba. This includes corporate officers, principals, or shareholders with a controlling interest in an entity involved in the confiscation of U.S. property or trafficking of U.S. property. It also includes the spouse, minor child, or agent of aliens who would be excludable under the provision. This provision is mandatory, and only waiveable on a case-by-case basis for travel to the United States for humanitarian medical reasons or for individuals to defend themselves in legal actions regarding confiscated property. To date the State Department has banned from the United States a number of executives and their families from three companies because of their investment in confiscated U.S. property in Cuba: Grupos Domos, a Mexican telecommunications company; Sherritt International, a Canadian mining company; and BM Group, an Israeli-owned citrus company. In 1997, Grupos Domos disinvested from U.S.-claimed property in Cuba, and as a result its executives are again eligible to enter the United States. Action against executives of STET, an Italian telecommunications company was averted by a July 1997 agreement in which the company agreed to pay the U.S.-based ITT Corporation $25 million for the use of ITT-claimed property in Cuba for ten years. For several years, the State Department has been investigating a Spanish hotel company, Sol Melia, for allegedly investing in property that was confiscated from U.S. citizens in Cuba's Holguin province in 1961. Press reports in March 2002, indicated that a settlement was likely between Sol Melia and the original owners of the property, but by the end of the year settlement efforts had failed. In mid-June 2004, Jamaica's SuperClubs resort chain decided to disinvest from two Cuban hotels. The State Department had written to the hotel chain in May advising that its top officials could be denied U.S. entry because the company's Cuban investments involved confiscated U.S. property. Foreign Reaction and the EU's WTO Challenge Many U.S. allies—including Canada, Japan, Mexico, and European Union (EU) nations—strongly criticized the enactment of the Cuban Liberty and Democratic Solidarity Act. They maintain that the law's provisions allowing foreign persons to be sued in U.S. court constitute an extraterritorial application of U.S. law that is contrary to international principles. U.S. officials maintain that the United States, which reserves the right to protect its security interests, is well within its rights under NAFTA and the World Trade Organization (WTO). Until mid-April 1997, the EU had been pursuing a case at the WTO, in which it was challenging the Helms/Burton legislation as an extraterritorial application of U.S. law. The beginning of a settlement on the issue occurred on April 11, 1997, when an EU-U.S. understanding was reached. In the understanding, both sides agreed to continue efforts to promote democracy in Cuba and to work together to develop an agreement on agreed disciplines and principles for the strengthening of investment protection relating to the confiscation of property by Cuba and other governments. As part of the understanding, the EU agreed that it would suspend its WTO dispute settlement case. Subsequently in mid-April 1998, the EU agreed to let its WTO challenge expire. Talks between the United States and the European Union on investment disciplines proved difficult, with the European Union wanting to cover only future investments and the United States wanting to cover past expropriations, especially in Cuba. Nevertheless, after months of negotiations, the European Union and the United States reached a second understanding on May 18, 1998. The understanding set forth EU disciplines regarding investment in expropriated properties worldwide, in exchange for the Clinton Administration's obtaining a waiver from Congress for the legislation's Title IV visa restrictions. Under the understanding, future investment in expropriated property would be barred. For past illegal expropriations, government support or assistance for transactions related to those expropriated properties would be denied. A Registry of Claims would also be established to warn investors and government agencies providing investment support that a property has a record of claims. These investment disciplines were to be applied at the same time that the President's Title IV waiver authority was exercised. Reaction was mixed among Members of Congress to the EU-U.S. accord, but opposition to the agreement by several senior Members has forestalled any amendment of Title IV in Congress. The Bush Administration initially indicated that the Administration was looking into the possibilities of legislation to enact a presidential waiver for the provision, but during the June 2001 U.S.-EU summit, President Bush noted the difficulty of persuading Congress to amend the law. In July 2003, some press reports indicated that the Administration was considering an arrangement with the EU in which the EU would take a stronger policy stance toward Cuba in exchange for the Administration securing waiver authority for Title IV and permanent waiver authority for Title III of the Helms/Burton legislation. Section 211 Trademark Provision30 Another European Union challenge of U.S. law regarding Cuba in the World Trade Organization involves a dispute between the French spirits company, Pernod Ricard, and the Bermuda-based Bacardi Ltd. Pernod Ricard entered into a joint venture with the Cuban government to produce and export Havana Club rum, but Bacardi maintains that it holds the right to the Havana Club name. A provision in the FY1999 omnibus appropriations measure (Section 211 of Division A, title II, P.L. 105-277 , signed into law October 21, 1998) prevents the United States from accepting payment for trademark registrations and renewals from Cuban or foreign nationals that were used in connection with a business or assets in Cuba that were confiscated unless the original owner of the trademark has consented. The provision prohibits U.S. courts from recognizing such trademarks without the consent of the original owner. Although Pernod Ricard cannot market Havana Club in the United States because of the trade embargo, it wants to protect its future distribution rights should the embargo be lifted. After Bacardi began selling rum in the United States under the Havana Club label, Pernod Ricard's joint venture unsuccessfully challenged Bacardi in U.S. federal court. In February 2000, the U.S. Court of Appeals for the Second Circuit in New York upheld a lower court's ruling that the joint venture had no legal right to use the Havana Club name in the United States and also that it was barred from recognizing any assertion of treaty rights with regard to the trade name. After formal U.S.-EU consultations on the issue were held in 1999 without resolution, the EU initiated WTO dispute settlement proceedings in June 2000, maintaining that the U.S. law violates the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS). An August 6, 2001 ruling by the WTO panel was described as mixed, with both sides claiming a partial victory. The panel ruled that WTO rules on intellectual property rights did not cover trade names, but also ruled that a portion of the law (Section 211(a)(2)) prohibiting U.S. courts from recognizing such Cuban trademarks based on common law rights or registration is in violation of the TRIPS because it denies access to U.S. courts by trademark holders. In early October 2001, the EU formally notified the WTO that it was appealing the ruling. The WTO appeals panel issued its ruling on January 2, 2002, and again the ruling was described as mixed. According to the United States Trade Representative (USTR), the appellate panel upheld the "U.S. position that WTO intellectual property rights rules leave WTO members free to protect trademarks by establishing their own trademark ownership criteria" and overturned the earlier ruling that Section 211 was in violation of TRIPs because it denied access to U.S. courts by trademark holders. However, the appellate panel also found that Section 211 violated WTO provisions on national treatment and most-favored-nation treatment, which could require the United States to amend Section 211 so that it does not violate WTO rules. Although there is access to courts to enforce trademark rights, Section 211 restricted access in a discriminatory manner (against Cuban nationals and foreign successors-in-interest). On March 28, 2002, the United States agreed that it would come into compliance with the WTO ruling through legislative action by Congress by January 3, 2003. That deadline was extended several times since no legislative action had been taken to bring Section 211 into compliance with the WTO ruling. On July 1, 2005, however, in an EU-U.S. bilateral agreement, the EU agreed that it would not request authorization to retaliate at that time, but reserved the right to do so at a future date, and the United States agreed not to block a future EU request. Two different approaches have been advocated to bring Section 211 into compliance with the WTO ruling. Some want a narrow fix in which Section 211 would be amended so that it also applies to U.S. companies instead of being limited to foreign companies. Advocates of this approach argue that it would affirm that the United States "will not give effect to a claim or right to U.S. property if that claimed is based on a foreign compensation." Others want Section 211 repealed altogether. They argue that the law endangers over 5,000 trademarks of over 500 U.S. companies registered in Cuba. They maintain that Cuba could retaliate against U.S. companies under the Inter-American Convention for Trademark and Commercial Protection. In the 108 th Congress, the Senate Judiciary Committee held a July 13, 2004, hearing on the Section 211 trademark issue featuring those advocating the narrow fix as advanced by S. 2373 (Domenici) and H.R. 4225 (Smith of Texas), as well as those calling for the repeal of Section 211 as advanced by S. 2002 (Baucus) and H.R. 2494 (Rangel), but no action was taken on any of these measures in the 108 th Congress. In the 109 th Congress, several legislative initiatives would have repealed the Section 211 trademark provision from law, while two identical bills would have advanced the narrow fix to Section 211 in order to comply with the WTO ruling, but no action was taken on these measures. H.R. 3372 (Flake) and S. 1604 (Craig) would have repealed Section 211. Two bills that would have lifted the overall embargo, H.R. 208 (Serrano) and H.R. 579 (Paul), included provisions that would have repealed Section 211. In addition, two identical bills that would have facilitated U.S. agricultural sales to Cuba, H.R. 719 (Moran of Kansas) and S. 328 (Craig), also had provisions that would have repealed Section 211. A proposed amendment ( S.Amdt. 281 ) to S. 600 (Lugar), the FY2006 and FY2007 Foreign Affairs Authorization Act consisted of the language of S. 328 , including a provision that would have repeal Section 211. In contrast, two identical bills— S. 691 (Domenici) and H.R. 1689 (Feeney)—would have advanced the narrow fix in which Section 211 would be amended so that it also applied to U.S. companies. The July 2005 EU-U.S. bilateral agreement, in which the EU agreed not to retaliate against the United States, but reserved the right to do so at a later date, reduced pressure on Congress to take action to comply with the WTO ruling. Agricultural Exports U.S. commercial agricultural exports to Cuba have been allowed for several years, but with numerous restrictions and licensing requirements. The 106 th Congress passed the Trade Sanctions Reform and Export Enhancement Act of 2000 or TSRA ( P.L. 106-387 , Title IX) that allows for one-year export licenses for selling agricultural commodities to Cuba, although no U.S. government assistance, foreign assistance, export assistance, credits, or credit guarantees are available to finance such exports. TSRA, furthermore, denies exporters access to U.S. private commercial financing or credit; all transactions must be conducted in cash in advance or with financing from third countries. TSRA reiterates the existing ban on importing goods from Cuba but authorizes travel to Cuba, under a specific license, to conduct business related to the newly allowed agricultural sales. Regulations implementing the new provisions were published in the Federal Register on July 12, 2001. In November 2004, the Treasury Department's Office of Foreign Assets Control (OFAC) instructed U.S. banks to stop transfers of funds to U.S. companies for sales of agricultural and medical products to Cuba. The temporary move was taken so that OFAC could examine whether there were any violations of the provisions of the Trade Sanctions Reform and Export Enhancement Act of 2000, which requires that the sales be conducted in "payment of cash in advance." OFAC ultimately amended the Cuba embargo regulations on February 22, 2005, to clarify that TSRA's term of "payment of cash in advance" means that the payment is received by the seller or the seller's agent prior to the shipment of the goods from the port at which they are loaded. The new regulations, published in the Federal Register on February 25, went into effect on March 24, 2005, providing a 30-day window for exporters to comply. U.S. agricultural exporters and some Members of Congress strongly objected that the action constitutes a new sanction that violates the intent of TSRA and could jeopardize millions of dollars in U.S. agricultural sales to Cuba. OFAC Director Robert Werner maintains that the clarification "conforms to the common understanding of the term in international trade." On July 29, 2005, OFAC clarified that, for "payment of cash in advance" for the commercial sale of U.S. agricultural exports to Cuba, vessels can leave U.S. ports as soon as a foreign bank confirms receipt of payment from Cuba. OFAC's action would reportedly ensure that the goods would not be vulnerable to seizure for unrelated claims while still at the U.S. port. Supporters of overturning OFAC's February 22, 2005 amendment, such as the American Farm Bureau Federation, were pleased by the clarification but indicated that they would still work to overturn the February rule. Since late 2001, Cuba has purchased more than $1.4 billion in agricultural products from the United States. Overall U.S. exports to Cuba amounted to about $7 million in 2001, $146 million in 2002, $259 million in 2003, $404 million in 2004, $369 million in 2005, and $263 for the first eight months of 2006, the majority in agricultural products. In the first seven months of 2005, U.S. agricultural exports to Cuba had fallen by 25%, but rebounded beginning in August 2005 so that for the year overall, U.S. exports to Cuba had declined just 8.7% compared to 2004. The rebound in U.S. exports to Cuba in the second half of 2005 coincided with OFAC's late July 2005 clarification regarding "payment of cash in advance" noted above. The Cuban government maintains that the overall decline in U.S. agricultural exports to Cuba in 2005 was because of the stricter U.S. regulations. Other observers maintain that the decline was a result of Cuba's efforts to influence U.S. companies, local and state officials, and Members to lobby for changes in U.S. policy as well as a result of the financial support that Cuba receives from Venezuela and China. Some groups favor further easing restrictions on agricultural exports to Cuba. They argue that the restrictions harm the health and nutrition of the Cuban population. Some believe the embargo plays into Castro's hands by allowing him to use U.S. policy as a scapegoat for his failed economic policies and as a rationale for political repression. U.S. agribusiness companies that support the removal of restrictions on agricultural exports to Cuba believe that U.S. farmers are missing out on a market of over $700 million annually so close to the United States. Some exporters want to change U.S. restrictions so that they can sell agriculture and farm equipment to Cuba. Some agricultural exporters who support the lifting of the prohibition on financing contend that allowing such financing would help smaller U.S. companies expand purchases to Cuba more rapidly. Opponents of further easing restrictions on agricultural exports to Cuba maintain that U.S. policy does not deny such sales to Cuba, as evidenced by the large amount of sales since 2001. Moreover, according to the State Department, since the Cuban Democracy Act was enacted in 1992, the United States has licensed billions of dollars in private humanitarian donations. Opponents further argue that easing pressure on the Cuban government would in effect be lending support and extending the duration of the Castro regime. They maintain that the United States should remain steadfast in its opposition to any easing of pressure on Cuba that could prolong the Castro regime and its repressive policies. Some agricultural producers that export to Cuba support continuation of the prohibition on financing for agricultural exports to Cuba because it ensures that they will be paid. Legislative Initiatives In the first session of the 109 th Congress, attention focused on overturning the Treasury Department's new regulations that clarify the meaning of "payments of cash in advance" for U.S. agricultural exports to Cuba under TSRA. The House Agriculture Committee held a hearing on the issue on March 16, 2005, featuring the OFAC Director and representatives of U.S. companies exporting agricultural commodities to Cuba. In legislative action, the House- and Senate-passed versions of the FY2006 Treasury appropriations bill, H.R. 3058 , had identical provisions (Section 945 in the House version and Section 719 in the Senate version) that would have prohibited funds from being used to implement the Administration's February 25, 2005, amendments to the Cuban Assets Control Regulations that tightened restrictions on "payments of cash in advance" for U.S. agricultural exports to Cuba. The Administration's Statements of Policy on the bill, for both the House and Senate versions, maintained that the President would veto the bill if the final version contained such a provision. Ultimately the provision was not included in the November 18, 2005, conference report ( H.Rept. 109-307 ) to the bill. Press reports indicated that the White House rejected, during conference, language that would have denied $5 million to the Treasury Department's Office of Foreign Assets Control (OFAC) until the Treasury Department changed the tightened restrictions. In the second session of the 109 th Congress, both the House-passed and Senate Appropriations Committee-reported versions of the FY2007 Transportation/Treasury appropriation bill, H.R. 5576 , contained a provision similar to that approved in 2005, which would have prohibited funds from being used to implement the February 2005 tightened restrictions on financing for U.S. agricultural exports to Cuba. The House provision (Section 950) was added by H.Amdt. 1049 (Moran, Kansas), adopted by voice vote on June 14, 2006. The Senate provision (Section 846) was in the Senate Appropriations Committee's version of the bill reported on July 26, 2006 ( S.Rept. 109-293 ); it was added by an amendment offered by Senator Dorgan by voice vote during the committee's July 20, 2006, markup of the bill. The Administration's Statement of Policy on the bill had a presidential veto threat if the bill contained any provision weakening Cuba sanctions. Action on H.R. 5576 was not completed by the end of the 109 th Congress, so final action on FY2007 Transportation/Treasury appropriations will be completed in early 2007. Also in the second session, the Senate Appropriations Committee reported its version of the FY2007 Agriculture appropriations bill, H.R. 5384 ( S.Rept. 109-266 ), which contains a provision (Section 755) liberalizing travel to Cuba related to the sale of agricultural and medical goods. It would have provided for such travel under a general license, instead of under a specific license currently issued by the Treasury Department on a case-by-case basis. Action on H.R. 5384 was not completed by the end of the 109 th Congress, so FY2007 agriculture appropriations will need to be addressed early in the new Congress. Among other legislative initiatives in the 109 th Congress, H.R. 1339 (Emerson) and S. 634 (Chambliss), both introduced March 16, 2005, would have clarified that TSRA's "payment of cash in advance" term means that the payment by the purchaser and the receipt of such payment to the seller occurs prior to the transfer of title of the commodity and the release of control of the commodity to the purchaser. A similar provision was included in H.R. 719 (Moran of Kansas) and S. 328 (Craig), the Agricultural Export Facilitation Act of 2005, both introduced February 9, 2005. These two bills also included provisions that would have provided for a general license for travel transactions related to the marketing and sale of agricultural products, as opposed to the current requirement of a specific license for such travel transactions. The bills also would have expressed the sense of Congress that the Secretary of State should issue visas for the temporary entry of Cuban nationals to conduct activities related to purchasing U.S. agricultural commodities. A proposed amendment— S.Amdt. 281 (Baucus)—to S. 600 (Lugar), consisted of the language of S. 328 , the Agricultural Export Facilitation Act of 2005. Two additional bills, H.R. 208 (Serrano) and H.R. 579 (Paul), would have lifted the overall embargo, including restrictions on agricultural trade with Cuba. Travel and Private Humanitarian Assistance Restrictions Restrictions on travel to Cuba have been a key and often contentious component of U.S. efforts to isolate the communist government of Fidel Castro for much of the past 40 years. Over time there have been numerous changes to the restrictions and for five years, from 1977 until 1982, there were no restrictions on travel. Restrictions on travel and remittances to Cuba are part of the Cuban Assets Control Regulations (CACR), the overall embargo regulations administered by the Treasury Department's Office of Foreign Assets Control (OFAC). Under the Bush Administration, enforcement of U.S. restrictions on Cuba travel has increased, and restrictions on travel and on private remittances to Cuba have been tightened. In March 2003, the Administration eliminated travel for people-to-people educational exchanges unrelated to academic course work. In June 2004, the Administration significantly restricted travel, especially family travel, and the provision of private humanitarian assistance to Cuba in the form of remittances and gift parcels. Among the June 2004 restrictions are the following. Family visits are restricted to one trip every three years under a specific license and are restricted to immediate family members. Under previous regulations, family visits could occur once a year under a general license, with travel more than once a year allowed but under a specific license. Previously travel had been allowed to visit relatives to within three degrees of relationship to the traveler. Cash remittances, estimates of which range from $400 million to $800 million, are further restricted. Quarterly remittances of $300 may still be sent, but it is now restricted to members of the remitter's immediate family and may not be remitted to certain government officials and certain members of the Cuban Communist Party. The regulations were also changed to reduce the amount of remittances that authorized travelers may carry to Cuba, from $3000 to $300. Gift parcels are limited to immediate family members and are denied to certain Cuban officials and certain members of the Cuban Communist Party. The contents of gift parcels may no longer include seeds, clothing, personal hygiene items, veterinary medicines and supplies, fishing equipment and supplies, and soap-making equipment. The authorized per diem allowed for a family visit is reduced from the State Department per diem rate, currently $167 per day, to $50 per day. With the exception of informational materials, licensed travelers may not purchase or otherwise acquire merchandise and bring it back into the United States. Previous regulations allowed visitors to Cuba to import $100 worth of goods as accompanied baggage. Fully-hosted travel is no longer allowed as a permissible category of travel. Travel for educational activities is further restricted, including the elimination of educational exchanges sponsored by secondary schools. There was mixed reaction to the tightening of Cuba travel and remittance restrictions. Supporters maintain that the increased restrictions will deny the Cuban government dollars that help maintain its repressive control. Opponents argue that the tightened sanctions are anti-family and will only result in more suffering for the Cuban people. There have also been concerns that the new restrictions were drafted without considering the full consequences of their implementation. For example, the elimination of fully-hosted travel raised concerns about the status of 70 U.S. students receiving full scholarships at the Latin American School of Medicine in Havana. Members of the Congressional Black Caucus, who were instrumental in the establishment of the scholarship program for U.S. students, expressed concern that the students may be forced to abandon their medical education because of the new OFAC regulations. As a result of these concerns, OFAC ultimately licensed the medical students in August 2004 to continue their studies for a period of two years and engage in travel-related transactions. Several high profile cases highlighted the Cuba travel issue in 2005. In April, OFAC cracked down on certain religious organizations promoting licensed travel to Cuba and warned them not to abuse their license by taking individuals not affiliated with the religious organizations. OFAC's action were prompted by reports that groups practicing the Afro-Cuban religion Santería had been taking large groups to Cuba as a means of skirting U.S. travel restrictions. During the year, attention also focused on the case of a U.S. military member who served in Iraq, Sgt. Carlos Lazo, who is prohibited by the travel restrictions from visiting his two sons in Cuba since he had visited them in 2003. In December 2005, OFAC initially denied a license to Major League Baseball that would allow a Cuba team to participate in World Baseball Classic tournament in the United States. OFAC had concerns that the Cuban government could have benefitted financially from its team's participation. On January 20, 2006, however, OFAC ultimately approved the license after assurances that any proceeds earned by the Cuban team would go to charity, in this case to the victims of Hurricane Katrina. In 2006, there were further indications of the Administration's strict enforcement of travel restrictions. Press reports in January indicated that OFAC reportedly sent letters to some 200 travelers from two U.S. groups—Pastors for Peace (which organizes caravans of aid from the United States to Cuba via Mexico) and the Venceremos Brigade—both of which have long organized trips to Cuba in defiance of U.S. sanctions. On January 23, OFAC suspended one of the largest licensed travel service providers in Florida, La Estrella de Cuba, from booking travel to Cuba. Another three agencies had their OFAC license suspended, and some 26 of the approximate 200 travel agencies licensed by OFAC to book travel to Cuba chose not to renew their licenses. Several religious organizations also had their licenses suspended, and Church groups and several Members of Congress have expressed concern about more restrictive licenses for religious travel. Major arguments made for lifting the Cuba travel ban are that it contributes to the suffering of Cuban families; it hinders efforts to influence conditions in Cuba and may be aiding Castro by helping restrict the flow of information; it abridges the rights of ordinary Americans; and Americans can travel to other countries with communist or authoritarian governments. Major arguments in opposition to lifting the Cuba travel ban are that more American travel would support Castro's rule by providing his government with millions of dollars in hard currency; that there are legal provisions allowing travel to Cuba for humanitarian purposes that are used by thousands of Americans each year; and that the President should be free to restrict travel for foreign policy reasons. Legislative Initiatives In the first session of the 109 th Congress, on June 30, 2005, the House rejected three amendments to the FY2006 Transportation appropriations bill, H.R. 3058 , that would have eased Cuba travel restrictions: H.Amdt. 420 (Davis) on family travel, by a vote of 208-211; H.Amdt. 422 (Lee) on educational travel, by a vote of 187-233; and H.Amdt. 424 (Rangel) on the overall embargo, by a vote of 169-250. An additional amendment on religious travel, H.Amdt. 421 (Flake), was withdrawn, and an amendment on travel by members of the U.S. military, H.Amdt. 419 (Flake), was ruled out of order for constituting legislation in an appropriations bill. The introduction of H.Amdt. 419 was prompted by the case of U.S. military member Sgt. Carlos Lazo, noted above, who wants to visit his two sons in Cuba. In Senate action, during June 29, 2005, consideration of H.R. 2361 , the FY2006 Interior appropriations bill, the Senate rejected a motion to suspend the rules with respect to S.Amdt. 1059 (Dorgan), which would have allowed travel to Cuba under a general license for the purpose of visiting a member of the person's immediate family for humanitarian reasons. The Dorgan amendment had also been prompted by the case of Sgt. Lazo. In the second session, on June 14, 2006, the House rejected two amendments to the FY2007 Transportation/Treasury appropriation bill, H.R. 5576 , that would have eased Cuba travel restrictions. H.Amdt 1050 (Rangel), rejected by a vote of 183-245, would have prohibited funds from being used to implement the overall economic embargo of Cuba. H.Amdt. 1051 (Lee), rejected by a vote of 187-236, would have prohibited funds from being used to implement the Administration's June 2004 tightening of restrictions on educational travel to Cuba. An additional Cuba amendment, H.Amdt. 1032 (Flake), that would have prohibited the use of funds to amend regulations relating to travel for religious activities in Cuba, was withdrawn from consideration. In other action, on June 22, 2006, the Senate Appropriations Committee reported its version of the FY2007 Agriculture appropriations bill, H.R. 5384 ( S.Rept. 109-266 ), which contained a provision (Section 755) that would have liberalized travel to Cuba related to the sale of agricultural and medical goods. The provision would have provided for such travel under a general license, instead of under a specific license as currently allowed, issued on a case-by-case basis by the Treasury Department. Final action on the bill was not completed before the end of the 109 th Congress. Similar Senate provisions in FY2004 and FY2005 agricultural appropriations bills were stripped out of the final enacted measures. Among other legislative initiatives in the 109 th Congress, two bills would have specifically lifted overall restrictions on travel to Cuba: S. 894 (Enzi) and H.R. 1814 (Flake); H.R. 2617 (Davis) would have prohibited any additional restrictions on per diem allowances, family visits to Cuba, remittances, and accompanied baggage beyond those that were in effect on June 15, 2004; and H.R. 3064 (Lee) would have prohibited the use of funds available to the Department of the Treasury to implement regulations from June 2004 that tightened restrictions on travel to Cuba for educational activities. H.Con.Res. 206 (Serrano), introduced in the aftermath of Hurricane Dennis that struck Cuba on July 8, 2005 (causing 16 deaths and significant damage), would have expressed the sense of Congress that the President should temporarily suspend restrictions on remittances, gift parcels, and family travel to Cuba to allow Cuban-Americans to assist their relatives. Two bills that would have lifted the overall embargo on trade and financial transaction with Cuba, H.R. 208 (Serrano) and H.R. 579 (Paul), included restrictions removing restrictions on travel to Cuba. Two identical bills dealing with easing restrictions on exporting agricultural commodities to Cuba, H.R. 719 (Moran of Kansas) and S. 328 (Craig), included provisions that provide for a general license for travel transactions related to the marketing and sale of agricultural products, as opposed to the current requirement of a specific license for such travel transactions. Finally, pending amendments— S.Amdt. 281 (Baucus) and S.Amdt. 282 (Craig)—to S. 600 would have added the language of S. 328 , with a provision on travel transactions for the marketing and sale of agricultural products. (For further information, including details on legislative action since the 106 th Congress, see CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances , by [author name scrubbed].) Offshore Oil Sector Development The issue of Cuba's development of its offshore oil reserves along its northwest coast, which reportedly could amount to more than 5 billion barrels of oil, has been a concern among some Members of Congress. Cuba has signed agreements with four foreign oil companies—Repsol (Spain), Sherritt International (Canada), Norsk-Hydro (Norway), and ONGC (India)—for the exploration of offshore oil and gas. Some Members expressed concern about the oil development so close to the United States and about potential environmental damage to the Florida coast. Legislation was introduced in both houses that would have imposed sanctions related to Cuba's offshore oil development on its northern coast. S. 2682 (Nelson) would have nullified the 1977 U.S.-Cuba maritime boundary agreement and would have excluded from admission to the United States aliens who have made investments directly that significantly contribute to Cuba's ability to develop its petroleum resources. H.R. 5292 (Ros-Lehtinen) and S. 2795 (Martinez) would have imposed similar visa restrictions as S. 2682 and also impose economic sanctions on persons (including foreign subsidiaries) that are determined to have made an investment equal to or exceeding $1 million that contributes to the enhancement of Cuba's ability to develop petroleum resources of the submerged lands of Cuba's northern coast. In contrast, other Members have introduced legislation, H.R. 5353 (Flake) and S. 2787 (Craig), that would have authorized U.S. companies to work with Cuba for the offshore exploitation and extraction of oil along Cuba's northern coast. They argued that U.S. companies' involvement in Cuba's offshore oil development would reduce the likelihood of potential environmental damage caused by an oil spill. Drug Interdiction Cooperation Because of Cuba's geographic location, the country's waters and airspace have been used by illicit narcotics traffickers to transport drugs for ultimate destinations in the United States. Over the past several years, Cuban officials have expressed concerns over the use of their waters and airspace for drug transit as well as increased domestic drug use. The Cuban government has taken a number of measures to deal with the drug problem, including legislation to stiffen penalties for traffickers, increased training for counternarcotics personnel, and cooperation with a number of countries on anti-drug efforts. Cuba has bilateral counternarcotics agreements with 33 countries and less formal arrangements with 16 others, according to the Department of State. In 2003, Cuba began nationwide multi-agency anti-drug efforts: Operation Hatchet III, focusing on maritime and air interdiction; and Operation Popular Shield, focusing on investigations. There has been a mixed record of cooperation with Cuba on anti-drug efforts. In 1996, Cuban authorities cooperated with the United States in the seizure of 6.6 tons of cocaine aboard the Miami-bound Limerick , a Honduran-flag ship. Cuba turned over the cocaine to the United States and cooperated fully in the investigation and subsequent prosecution of two defendants in the case in the United States. Cooperation has increased since 1999 when U.S. and Cuban officials met in Havana to discuss ways of improving anti-drug cooperation. Cuba accepted an upgrading of the communications link between the Cuban Border Guard and the U.S. Coast Guard as well as the stationing of a U.S. Coast Guard Drug Interdiction Specialist (DIS) at the U.S. Interests Section in Havana. The Coast Guard official was posted to the U.S. Interests Section in September 2000, and since that time, coordination has increased somewhat. The State Department, in its March 2006 International Narcotics Control Strategy Report, maintains narcotics cooperation occurs on a case-by-case basis through the Coast Guard specialist. The report notes that Cuba has provided to the United States' investigation information on narcotics trafficking cases as well as information on suspect vessels and aircraft. The report contends, however, that Cuba consistently seeks to engage U.S. cooperation on counternarcotics efforts in order "to project an aura of normalization with the United States." The report maintains that broader cooperation with Cuba, such as through a bilateral agreement, is not possible until the Cuba "abandons its totalitarian character and its role as a state sponsor of terrorism." Cuba maintains that it wants to cooperate with the United States to combat drug trafficking, and on various occasions has called for a bilateral anti-drug cooperation agreement with the United States. In January 2002, Cuba deported to the United States Jesse James Bell, a U.S. fugitive wanted on drug charges, and in early March 2002, Cuba arrested a convicted Colombian drug trafficker, Rafael Bustamante, who escaped from jail in Alabama in 1992. At the time, while Drug Enforcement Administration head Asa Hutchison expressed appreciation for Cuba's actions, he indicated that cooperation would continue on a case-by-case basis, not through a bilateral agreement. Legislative Initiatives In the first session of the 109 th Congress, the House-passed version of the FY2006 Foreign Operations appropriations bill, H.R. 3057 , had a provision (Section 572) providing that no International Narcotics Control and Law Enforcement (INCLE) funds could be made available for assistance to the Cuban government. The Senate-passed version, in Section 6089, would have provided $5 million in INCLE funds for preliminary work to establish cooperation with Cuba on counter-narcotics matters. The money would not be available if the President certified that Cuba did not have in place appropriate procedures to protect against the loss of innocent life in the air and on the ground in connection with the interdiction of illegal drugs and there was evidence of involvement of the Cuban government in drug trafficking. In the end, the conference report ( H.Rept. 109-265 ) to the bill did not include either the House or Senate provision. In the second session of the 109 th Congress, the House-passed provision of the FY2007 Foreign Operations appropriations bill, H.R. 5522 , included a provision that no INCLE assistance could be made available to the Cuban government. The report to the bill ( H.Rept. 109-486 ) maintains that full reporting and transparency by the Cuban government and that U.S. monitoring of counternarcotics assistance in Cuba would be difficult, if not impossible, given Cuba's hostility toward the U.S. government. As in past years, the Senate version of the bill had a provision, in Section 551(e), that would have provided $5 million in INCLE funds for preliminary work to establish cooperation with Cuba on counternarcotics matters with the same conditions noted above. Final action on H.R. 5522 was not completed before the end of the 109 th Congress. Cuba and Terrorism49 Cuba was added to the State Department's list of states sponsoring international terrorism in 1982 because of its alleged ties to international terrorism and its support for terrorist groups in Latin America. Cuba had a long history of supporting revolutionary movements and governments in Latin America and Africa, but in 1992, Fidel Castro said that his country's support for insurgents abroad was a thing of the past. Cuba's change in policy was in large part because of the breakup of the Soviet Union, which resulted in the loss of billions of dollars in annual subsidies to Cuba, and led to substantial Cuban economic decline. Cuba remains on the State Department's terrorism list. According to the State Department's Country Reports on Terrorism 2005 report (issued in April 2006), Cuba has "actively continued to oppose the U.S.-led Coalition prosecuting the global war on terror and has publicly condemned various U.S. polices and action." The State Department report also noted that Cuba maintains close relationships with other state sponsors of terrorism such as Iran and North Korea and has provided safe haven for members of several Foreign Terrorist Organizations. The report maintained that Cuba provides safe haven to various Basque ETA members from Spain and to members of two Colombian insurgent groups, the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN), although the report also maintained that there is no information concerning terrorist activities of these or other organizations in Cuba. The State Department's 2002 and 2003 Patterns of Global Terrorism reports acknowledged that Colombia acquiesced to this arrangement and that Colombia publicly said that it wanted Cuba's continued mediation with the ELN in Cuba. In December 2005, a group of international facilitators representing Cuba, Norway, Spain, and Switzerland oversaw exploratory talks between the Colombian government and the ELN in Havana. In April 2006, Colombia and the ELN held four days of talks in Cuba and reiterated their commitment to continue meeting after Colombia's May 28, 2006, elections. The 2005 report also maintained that Cuba permits U.S. fugitives from justice to live legally in Cuba. Many are accused of hijacking or committing violent actions in the United States, including Joanne Chesimard, who is wanted for the murder of a New Jersey State Trooper in 1973. The State Department report noted that most of the fugitives entered Cuba in the 1970s and that Cuba has stated that it will no longer provide safe haven to new fugitives who may enter Cuba. In the 109 th Congress, Section 101(1)(H) of House-passed H.R. 2601 would have authorized funds for the U.S. Interests Section in Havana to disseminate the names of U.S. fugitives residing in Cuba and any rewards for their capture. H.R. 332 (King) would have amended the Cuban Liberty and Democratic Solidarity Act of 1996 to require that, in order to determine that a democratically elected government in Cuba exists, the government extradite to the United States individuals who are living in Cuba in order to escape prosecution or confinement for criminal offense committed in the United States. In general, those who support keeping Cuba on the terrorism list argue that there is ample evidence that Cuba supports terrorism. They point to the government's history of supporting terrorist acts and armed insurgencies in Latin America and Africa. They point to the government's continued hosting of members of foreign terrorist organizations and U.S. fugitives from justice. Critics of retaining Cuba on the terrorism list maintain that it is a holdover from the Cold War. They argue that domestic political considerations keep Cuba on the terrorism list and maintain that Cuba's presence on the list diverts U.S. attention from struggles against serious terrorist threats. Although Cuba offered support to the United States in the aftermath of the World Trade Center and Pentagon attacks in 2001, Fidel Castro also stated that the attacks were in part a consequence of the United States having applied "terrorist methods" for years. Cuba's subsequent statements became increasingly hostile, according to press reports, which quoted Cuba's mission to the United Nations as describing the U.S. response to the U.S. attacks as "fascist and terrorist" and that the United States was using the attack as an excuse to establish "unrestricted tyranny over all people on Earth." Castro himself said that the U.S. government was run by "extremists" and "hawks" whose response to the attack could result in an "infinite killing of innocent people." The Cuban government, however, had a much more muted reaction to the U.S. decision to send captured Taliban and Al Qaeda fighters from Afghanistan to the U.S. naval base at Guantanamo Bay, Cuba. Although the Cuban government objects to the U.S. presence at Guantanamo as a national security threat and opposes the presence as illegal, it has not opposed the new mission of housing detainees from Afghanistan. The Cuban government has, however, expressed concerns about the treatment of terrorist suspects at Guantanamo. (Also see " Guantanamo Naval Base " below.) Cuba and Biological Weapons? U.S. government concerns about Cuba's capability to produce biological weapons date back several years. In 1998, then U.S. Secretary of Defense William Cohen stated in a transmittal letter (accompanying a report to Congress on Cuba's threat to U.S. national security) that he was "concerned about Cuba's potential to develop and produce biological agents, given its biotechnology infrastructure..." Cuba began building up its biotechnology industry in the 1980s and has spent millions investing in the sector. The industry was initially geared "to apply biotechnology and genetic engineering to agriculture in order to increase yields" but has also produced numerous vaccines, interferon, and other drugs and has exported many of its biotechnology products. In 1999, the British pharmaceutical company GlaxoSmithKline announced an agreement to test and market a new Cuban meningitis vaccine that might eventually be used in the United States. In May 2003, the Center for Defense Information published a report on a delegation sent to Cuba that visited nine Cuban biotechnology facilities. In 2002, the State Department made controversial allegations that Cuba biotechnology sector, has been involved in developing biological weapons. On May 6, 2002, Under Secretary of State for Arms Control and International Security John Bolton stated that "the United States believes that Cuba has at least a limited offensive biological warfare research-and-development effort" and "has provided dual-use technology to other rogue states." Bolton called on Cuba "to cease all BW-applicable cooperation with rogue states and to fully comply with all of its obligations under the Biological Weapons Convention." Although Bolton's statement received considerable media attention, it was similar to a March 19, 2002 statement by Assistant Secretary of State for Intelligence and Research Carl Ford before the Senate Committee on Foreign Relations. When questioned on the issue, Secretary of State Powell maintained that Under Secretary Bolton's statement was not based on new information. Powell asserted that the United States believes Cuba has the capacity and the capability to conduct research on biological weapons but emphasized that the Administration had not claimed that Cuba had such weapons. Some observers viewed Powell's statement as contradicting that of Under Secretary Bolton. In response to Under Secretary Bolton's statement, the Cuban government called the allegations a lie and maintained that the Bush Administration was trying to justify its hard-line policies just when the momentum is increasing in the United States to ease the embargo. During his trip to Cuba, former President Jimmy Carter criticized the Bush Administration for the allegations and said that Administration officials who had briefed him before the trip assured him that Cuba had not shared anything with other countries that could be used for terrorist purposes. The Senate Foreign Relations Committee's Subcommittee on Western Hemisphere, Peace Corps, and Narcotics Affairs held a hearing on the issue on June 5, 2002. At the hearing, Assistant Secretary of State for Intelligence and Research Carl Ford distinguished between the term "effort" and "program," and maintained that Cuba has a biological weapons effort and not a biological weapons program. Ford characterized a program as something substantial and multifaceted that includes test facilities, production facilities, and a unit within the military specifically designated for such weapons capability. In contrast, he characterized an effort as the research and development that would be necessary to create biological weapons. In late June 2003, news reports stated that an employee of the State Department's Bureau of Intelligence and Research maintained that Undersecretary Bolton's assertions about Cuba and biological weapons were not supported by sufficient intelligence. In March 30, 2004, congressional testimony before the House International Relations Committee, Under Secretary of State John Bolton asserted that "Cuba remains a terrorist and BW threat to the United States." According to Bolton: "The Bush Administration has said repeatedly that we are concerned that Cuba is developing a limited biological weapons effort, and called on Fidel Castro to cease his BW aspirations and support of terrorism." Bolton went on to add a caveat, however, that "existing intelligence reporting is problematic, and the Intelligence Community's ability to determine the scope, nature, and effectiveness of any Cuban BW program has been hampered by reporting from sources of questionable access, reliability, and motivation." The New York Times reported on September 18, 2004 that the Bush Administration, using more stringent intelligence standards, had "concluded that it is no longer clear that Cuba has an active, offensive bio-weapons program." An August 2005 State Department report to Congress indicated that while observers agree that Cuba has the technical capability to pursue some aspects of offensive biological warfare, there is disagreement over whether Cuba has an active biological warfare effort now, or even had one in the past. The State Department's Country Reports on Terrorism 2005 report (issued in April 2006) also maintained that although Cuba invests heavily in biotechnology, "there is some dispute about the existence and extent of Cuba's offensive biological weapons program." Cuba as the Victim of Terrorism Cuba has been the target of various terrorist incidents over the years. In 1976, a Cuban plane was bombed, killing 73 people. In 1997, there were almost a dozen bombings in the tourist sector in Havana and in the Varadero beach area in which an Italian businessman was killed and several others were injured. Two Salvadorans were convicted and sentenced to death for the bombings in March 1999, and three Guatemalans were sentenced to prison terms ranging from 10-15 years in January 2002. Cuban officials maintain that Cuban exiles funded the bombings. In November 2000, four anti-Castro activists were arrested in Panama for a plot to kill Fidel Castro. One of the accused, Luis Posada Carriles, was allegedly involved in the 1976 bombing of a Cuban airliner. The four stood trial in March 2004 and were sentenced on weapons charges in the case to prison terms ranging from seven to eight years. In late August 2004, Panamanian President Mireya Moscoso pardoned the four men before the end of her presidential term. Three of the men are U.S. citizens and traveled to Florida, where they received strong support from some in the Cuban American community, while Posada Carriles reportedly traveled to another country. U.S. State Department officials did not criticize President Moscoso's pardon of the four, but maintained that they did not lobby Panama for the pardons. On April 13, 2005, Posada's lawyer said that his client, reportedly in the United States for a month after entering the United States illegally from Mexico, would seek asylum in the United States because he has a "well-founded fear of persecution" for his opposition to Fidel Castro. Posada, a Venezuelan citizen, had been imprisoned in Venezuela for the bombing of the Cuban airliner in 1976, but reportedly was allowed to "escape" from prison in 1985 after his supporters paid a bribe to the prison warden. He had been acquitted for the bombing but remained in prison pending a prosecutorial appeal. Posada also reportedly admitted, but later denied, involvement in a string of bombings in Havana in 1997, one of which killed an Italian tourist. U.S. Immigration and Customs Enforcement (ICE) arrested Posada on May 17, 2005, and subsequently charged him with illegally entering the United States. A Department of Homeland Security press release indicated that ICE does not generally deport people to Cuba or countries believed to be acting on Cuba's behalf. Venezuela requested Posada's extradition and pledged that it would not hand Posada over to Cuba, but on September 26, 2005, a U.S. immigration judge ruled that Posada cannot be deported to Venezuela because he could be tortured. ICE reviewed the case and determined on March 22, 2006, that Posada would not be freed from a federal immigration facility in El Paso, Texas. In early November 2006, however, a U.S. federal judge, who is considering Posada's plea that he be released, ordered the government to supply evidence, by February 1, 2007, justifying his continued detention. Federal grand juries are reportedly investigating Posada's activities that could lead to his indictment and justify his continued detention. In Texas, a grand jury reportedly is focusing on whether he lied about how he entered the United States, while in New Jersey, a grand jury is examining Posada's alleged role in the 1997 bombings in Cuba. Guantanamo Naval Base76 The 45-square mile U.S. naval facility at Guantanamo Bay, Cuba, has been a U.S. base since 1903, and under a 1934 treaty that remains in force, the U.S. presence can only be terminated by mutual agreement or by abandonment by the United States. When Fidel Castro assumed power in the 1959 Cuban revolution, the new government gave assurances that it would respect all its treaty commitments, including the 1934 treaty covering the Guantanamo base. Subsequently, however, as U.S.-Cuban relations deteriorated, the Cuban government opposed the presence as illegal. The mission of the base has changed over time. During the Cold War, the base was viewed as a good location for controlling Caribbean sea lanes, as a deterrent to the Soviet presence in the Caribbean, and as a location for supporting potential military operations in the region. In 1994-1995, the base was used to house thousands of Cubans and Haitians fleeing their homeland, but by 1996 the last of refugees had departed, with most Cubans paroled into the United States, pursuant to a May 1995 U.S.-Cuban migration accord. Since the 1995 accord, the U.S. Coast Guard has interdicted thousands of Cubans at sea and returned them to Cuba, while a much smaller number, those deemed at risk for persecution, have been taken to Guantanamo and then granted asylum in a third country. In the aftermath of increased violence in Haiti in February 2004, the base reportedly was being considered as a contingency option to house Haitian migrants in the event of a mass exodus from Haiti. Another mission for the Guantanamo base emerged with the U.S.-led global campaign against terrorism in the aftermath of the September 11, 2001, terrorist attacks in the United States. With the U.S. war in Afghanistan in 2001, the United States decided to send captured Taliban and Al Qaeda fighters to be imprisoned in Guantanamo. Although the Cuban government has objected to the U.S. presence at Guantanamo, it did not initially oppose the new mission of housing detainees. Defense Minister Raúl Castro noted that, in the unlikely event that a prisoner would escape into Cuban territory, Cuba would capture the prisoner and return him to the base. The Cuban government, however, has expressed concerns about the treatment of prisoners at the U.S. base and has said it will keep pressing the international community to investigate the treatment of terrorist suspects. In January 2005, it denounced what it described as "atrocities" committed at the Guantanamo base. Some Members of Congress have called on the Administration to close the U.S. detention facility at Guantanamo, while others support the continued use of Guantanamo to hold terrorist detainees. With regard to the future of the Guantanamo base, a provision in the Cuban Liberty and Democratic Solidarity Act of 1996 ( P.L. 104-114 , Section 210), states that once a democratically elected Cuban government is in place, U.S. policy will be to be prepared to enter into negotiations either to return the base to Cuba or to renegotiate the present agreement under mutually agreeable terms. Radio and TV Marti U.S.-government sponsored radio and television broadcasting to Cuba—Radio and TV Marti—began in 1985 and 1990 respectively. As spelled out in the Broadcasting Board of Governors FY2007 Budget Request , the objectives of Radio and TV Marti are 1) to support the right of the Cuban people to seek, receive, and impart information and ideas through any media and regardless of frontiers; 2) to be effective in furthering the open communication of information and ideas through use of radio and television broadcasting to Cuba; 3) to serve as a consistently reliable and authoritative source of accurate, objective, and comprehensive news; and 4) to provide news, commentary, and other information about events in Cuba and elsewhere to promote the cause of freedom in Cuba. Until October 1999, U.S.-government funded international broadcasting programs had been a primary function of the United States Information Agency (USIA). When USIA was abolished and its functions were merged into the Department of State at the beginning of FY2000, the Broadcasting Board of Governors (BBG) became an independent agency that included such entities as the Voice of America (VOA), Radio Free Europe/Radio Liberty (RFE/RL), Radio Free Asia, and the Office of Cuba Broadcasting (OCB), which manages Radio and TV Marti. OCB is headquartered in Miami, Florida. Legislation in the 104 th Congress ( P.L. 104-134 ) required the relocation of OCB from Washington D.C. to south Florida. The move began in 1996 and was completed in 1998. Radio Marti broadcasts on short and medium wave (AM) channels for 24 hours six days per week, and for18 hours one day per week. TV Marti broadcasts 24 hours a day, seven days a week on the Hispasat satellite and is also available on the Internet 24 hours a day. Until July 2005, TV Marti had also been broadcast via blimps from facilities in Cudjoe Key, Florida for four and one-half hours daily, but the aerostats were destroyed by Hurricane Dennis. Since mid-2004, both Radio and TV Marti programming have been transmitted for several hours once a week via airborne broadcasts conducted by the Air Force. Since August 2006, a dedicated contracted private aircraft has been used to transmit TV Marti Monday through Saturday evenings, and Radio Marti broadcasts will reportedly be added in the future. In addition, the OCB contracted with a private U.S. commercial television station to broadcast some TV Marti programs daily, beginning on December 18, 2006. OCB also contracted with a private commercial radio station in Miami, Radio Mambi, to broadcast some Radio Marti programming. Both Radio and TV Marti have at times been the focus of controversies, including questions about adherence to broadcast standards. There have been various attempts over the years to cut funding for the programs, especially for TV Marti, which has not had an audience because of Cuban jamming efforts. Various studies and audits of these programs have been conducted, including investigations by the U.S. General Accounting Office, by a 1994 congressionally established Advisory Panel on Radio and TV Marti, and by the State Department's and BBG's Inspector General offices in 1999 and 2003. More recently, in December 2006, press reports alleged significant problems in the OCB's operations, with claims of cronyism, patronage, and bias in its coverage. (For background on Cuba broadcasting through 1994, see CRS Report 94-636, Radio and Television Broadcasting to Cuba: Background and Issues Through 1994 , by [author name scrubbed] and [author name scrubbed] (pdf).) From FY1984 through FY2005, about $493 million has been spent for broadcasting to Cuba, with about $300 million for Radio Marti (since FY1984) and $193 million for TV Marti (since FY1989). Debate on TV Marti In the various congressional debates on TV Marti over the years, opponents of continued funding of the program maintain that virtually the only people who see TV Marti in Cuba are those Cubans who visit the consular section of the U.S. Interests Section in Havana, which has a waiting room in which TV Marti may be viewed. These critics argue that some $190 million has been spent by the United States for TV Marti, while the Cuban government only needs to spend a few thousand dollars to jam the broadcasts effectively. They argue that TV Marti is a waste of taxpayers' money because it does not contribute to the promotion of freedom and democracy in Cuba, unlike Radio Marti, which some Cubans listen to as a source of information. Opponents also argue that the conversion of TV Marti from VHF to UHF transmission has not succeeded in overcoming Cuba's jamming efforts. In contrast, supporters of continued TV Marti funding point to a congressionally mandated Advisory Panel in 1994, which stated that "the Cuban people have an ardent desire and a genuine need to receive the programming produced by TV Marti." Supporters argue that eliminating TV Marti would send a message to the Cuban people that the United States is not committed to the cause of freedom in Cuba. They believe that eliminating TV Marti would be giving in to the dictatorial Castro government, which suppresses the free flow of information in Cuba. These proponents contend that it is impossible for the Cuban government to completely jam TV Marti, and maintain that significant numbers of Cubans have attempted to tune in to the programming. Still others point to the potential use of TV Marti in the event of a crisis or upheaval in Cuba's future, and argue that in such a scenario, it would be important to have TV Marti available as a news source. Airborne Broadcasts In early May 2004, the Commission for Assistance for a Free Cuba called for the immediate deployment of the EC-130E/J Commando Solo airborne platform for weekly airborne radio and television broadcasts to Cuba in order to overcome Cuban jamming. It also called for funds "to acquire and refit a dedicated airborne platform for full-time transmission of Radio and TV Marti into Cuba." In support of these recommendations, President Bush directed that up to $18 million be committed "for regular airborne broadcasts to Cuba and the purchase of a dedicated airborne platform for the transmission of Radio and Television Marti into Cuba." The longer term proposal for a dedicated airborne platform would not be a military aircraft but an aircraft acquired and operated by the Broadcasting Board of Governors' Office of Cuba Broadcasting (OCB). EC-130E/J Commando Solo aircraft, flown by the Air Force Special Operations Wing at Harrisburg, Pennsylvania, are specialized assets that have been used to conduct information operations, psychological operations, and civil affairs broadcasts worldwide including Grenada in 1983, Operation Desert Storm in 1990-1991, Kosovo in 1999, Operation Enduring Freedom in Afghanistan, and Operation Iraqi Freedom. In May 2003, the aircraft was used in a test to broadcast Radio and TV Marti to Cuba in an effort to overcome Cuban jamming of the U.S.-government broadcasts. Since August 2004, the aircraft has been used periodically to transmit Radio and TV Marti programming; most recently the aircraft has been transmitting programming for several hours on Saturday. As noted below, Congress appropriated almost $10 million in FY2006 for an aircraft for dedicated airborne radio and television broadcasts to Cuba. According to the Broadcasting Board of Governors, the OCB planned to use contractor-owned-and-operated aircraft that will provide up to 5 hours a day of Radio and TV Marti broadcasts to Cuba. The aircraft was expected to be operational by late August 2006, but political developments in Cuba caused U.S. officials to announce August 6, 2006 that the private aircraft would be used to transmit TV Marti Monday through Saturday evenings, with Radio Marti broadcasts to be added in the future. FY2006 Funding The Administration requested $37.7 million for Cuba broadcasting in FY2006, and although Congress originally funded this amount, subsequent across-the-board rescissions ultimately brought the amount funded to an estimated $37.1 million, almost a $10 million increase from the $27.6 million appropriated for FY2005. The increase is for the Broadcasting Board of Governors to acquire and outfit an aircraft for dedicated airborne radio and television broadcasts to Cuba. According to the budget request, the aircraft would support Radio and TV Marti broadcasts with the goal of overcoming Cuban government jamming. The report to the House-passed version of H.R. 2862 ( H.Rept. 109-118 ), the FY2006 Science, State, Justice, Commerce, and Related Agencies Appropriations Act, included a committee recommendation for $27.9 million for Cuba broadcasting, about $10 million below the Administration's request. According to the report, the committee does not provide funding for an aircraft to transmit Radio and TV Marti programming but assumes the continuation of periodic Commando Solo flights, operating within U.S. air space, for such transmissions. The House approved H.R. 2862 on June 16, 2005. In the Senate, appropriations for Cuba broadcasting was included in the Senate version of the FY2006 Foreign Operations appropriations bill, H.R. 3057 ( S.Rept. 109-96 ). As approved by the Senate on July 20, 2005, the bill would provide $37.7 million for Cuba broadcasting, including funds for an aircraft to transmit Radio and TV Marti programming. During July 19, 2005, floor consideration, the Senate defeated (33-66) S.Amdt. 1294 (Dorgan) that would have eliminated funding for television broadcasting to Cuba. Ultimately, Congress included appropriations for Cuba broadcasting in H.R. 2862 , which was signed into law on November 22, 2005 as P.L. 109-108 . Although the conference report ( H.Rept. 109-272 ) to the bill noted full funding of the Administration's request of $37.7 million, across-the-board rescissions brought the funded amount to an estimated $37.1 million. In other legislative action, both H.R. 2601 and S. 600 , the FY2006 and FY2007 Foreign Affairs Authorization Act, in Section 503 of each bill, would authorize the OCB to use additional AM frequencies as well as FM and shortwave frequencies for Radio Marti in order to help overcome Cuban jamming. House-passed H.R. 2601 (Section 106) would authorize the Administration's full request of $37.7 million for Cuba broadcasting for FY2006 and $29.9 million for FY2007, including funds for an aircraft to improve radio and television transmission and reception. S. 600 (Section 111) would authorize funding for Cuba broadcasting under the International Broadcasting Operations account, but without a specific earmark. During Senate floor consideration of S. 600 on April 6, 2005, the Senate rejected S.Amdt. 284 (Dorgan), by a vote of 65-35, that would have prohibited funds from being used for television broadcasting to Cuba. FY2007 Request The Administration requested $36.279 million for Cuba broadcasting in FY2007, with $2.7 million of this to purchase an aerostat for broadcasting TV Marti. The request was slightly below the $37.129 million appropriated in FY2006 (when Congress funded the Administration's request for a dedicated aircraft), but almost $9 million above the $27.6 million appropriated in FY2005. On June 29, 2006, the House passed H.R. 5672 , the FY2007 Science, State, Justice, Commerce and Related Agencies appropriations bill, that would fund Cuba broadcasting under the International Broadcasting Operations account. The report to the bill ( H.Rept. 109-520 ) recommended $36.102 million for Cuba broadcasting, including $2.7 million to improve transmission capabilities via aerostat for broadcasting TV Marti. In the Senate, the Senate version of H.R. 5522 , the FY2007 Foreign Operations appropriations bill, would fund Cuba broadcasting. The Senate report to the bill ( S.Rept. 109-277 ) recommended full funding of the Administration's request of $36.279 million. Final action was not completed on either bill before the end of the 109 th Congress. U.S. Funding to Support Democracy and Human Rights Over the past several years, the United States provided assistance—primarily through the U.S. Agency for International Development (USAID), but also through the State Department—to increase the flow of information on democracy, human rights, and free enterprise to Cuba. USAID's Cuba program supports a variety of U.S.-based non-governmental organizations to promote rapid, peaceful transition to democracy, help develop civil society, and build solidarity with Cuba's human rights activists. These efforts are largely funded through Economic Support Funds (ESF) in the annual foreign operations appropriations bill. Funding for such projects amounted to $4.989 million in FY2001, $5 million in FY2002, $6 million in FY2003, $21.4 million in FY2004 (because of re-programmed ESF assistance to fund the democracy-building recommendations of the Commission to Provide Assistance for a Free Cuba), $8.9 million in FY2005, and an estimated $10.9 million in FY2006. In terms of authorization legislation, during April 6, 2005, Senate floor consideration of S. 600 , the FY2006 and FY2007 Foreign Affairs Authorization Act, an amendment was proposed— S.Amdt. 319 (Ensign)—that would have authorized not more than $15 million in assistance and other support "for individuals and independent nongovernmental organizations to support democracy-building efforts for Cuba" and up to $5 million for the OAS to support work on Cuba's human rights situation. The House-passed version of H.R. 2601 had a provision (Section 215) that would have authorized $5 million for the State Department's Bureau of Educational and Cultural Affairs for a variety of U.S. government scholarship and exchange programs, with priority given to human rights dissidents, pro-democracy activists, and independent civil society members for participation in these programs. Action was not completed on either S. 600 or H.R. 2601 in the 109 th Congress. For FY2006, the Administration had requested $15 million in ESF assistance for democracy activities for Cuba. According to the request, the funds will support USAID-administered programs with democracy and human rights groups, focusing on those groups that disseminate information to the Cuban people and those that provide humanitarian assistance to victims of political repression and their families. USAID will also continue to work with third-country non-governmental organizations in Latin America and Europe to raise awareness of Cuban government repression. Neither the House- nor Senate-passed versions of H.R. 3057 , the FY2006 Foreign Operations appropriations bill, addressed this issue, and the conference report on the measure ( H.Rept. 109-265 ) did not include a Cuba earmark for ESF assistance. Ultimately, the Administration allocated $10.89 million for Cuba projects, consisting of $8.91 million in ESF and $1.98 million in development assistance. For FY2007, the Administration requested $9 million in ESF to support the recommendations of the President's Commission for Assistance to a Free Cuba, and to support USAID-administrated democracy and human rights programs. The report to the House-passed version of the FY2007 Foreign Operations appropriations bill, H.R. 5522 ( H.Rept. 109-486 ), recognized the work of USAID in promoting democracy and humanitarian assistance for Cuba and urges the agency to continue to promote its Cuba program. The report to the Senate version of H.R. 5522 ( S.Rept. 109-277 ) recommended $2.5 million in ESF for Cuba democracy programs, $6.5 million less than the request. Final action on H.R. 5522 was not completed before the end of the 109 th Congress, so action on FY2007 Foreign Operations appropriations will be completed in 2007. The July 2006 report of the Commission for Assistance to a Free Cuba recommended, in addition to current funding, $80 million over two years for a variety of measures to hasten Cuba's transition to democracy, and not less than $20 million annually thereafter for Cuba democracy programs. (For additional information, see " July 2006 Commission for Assistance to a Free Cuba Report " above.) In addition to funding through foreign operations appropriations, the United States provides democratization assistance for Cuba through the National Endowment for Democracy (NED), which is funded through the annual Commerce, Justice, and State (CJS) appropriations measure. Cuba funding through NED has steadily increased over the past several years. NED-funded democracy projects for Cuba amounted to $765,000 in FY2001; $841,000 in FY2002; $1.143 million in FY2003; and $1.149 million in FY2004. For FY2005, NED funded 17 Cuba projects with $2.4 million. In the aftermath of Fidel's July 31, 2006, announcement that he was temporarily ceding political power to his brother Raúl, legislation was introduced, S. 3769 (Ensign), that would have authorized assistance for the OAS for Cuban human rights activities, but no action was taken on the measure. The bill would also have authorized assistance for a fund to support civil-society building efforts in Cuba and create a "Fund for a Free Cuba" to provide assistance to a transition government in Cuba. During August 3, 2006, Senate floor consideration of the FY2007 Department of Defense Appropriations Act, H.R. 5631 , Senator Nelson offered S.Amdt. 4853 , ultimately ruled out of order, that would have provided $40 million for a "Cuba Fund for a Democratic Future." The funding would have supported the Cuban people and the democratic opposition take advantage of opportunities to promote a transition to democracy. In mid-November 2006, the Government Accountability Office (GAO) issued a report examining U.S. democracy assistance for Cuba from 1996-2005, and concluded that the U.S. program had significant problems and needed better management and oversight. According to GAO, internal controls, for both the awarding of Cuba program grants and oversight of grantees, "do not provide adequate assurance that the funds are being used properly and that grantees are in compliance with applicable law and regulations." Investigative news reports on the program maintained that high shipping costs and lax oversight have diminished its effectiveness. Representative William Delahunt, who along with Representative Jeff Flake had requested the GAO study, promised hearings on the Cuba democracy funding in the 110 th Congress. Migration Issues91 1994 and 1995 Agreements In 1994 and 1995, Cuba and the United States reached two migration accords designed to stem the mass exodus of Cubans attempting to reach the United States by boat. On the minds of U.S. policymakers was the 1980 Mariel boatlift in which 125,000 Cubans fled to the United States with the approval of Cuban officials. In response to Castro's threat to unleash another Mariel, U.S. officials reiterated U.S. resolve not to allow another exodus. Amid escalating numbers of fleeing Cubans, on August 19, 1994, President Clinton abruptly changed U.S. migration policy, under which Cubans attempting to flee their homeland were allowed into the United States, and announced that the U.S. Coast Guard and Navy would take Cubans rescued at sea to the U.S. naval base at Guantanamo Bay, Cuba. Despite the change in policy, Cubans continued fleeing in large numbers. As a result, in early September 1994, Cuba and the United States began talks that culminated in a September 9, 1994 bilateral agreement to stem the flow of Cubans fleeing to the United States by boat. In the agreement, the United States and Cuba agreed to facilitate safe, legal, and orderly Cuban migration to the United States, consistent with a 1984 migration agreement. The United States agreed to ensure that total legal Cuban migration to the United States would be a minimum of 20,000 each year, not including immediate relatives of U.S. citizens. In a change of policy, the United States agreed to discontinue the practice of granting parole to all Cuban migrants who reach the United States, while Cuba agreed to take measures to prevent unsafe departures from Cuba. In May 1995, the United States reached another accord with Cuba under which the United States would parole the more than 30,000 Cubans housed at Guantanamo into the United States, but would intercept future Cuban migrants attempting to enter the United States by sea and would return them to Cuba. The two countries would cooperate jointly in the effort. Both countries also pledged to ensure that no action would be taken against those migrants returned to Cuba as a consequence of their attempt to immigrate illegally. On January 31, 1996, the Department of Defense announced that the last of some 32,000 Cubans intercepted at sea and housed at Guantanamo had left the U.S. Naval Base, most having been paroled into the United States. Elian Gonzalez Case92 From late November 1999 through June 2000, national attention became focused on Cuban migration policy as a result of the Elian Gonzalez case, the five-year old boy found clinging to an inner tube off the coast of Fort Lauderdale. The boy's mother drowned in the incident, while his father, who resided in Cuba, called for his return. Although the boy's relatives in Miami wanted him to stay in the United States, the Immigration and Naturalization Service ruled that the boy's father had the sole legal authority to speak on his son's behalf. After numerous legal appeals by the Miami relatives were exhausted, the boy returned to Cuba with his father in June 2000. In Cuba, Fidel Castro orchestrated numerous mass demonstrations and a media blitz on the issue until the boy's return. The case generated an outpouring of emotion among the Cuban population as well as in south Florida. Wet Foot/Dry Foot Policy Since the 1995 migration accord, the U.S. Coast Guard has interdicted thousands of Cubans at sea and returned them to their country, while those deemed at risk for persecution have been transferred to Guantanamo and then found asylum in a third country. Those Cubans who reach shore are allowed to apply for permanent resident status in one year, pursuant to the Cuban Adjustment Act of 1966 (P.L. 89-732). This so-called "wet foot/dry foot" policy has been criticized by some as encouraging Cubans to risk their lives in order to make it to the United States and as encouraging alien smuggling. Others maintain that U.S. policy should welcome those migrants fleeing communist Cuba whether or not they are able to make it to land. The number of Cubans interdicted at sea by the U.S. Coast Guard has risen in recent years, from 931 in 2002 to 1,464 in 2003 and 1,499 in 2004. In 2005, 2,952 Cubans were interdicted, almost twice the number of Cubans interdicted in 2004. As of early December 2006, more than 2,200 Cubans had been interdicted so far this year. U.S. prosecution against migrant smugglers in Florida has increased in recent years with numerous convictions. There have been several violent incidents in which Cuban migrants have brandished weapons or in which Coast Guard officials have used force to prevent Cubans from reaching shore. In July 2003, a U.S. federal court in Florida convicted a Cuban national for hijacking a plane to Key West on April 1, 2003. Another six Cubans were convicted in Key West in December 2003 for hijacking a Cubana Airlines plane to Florida earlier in the year. The Cuban government has taken forceful action against individuals engaging in alien smuggling. Prison sentences of up to three years may be imposed against those engaging in alien smuggling, and for incidents involving death or violence, a life sentence may be imposed. On April 11, 2003, the Cuban government executed three men who had hijacked a ferry in Havana on April 2 in an attempt to reach the United States. The ferry hijacking had been preceded by the hijacking of two small planes to the United States. The summary execution prompted worldwide condemnation of the Cuban government. The Cuban government maintained that it took the action to prevent additional hijackings. The U.S. Interest Section in Havana has officers that visit the homes of returned migrants to assess the Cuban government's treatment of those repatriated. The Department of State (pursuant to P.L. 105-277 , Section 2245) makes a semi-annual report to Congress on the methods employed by the Cuban government to enforce the 1994 migration agreement and on the Cuban government's treatment of those returned. In a May 2004 report to Congress, the State Department noted that it has been unable to monitor returnees outside Havana since March 2003. The State Department noted, however, that prior to that time, "a majority of the returnees it monitored did not suffer retribution from the Cuban authorities as a result of their attempt to depart illegally" but noted that "there continued to be clear and credible instances of harassment and punishment of returnees." In the aftermath of Fidel Castro's July 31, 2006, announcement that he was temporarily ceding political power to his brother, Department of Homeland Security officials announced several measures to discourage Cubans from risking their lives on the open seas. On August 11, 2006, Department of Homeland Security (DHS) Deputy Secretary Michael P. Jackson urged "the Cuban people to stay on the island" and discouraged "anyone from risking their life in the open seas in order to travel to the United States." At the same time, DHS announced additional measures to discourage Cubans from turning to alien smuggling as a way to enter the United States. The measures support family reunification by increasing the numbers of Cuban migrants admitted to the United States each year who have family members in the United States, although the overall number of Cuban admitted to the United States annually will remain at about 21,000. Cubans who attempt to enter the United States illegally will be deemed ineligible to enter under this new family reunification procedure. In another change of policy, Cuban medical personnel currently conscripted by the Cuban government to work in third countries will be allowed to enter the United States; their families in Cuba will also be allowed to enter the United States. Migration Talks Semi-annual U.S.-Cuban talks alternating between Cuba and the United States had been held regularly on the implementation of the 1994 and 1995 migration accords, but the State Department cancelled the 20 th round of talks scheduled for January 2004, and no migration talks have been held since. According to the State Department, Cuba has refused to discuss five issues identified by the United States: (1) Cuba's issuance of exit permits for all qualified migrants; (2) Cuba's cooperation in holding a new registration for an immigrant lottery; (3) the need for a deeper Cuban port used by the U.S. Coast Guard for the repatriation of Cubans interdicted at sea; (4) Cuba's responsibility to permit U.S. diplomats to travel to monitor returned migrants; and (5) Cuba's obligation to accept the return of Cuban nationals determined to be excludable from the United States. In response to the cancellation of the talks, Cuban officials maintained that the U.S. decision was irresponsible and that it was prepared to discuss all of the issues raised by the United States. The last time talks were suspended was in 2000 by the Cuban government when Elian Gonzalez was in the United States. Legislation Approved in the 108th Congress For a complete listing of legislative initiatives on Cuba in the 108 th Congress, see CRS Report RL31740, Cuba: Issues for the 108 th Congress , by [author name scrubbed]. Appropriations Measures P.L. 108-447 ( H.R. 4818 ), Consolidated Appropriations Act for FY2005. Originally introduced as FY2005 Foreign Operations Appropriations, which the House approved on July 13, 2004, and the Senate approved, amended, on September 23, 2004. Conference report, H.Rept. 108-792 , filed November 20, 2004, which incorporated nine regular appropriations bills. The House agreed (344-51) to the conference report on November 20, 2004, as did the Senate (65-30). President signed into law December 8, 2004. Division A, covering Agriculture appropriations, dropped the Cuba provision that had been included in the Senate committee version of S. 2803 (Section 776) that would have eased restrictions on travel to Cuba if it was related to the commercial sale of agricultural and medical products. Division B, covering Commerce, Justice and State appropriations, dropped the Cuba provision in the House-passed version of H.R. 4754 (Section 801) that would have prohibited funds from being used to implement recent restrictions on gift parcels and on baggage for travelers. The omnibus measure also earmarked $27.629 million for broadcasting to Cuba, the full amount requested by the Administration. Division D, covering Foreign Operations appropriations, dropped contrasting House- and Senate-approved provisions from the original versions of H.R. 4818 related to assistance for cooperation with Cuba on counter-narcotics matters. The Senate version would have provided $5 million in International Narcotics Control and Law Enforcement assistance for such efforts, while the House version would have prohibited such assistance. The omnibus measure also earmarked $9 million in Economic Support Funds, as requested by the Administration, for Cuba projects to promote democratization, respect for human rights, and the development of a free market economy. Division H, covering Transportation/Treasury appropriations, dropped all House and Senate provisions that would have eased Cuba sanctions. These consisted of three House provisions in H.R. 5025 that would have eased Cuba sanctions on family and educational travel and on private commercial sales of agricultural and medical products; and one Senate provision in the committee version S. 2806 that would have prohibited funds from administering or enforcing restrictions on Cuba travel. P.L. 108-199 ( H.R. 2673 ), Consolidated Appropriations Act for FY2004. Originally introduced as the FY2004 agriculture appropriations measure, which the House passed July 14, 2003, and the Senate passed November 6, 2003. On November 25, 2003, a conference report was filed, H.Rept. 108-401 , which incorporated seven regular appropriations acts for the year. Conference report agreed to (242-176) in House November 25, 2003; agreed to (65-28) in Senate January 22, 2004. Signed into law January 23, 2004. Division A, covering Agriculture appropriations, dropped the Cuba provision that had been included in the Senate-approved version of H.R. 2673 (Section 760) that would have allowed travel to Cuba under a general license (without applying to the Treasury Department) for travel related to commercial sales of agricultural and medical goods. Division B, covering Commerce, Justice, and State appropriations, funds Radio and TV broadcasting to Cuba under the International Broadcasting Operations Account, but without a specific earmark. The conferees stated that they expected the Broadcasting Board of Governors to provide $1.2 million to pursue alternative means of transmission, including Internet transmission, of Cuba broadcasting. The Administration requested $26.901 million for Cuba broadcasting, with $16.355 million for Radio Marti and $10.546 million for TV Marti. Division D, covering Foreign Operations appropriations, did not include assistance for counter-narcotics cooperation with Cuba that had been in the Senate-approved version of H.R. 2800 (Section 680), nor did it include the provision in the House version of bill (Section 571) that would have prohibited such assistance. Division D also funded democracy programs for Cuba. While the conferees did not earmark assistance for Cuba democracy programs in the bill, the conference report recommended full funding of the Administration's $7 million in Economic Support Funds for democracy programs supported by USAID. The House-passed version of H.R. 2800 had no earmark (although the House report, H.Rept. 108-122 , recommended full funding of the Administration's $7 million request), while the Senate-passed version of H.R. 2800 (Section 699G) would have provided not more than $5 billion in Transition Initiatives funds for democracy-building efforts for Cuba. Division F, covering Transportation/Treasury appropriations, dropped all provisions easing Cuba sanctions that had been included in the House- and Senate-approved versions of H.R. 2989 . Both the House and Senate versions of H.R. 2989 had a nearly identical provision (Section 745 in the House version and Section 643 in the Senate version) that would have prevented funds from being used to administer or enforce restrictions on travel or travel-related transactions. In addition, the House version of H.R. 2989 had provisions that would have prevented funds from being used to administer or enforce restrictions on remittances (Section 746) and from being used to eliminate the travel category of people-to-people educational exchanges (Section 749). P.L. 108-7 ( H.J.Res. 2 ), Consolidated Appropriations Resolution for FY2003. President signed into law February 20, 2003. While the measure did not earmark funding for human rights and democracy projects for Cuba, it funded FY2003 Foreign Operations appropriations; the Administration's FY2003 foreign aid request had included $6 million for such projects ($5.750 was ultimately allocated by the Administration). The omnibus bill also provided $24.996 million for Radio and TV Marti broadcasting to Cuba. Human Rights Resolutions H.Res. 179 (Diaz-Balart, Lincoln). Expresses the sense of the House regarding the systematic human rights violations in Cuba committed by the Castro regime, calls for the immediate release of all political prisoners, and supports respect for basic human rights and free elections in Cuba. Introduced April 7, 2003. House passed (414-0, 11 present) April 8, 2003. S.Res. 62 (Ensign). Calling upon the OAS Inter-American Commission on Human Rights, the U.N. High Commissioner for Human Rights, the European Union, and human rights activists throughout the world to take certain actions in regard to the human rights situation in Cuba. Introduced February 24, 2003; referred to Committee on Foreign Relations. Senate agreed to by unanimous consent on June 27, 2003. S.Res. 97 (Nelson, Bill). Expresses the sense of the Senate regarding the arrests of Cuban democracy activists by the Cuban government. Introduced March 25, 2003; Senate Committee on Foreign Relations discharged by unanimous consent. Senate amended and agreed to the resolution April 7, 2003, by unanimous consent. S.Res. 328 (Nelson, Bill). Expresses the sense of the Senate regarding the continued human rights violations committed by Fidel Castro and the Cuban government, calls on Cuba to immediately release individuals imprisoned for political purposes, and calls upon the 60 th session of the U.N. Commission on Human Rights to condemn Cuba for its human rights abuses and demand that inspectors from the International Committee of the Red Cross be allowed to visit and inspect Cuban prisons. Introduced April 1, 2004; Senate passed, amended, April 8, 2004, by unanimous consent. Legislative Initiatives in the 109th Congress Human Rights and Democracy P.L. 109-102 ( H.R. 3057 ). FY2006 Foreign Operations, Export Financing, and Related Programs. Reported by House Committee on Appropriations June 24, 2005 ( H.Rept. 109-152 ). House approved (393-32) June 29, 2005. Reported by Senate Committee on Appropriations June 30, 2005 ( S.Rept. 109-96 ). Senate approved (98-1), amended, July 20, 2005. Conference report ( H.Rept. 109-265 ) filed November 2, 2005. House approved (358-39) November 4; Senate approved (91-0) November 10. Signed into law November 14. The Administration requested $15 million in ESF assistance for democracy activities for Cuba. Neither the House nor the Senate versions addressed this issue, and the conference report did not include a specific earmark for Cuba. (Also see provisions on " Cuba Broadcasting " and " Anti-Drug Cooperation " below.) H.Con.Res. 81 (Menendez). Expresses the sense of Congress regarding the two-year anniversary of the human rights crackdown in Cuba. Introduced March 2, 2005; approved by the House Committee on International Relations March 9, 2005. House passed (398-27, 2 present) April 27, 2005. H.Con.Res. 165 (Andrews). Expresses the sense of Congress that the embargo should not be lifted until the Cuban government agrees to decriminalize free speech, association, and movement and other elements crucial to the development of democracy and the protection of fundamental human rights; and calls on the Cuban government to immediately release all political prisoners in Cuba, eliminate all of Cuba's criminal laws that unnecessarily restrict fundamental human rights, respect fundamental human rights and immediately schedule free multiparty and internationally supervised elections. Introduced May 24, 2005; referred to the Committee on International Relations. H.R. 5522 (Kolbe). FY2007 Foreign Operations, Export Financing and Related Programs. Introduced June 5, 2006, and reported by the House Appropriations Committee ( H.Rept. 109-486 ); House passed (373-34) June 9, 2006. The Senate Appropriations reported its version of the bill July 10, 2006 ( S.Rept. 109-277 ); this version recommends $2.5 million in ESF for Cuba democracy programs, $6.5 million less than the request. The House report to the bill recognizes the work of USAID in promoting democracy and humanitarian assistance for Cuba and urges the agency to continue to promote its Cuba program. Final action was not completed before the end of the 109 th Congress. (Also see provisions on " Anti-Drug Cooperation " and " Cuba Broadcasting " below.) H.Res. 193 (Diaz-Balart, Mario) . Expresses support of the House of Representatives to the organizers and participants of the May 20, 2005, meeting in Havana of the Assembly to Promote Civil Society. Introduced April 6, 2005; approved by the Committee on International Relations April 27, 2005. House passed (392-22, 1 present) May 10, 2005. H.Res. 388 (Diaz-Balart, Lincoln). Expresses the sense of the House of Representatives regarding the Cuban government's extreme repression against members of Cuba's pro-democracy movement in July 2005; condemns gross human rights violations committed by the Cuban regime; calls on the Secretary of State to initiate an international solidarity campaign on behalf of the immediate release of all Cuban political prisoners; calls on the European Union to reexamine its current policy toward the Cuban regime; and calls on the U.S. Permanent Representative to the United Nations and other international organizations to work with member countries of the U.N. Commission on Human Rights (UNCHR) to ensure a strong resolution on Cuba at the 62 nd session of the UNCHR. Introduced July 26, 2005. House passed (393-31) September 29, 2005. S. 600 (Lugar)/ H.R. 2601 (Smith). Foreign Affairs Authorization Act, Fiscal Years 2006 and 2007. S. 600 introduced and reported by Senate Foreign Relations Committee March 10, 2005 ( S.Rept. 109-35 ). H.R. 2601 introduced May 24, 2005; reported, amended, by House International Relations Committee July 13, 2005 ( H.Rept. 109-168 ). House approved (351-78) July 20, 2005. As approved by the House, H.R. 2601 has a provision (Section 215) that would authorize $5 million for the State Department's Bureau of Educational and Cultural Affairs for a variety of U.S. government scholarship and exchange programs, with priority given to human rights dissidents, pro-democracy activists, and independent civil society members for participation in these programs. During Senate consideration of S. 600 , S.Amdt. 319 (Ensign) offered on April 6, 2005, would authorize not more than $15 million in assistance and other support "for individuals and independent nongovernmental organizations to support democracy-building efforts for Cuba" and up to $5 million for the OAS to support work on Cuba's human rights situation. Final action was not taken before the end of the 109 th Congress. (See " Cuba Broadcasting " and " U.S. Fugitives " sections for additional Cuba provisions.) S.Res. 140 (Martinez). Expresses support of the Senate for the May 20, 2005 meeting in Havana of the Assembly to Promote Civil Society. Introduced May 12, 2005; Senate approved by unanimous consent May 17, 2005. S.Res. 469 (Lieberman). Condemns the April 25, 2006, beating and intimidation of Cuban dissident Martha Beatriz Roque. Introduced May 8, 2006; Senate passed May 25, 2006, by unanimous consent. S. 3769 (Ensign). Encourages multilateral cooperation and authorizes a program of assistance to facilitate a peaceful transition in Cuba. Introduced August 1, 2006; referred to Committee on Foreign Relations. Modification of Sanctions P.L. 109-108 ( H.R. 2862 ). FY2006 Science, State, Justice, Commerce, and Related Agencies Appropriations Act. Reported by Appropriations Committee ( H.Rept. 109-118 ). House passed June 16, 2005. Senate passed September 15, 2005. Conference report ( H.Rept. 109-272 ) filed November 7, 2005. House approved conference November 9; Senate approved November 16, 2005. Signed into law November 22, 2005. During June 15, 2005, House floor consideration, the House rejected H.Amdt. 270 (Flake), by a vote of 210-216, that would have prohibited use of funds to implement, administer, or enforce amendments to the Cuba embargo regulations from June 22, 2004, that tightened restrictions on gift parcels. H.Amdt. 269 (McDermott), which would have prohibited the use of funds in the bill to prosecute any individual for travel to Cuba, was offered but subsequently withdrawn on June 15, 2005. Also see provision on " Cuba Broadcasting " below. P.L. 109-115 ( H.R. 3058 ). FY2006 Transportation, Treasury, Housing and Urban Development, the Judiciary, District of Columbia, and Independent Agencies Appropriations. House Committee on Appropriations reported June 24, 2005 ( H.Rept. 109-153 ). House approved (4-5-18) June 30, 2005. Senate Committee on Appropriations reported July 26, 2005 ( S.Rept. 109-109 ). Senate approved (93-1) October 20, 2005. Conference report ( H.Rept. 109-307 ) filed November 18, 2005. House approved conference November 18, 2005. Senate approved conference November 21, 2005. Signed into law November 30, 2005. As approved by the House, Section 945 would have prohibited funds from being used to implement February 25, 2005, amendments to Section 515.533 of Title 31, Code of Federal Regulations, regarding a clarification of the term "payment of cash in advance." The Senate-passed version contained an identical provision, Section 719, regarding the "payment of cash in advance" for U.S. agricultural exports to Cuba; the provision was adopted by an amendment offered by Senator Dorgan during July 19, 2005, consideration by the Senate Appropriations Subcommittee. The conference report did not include the provision. In the House, during June 30, 2005, floor consideration, the House rejected three Cuba amendments: on family travel, H.Amdt. 420 (Davis), by a vote of 208-211; on educational travel, H.Amdt. 422 (Lee), by a vote of 187-233; and on the overall embargo, H.Amdt. 424 (Rangel), by a vote of 169-250. An additional amendment on religious travel, H.Amdt. 421 (Flake), was withdrawn, and an amendment on travel by members of the U.S. military, H.Amdt. 419 (Flake), was ruled out of order for constituting legislation in an appropriations bill. During Senate consideration, S.Amdt. 2133 (Dorgan), proposed on October 19, 2005, would have prohibited funds from being used to enforce restrictions on travel. The amendment was withdrawn the following day after a second-degree amendment, S.Amdt. 2158 (Ensign), related to abortion (and unrelated to Cuba) was proposed. H.Con.Res. 206 (Serrano). Expresses the sense of Congress that the President should temporarily suspend restrictions on remittances, gift parcels, and family travel to Cuba to allow Cuban-Americans to assist their relatives in Cuba in the aftermath of Hurricane Dennis. Introduced July 12, 2005; referred to Committee on International Relations. H.R. 208 (Serrano). Cuba Reconciliation Act. Lifts the trade embargo. Removes provisions restricting trade and other relations with Cuba, including repeal of the Cuban Democracy Act of 1992, the Cuban Liberty and Democratic Solidarity Act of 1996, and provisions of Section 211 of the Department of Commerce and Related Agencies Appropriations Act, 1999 related to transactions or payments with respect to trademarks. Introduced January 4, 2005; referred to the Committees on International Relations, Ways and Means, Energy and Commerce, Judiciary, Financial Services, Government Reform, and Agriculture. H.R. 579 (Paul). Lifts the trade embargo. Removes provisions restricting trade and other relations with Cuba, including repeal of the Cuban Democracy Act of 1992, the Cuban Liberty and Solidarity Act of 1996, and provisions of Section 211 of the Department of Commerce and Relations Agencies Appropriations Act, 1999 related to transactions or payments with respect to trademarks. Prohibits U.S. assistance to Cuba. Introduced February 2, 2005; referred to Committees on International Relations, Ways and Means, Energy and Commerce, Judiciary, Financial Services, Government Reform, and Agriculture. H.R. 719 (Moran of Kansas)/ S. 328 (Craig). Agricultural Export Facilitation Act of 2005. Identical bills to facilitate the sale of U.S. agricultural products to Cuba, as authorized by the Trade Sanctions and Export Enhancement Act of 2000. The bills would provide for a general license by the Secretary of the Treasury for travel-related transactions related to the sales and marketing of agricultural products to Cuba; express the sense of Congress that the Secretary of State should issue visas for the temporary entry of Cuban nationals to conduct activities related to purchasing U.S. agricultural goods; clarify the "payment of cash in advance" term used in the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) to mean that the payment by the purchaser and the receipt of such payment to the seller occurs prior to the transfer of title of the commodity or product to the purchaser and the release of control of such commodity or product to the purchaser; would prohibit the President from restricting direct transfers from a Cuban financial institution to a U.S. financial institution for U.S. agricultural sales under TSRA; and repeals Section 211 of the Department of Commerce and Relations Agencies Appropriations Act, 1999 related to transactions or payments with respect to trademarks. H.R. 719 was introduced February 9, 2005; referred to the Committees on International Relations, Judiciary, Financial Services, and Agriculture. S. 328 introduced February 9, 2005; referred to Committee on Foreign Relations. S.Amdt. 140 (Martinez), an amendment intended to be proposed to S. 328 , would require a presidential certification to Congress that Cuba has released or properly accounted for political prisoners in Cuba, including a list of 79 individuals, before the provisions of the act take effect. H.R. 1268 (Lewis). FY2005 Emergency Supplemental Appropriations for Defense, the Global War on Terror and Tsunami Relief. Introduced March 11, 2005. During April 20, 2005, Senate floor debate, S.Amdt. 475 (Craig), as modified by S.Amdt. 549 (Baucus) and S.Amdt. 552 (Baucus), would have clarified the terms of "payment of cash in advance" under the Trade Sanctions Reform and Export Enhancement Act of 2000. The amendment was ruled non-germane. H.R. 1339 (Emerson)/ S. 634 (Chambliss). Similar, although not identical, bills, to amend the Trade Sanctions Reform and Export Enhancement Act of 2000 to clarify allowable payment terms for sales of agricultural commodities and products to Cuba. The bills would clarify that "payment of cash in advance" means the payment by the purchaser and the receipt of such payment to the seller occurs prior to the transfer of title of such commodity or product to the purchaser and the release of control of such commodity or product to the purchaser. H.R. 1339 introduced March 16, 2005; referred to Committees on Financial Services, International Relations, and Agriculture. S. 634 was introduced March 16, 2005; referred to Committee on Foreign Relations. H.R. 2361 (Taylor, Charles). FY2006 Interior, Environment, and Related Agencies Appropriations. House passed May 19, 2005. Senate passed June 29, 2005. During June 29, 2005, Senate consideration, the Senate rejected (60-35; a two-thirds majority vote was required) a motion to suspend the rules with respect to S.Amdt. 1059 (Dorgan), which would have allowed travel to Cuba under a general license for the purpose of visiting a member of the person's immediate family for humanitarian reasons. The amendment was then ruled out of order. H.R. 2617 (Davis, Jim). Prohibits any additional restrictions on per diem allowances, family visits to Cuba, remittances, and accompanied baggage beyond those that were in effect on June 15, 2004. Introduced May 25, 2005; referred to the Committee on International Relations. H.R. 3064 (Lee). Prohibits the use of funds available to the Department of the Treasury to implement regulations from June 2004 that tightened restrictions on travel to Cuba for educational activities. Introduced June 24, 2005; referred to Committee on International Relations. H.R. 3372 (Flake). United States Trademark Defense Act of 2005. Repeals Section 211 of the Department of Commerce and Relations Agencies Appropriations Act, 1999, related to transactions or payments with respect to trademarks. Requires the United States Trade Representative (USTR) to examine the polices and practices of Cuba with respect to protecting and enforcing intellectual property rights, and requires USTR to give these findings due consideration when identifying countries that deny adequate protection, or market access, for intellectual property rights. Introduced July 21, 2005; referred to Committee on the Judiciary and Committee on Ways and Means. H.R. 5292 (Ros-Lehtinen)/ S. 2795 (Martinez). Excludes from admission to the United States aliens who have made investments contributing to the enhancement of the ability of Cuba to develop its petroleum resources off its northern coast. Requires the President to impose economic sanctions on persons (including foreign subsidiaries) that are determined to have made an investment equal to or exceeding $1 million that contributes to the enhancement of Cuba's ability to develop petroleum resources of the submerged lands of Cuba's northern coast. H.R. 5292 introduced May 4, 2006; referred to the Committee on the Judiciary and in addition to the Committees on International Relations, Financial Services, and Government Reform. S. 2795 introduced May 11, 2006; referred to the Committee on Banking, Housing, and Urban Affairs. H.R. 5353 (Flake)/ S. 2787 (Craig). Permits U.S. companies to participate in Cuba's exploration and exploitation of oil along Cuba's northern coast contiguous to the exclusive economic zone of the United States. Both bills were introduced May 11, 2006. H.R. 5353 was referred to the Committee on International Relations. S. 2787 was referred to the Committee on Banking, Housing, and Urban Affairs. H.R. 5384 (Bonilla). FY2007 Agriculture Appropriations bill. Introduced and reported by House Appropriations Committee May 12, 2006; passed House May 23, 2006. Senate Appropriations Committee reported its version June 22, 2006 ( S.Rept. 109-266 ). The Senate version contains a provision, Section 755, providing for travel to Cuba under a general license for travel related to the sale of agricultural and medical goods to Cuba. Currently such travel is provided under a specific license issued by the Treasury Department on a case-by-case basis. Final action was not completed by the end of the 109 th Congress. H.R. 5576 (Knollenberg). FY2007 Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act. Introduced June 9, 2006; reported by House Appropriations Committee ( H.Rept. 109-495 ). House passed (406-22) June 14, 2006. Reported by Senate Appropriations Committee ( S.Rept. 109-293 ) July 26, 2006. Both the House and Senate versions of the bill include a provision (Section 950 in the House version and Section 846 in the Senate version) that prohibits funds from being used to implement tightened restrictions on financing for U.S. agricultural exports to Cuba that were issued in February 2005. In the House bill, the provision was added by H.Amdt. 1049 (Moran, Kansas), approved by voice vote during floor consideration on June 14, 2006. On the same day, the House rejected two amendments that would have eased economic sanctions on Cuba: H.Amdt. 1050 (Rangel), defeated by a vote of 183-245, would have prohibited funds from implementing the overall embargo, and H.Amdt. 1051 (Lee), defeated by a vote of 187-236, would have prohibited funs from being used to implement the Administration's June 2004 tightened restriction on educational travel to Cuba. Another amendment, H.Amdt. 1032 (Flake), that would have prohibited the use of funds to amend regulations relating to travel for religious activities in Cuba, was withdrawn from consideration. Final action on the measure was not completed by the end of the 109 th Congress. S. 600 (Lugar). Foreign Affairs Authorization Act, Fiscal Years 2006 and 2007. Introduced and reported by Senate Foreign Relations Committee March 10, 2005 ( S.Rept. 109-35 ). During Senate floor consideration on April 6, 2005, the Senate considered S.Amdt. 281 (Baucus) and a second-degree amendment, S.Amdt. 282 (Craig) that would facilitate the sale of U.S. agricultural products to Cuba. The language of the amendments consists of the provisions of S. 328 (Craig), the Agricultural Export Facilitation Act of 2005 described above. Final action on the measure was not taken by the end of the 109 th Congress. (Also see amendments above on assistance for Cuba Human Rights and Democracy Projects ( S. 319 ), and below on Television Broadcasting to Cuba ( S.Amdt. 284 ).) S. 691 (Domenici)/ H.R. 1689 (Feeney) . Modifies the prohibition (so-called Section 211) on recognition by U.S. courts of certain rights relating to certain marks, trade names, or commercial names. S. 691 introduced April 4, 2005; referred to Senate Committee on the Judiciary. HR. 1689 introduced April 19, 2005; referred to House Committee on the Judiciary. S. 894 (Enzi)/ H.R. 1814 (Flake). Similar, although not identical, bills to allow travel between the United States and Cuba. S. 894 introduced April 25, 2005; referred to the Committee on Foreign Relations. H.R. 1814 introduced April 26, 2005; referred to the Committee on International Relations. S. 1604 (Craig). Judicial Powers Restoration Act of 2005. Repeals Section 211 of the Department of Commerce and Related Agencies Appropriations Act, 1999, related to transactions or payments with respect to trademarks. Introduced July 29, 2005; referred to Senate Committee on the Judiciary. S. 2682 (Nelson of Florida). Excludes from admission to the United States aliens who have made investments directly and significantly contributing to the enhancement of the ability of Cuba to develop its petroleum resources. Introduced April 27, 2006; referred to the Committee on the Judiciary. Migration H.R. 209 (Serrano). Baseball Diplomacy Act. Waives certain prohibitions with respect to nationals of Cuba coming to the United States to play organized baseball. Introduced January 4, 2005; referred to Committees on International Relations and Judiciary. H.R. 5670 (Frank). Repeals the Cuban Adjustment Act, P.L. 89-732. Introduced June 22, 2006; referred to the House Committee on the Judiciary. Cuba Broadcasting P.L. 109-108 ( H.R. 2862 ). FY2006 Science, State, Justice, Commerce, and Related Agencies Appropriations Act. Reported by Appropriations Committee ( H.Rept. 109-118 ). House passed June 16, 2005. Senate passed September 15, 2005. Conference report ( H.Rept. 109-272 ) filed November 7, 2005. House approved conference November 9; Senate approved conference November 16, 2005. Signed into law November 22, 2005. The report to the House bill included a committee recommendation of $27.9 million for Cuba broadcasting, $10 million below the Administration's request, and did not provide funding for an aircraft to transmit Radio and TV Marti programming. Senate action on appropriations for Cuba broadcasting were included in the Senate version of H.R. 3057 rather than H.R. 2862 , and fully funded the Administration's request of $37.7 million. The conference report fully funds the Administration's request of $37.7 million for Broadcasting to Cuba under the International Broadcasting Operations account. Also see above for failed amendments on Cuba Sanctions. P.L. 109-102 ( H.R. 3057 ). FY2006 Foreign Operations, Export Financing, and Related Programs. Reported by House Committee on Appropriations June 24, 2005 ( H.Rept. 109-152 ). House approved (393-32) June 29, 2005. Reported by Senate Committee on Appropriations June 30, 2005 ( S.Rept. 109-96 ). Senate approved (98-1), amended, July 20, 2005. Conference report ( H.Rept. 109-265 ) filed November 2, 2005. House approved (358-39) November 4; Senate approved (91-0) November 10. Signed into law November 14. The Senate-approved version provided $37.7 million for Cuba broadcasting, including assistance for the procurement of an aircraft to transmit Radio and TV Marti programming. During July 19, 2005 floor consideration, the Senate defeated (33-66) S.Amdt. 1294 (Dorgan) that would have provided no funding for television broadcasting to Cuba, increased Peace Corps funding by $21.1 million, and reduced the amount provided for the Broadcasting Board of Governors by $21.1 million (the amount requested for TV Marti, including for the procurement of an aircraft). Final congressional action on appropriations for Cuba broadcasting took place in H.R. 2862 (see above) where the conference report fully funded the Administration's request for $37.7 million. (Also see " Human Rights and Democracy " and " Anti-Drug Cooperation " for additional Cuba provisions in H.R. 3057 ) S. 600 (Lugar)/ H.R. 2601 (Smith). Foreign Affairs Authorization Act, Fiscal Years 2006 and 2007. S. 600 introduced and reported by Senate Foreign Relations Committee March 10, 2005 ( S.Rept. 109-35 ). H.R. 2601 introduced May 24, 2005; reported by Committee on International Relations July 13, 2005 ( H.Rept. 109-168 ). House approved (351-78) July 20, 2005. Section 503 of each bill would authorize the Office of Cuba Broadcasting to use additional AM frequencies as well as FM and shortwave frequencies for Radio Marti in order to help improve signal delivery to Cuba. H.R. 2601 (Section 106) would authorize the Administration's full request of $37.7 million for Cuba broadcasting for FY2006 and $29.9 million for FY2007, including funds for an aircraft to improve radio and television transmission and reception. S. 600 (Section 111) would authorize funding for Cuba broadcasting under the International Broadcasting Operations account, but without a specific earmark. During Senate floor consideration on April 6, 2005, the Senate tabled S.Amdt. 284 (Dorgan), by a vote of 65-35, that would have prohibited funds from being used for television broadcasting to Cuba. Also see amendments above on assistance for Cuba Human Rights and Democracy Projects ( S. 319 ) and on Cuba Sanctions ( S.Amdt. 281 ). H.R. 5672 (Wolf). FY2007 Science, State, Justice, Commerce and Related Agencies appropriations. Introduced June 22, 2006; reported by House Appropriations Committee ( H.Rept. 109-520 ). House passed June 29, 2006. As approved, Cuba broadcasting is to be funded under the International Broadcasting Operations account. The report to the bill recommends $36.102 million for Cuba broadcasting, including $2.7 million to improve transmission capabilities via aerostat for broadcasting TV Marti. Final action on the measure was not completed before the end of the 109 th Congress. H.R. 5522 (Kolbe). FY2007 Foreign Operations, Export Financing and Related Programs. Introduced June 5, 2006, and reported by the House Appropriations Committee ( H.Rept. 109-486 ); House passed (373-34) June 9, 2006. Senate Appropriations Committee reported July 10, 2006 ( S.Rept. 109-277 ). The Senate version would fund Cuba broadcasting. The Senate report to the bill recommends full funding of the Administration's request of $36.279 million. Final action on the measure was not completed before the end of the 109 th Congress. (Also see " Human Rights and Democracy " and " Anti-Drug Cooperation " sections for additional provisions.) Anti-Drug Cooperation P.L. 109-102 ( H.R. 3057 ). FY2006 Foreign Operations, Export Financing, and Related Programs. Reported by House Committee on Appropriations June 24, 2005 ( H.Rept. 109-152 ). House approved (393-32) June 29, 2005. Reported by Senate Committee on Appropriations June 30, 2005 ( S.Rept. 109-96 ). Senate approved (98-1), amended, July 20, 2005. Conference report ( H.Rept. 109-265 ) filed November 2, 2005. House approved (358-39) November 4; Senate approved (91-0) November 10. Signed into law November 14. As approved by the House, Section 572 provided that no International Narcotics Control and Law Enforcement (INCLE) funds may be made available for Cuba. As approved by the Senate, Section 6089 provided $5 million in INCLE funds for preliminary work to establish cooperation with appropriate agencies of the Cuban government on counter-narcotics matters. The conference report did not include either provision. (Also See " Human Rights and Democracy " and " Cuba Broadcasting " for additional Cuba provisions in H.R. 3057 .) H.R. 5522 (Kolbe). FY2007 Foreign Operations, Export Financing and Related Programs. Introduced June 5, 2006, and reported by the House Appropriations Committee ( H.Rept. 109-486 ); House passed (373-34) June 9, 2006. Senate Appropriations Committee reported its version of the bill July 10, 2006 ( S.Rept. 109-277 ). The House version includes a provision (Section 570) providing that no INCLE assistance can be made available to the Cuban government. The House report to the bill maintains that full reporting and transparency by the Cuban government and that U.S. monitoring of counternarcotics assistance in Cuba would be difficult, if not impossible, given Cuba's hostility toward the U.S. government. The Senate version, in Section 551(e), would provide $5 million in INCLE funds for preliminary work to establish cooperation with Cuba on counter-narcotics matters. The money would not be available if the President certified that Cuba did not have in place appropriate procedures to protect against the loss of innocent life in the air and on the ground in connection with the interdiction of illegal drugs and there was evidence of involvement of the Cuban government in drug trafficking. Final action on the measure was not completed before the end of the 109 th Congress. (Also see " Human Rights and Democracy " and " Cuba Broadcasting " for additional Cuba provisions in the bill.) U.S. Fugitives S. 600 (Lugar)/ H.R. 2601 (Smith). Foreign Affairs Authorization Act, Fiscal Years 2006 and 2007. S. 600 introduced and reported by Senate Foreign Relations Committee March 10, 2005 ( S.Rept. 109-35 ). H.R. 2601 introduced May 24, 2005; reported by Committee on International Relations July 13, 2005 ( H.Rept. 109-168 ). House approved (351-78) July 20, 2005. As approved by the House, H.R. 2601 includes a provision, Section 101(1)(H), that authorizes funds for the U.S. Interests Section in Havana to disseminate the names of fugitives, such as Joanne Chesimard and William Morales, who are residing in Cuba, and any rewards for their capture. Also see amendments above on assistance for Cuba Human Rights and Democracy Projects ( S. 319 ) and on Cuba Sanctions ( S.Amdt. 281 ). The provision was added by H.Amdt. 484 (Fosella), approved by voice vote, during July 20, 2005 floor consideration. S. 600 does not have a similar provision. Final action on either measure was not completed before the end of the 109 th Congress. H.R. 332 (King). Amends the Cuban Liberty and Democratic Solidarity Act of 1996 to require that, in order to determine that a democratically elected government in Cuba exists, the government extradite to the United States convicted felon William Morales and all other individuals who are living in Cuba in order to escape prosecution or confinement for criminal offense committed in the United States. Introduced January 25, 2005; referred to the Committee on International Relations. Support for U.S. Diplomatic Personnel in Cuba H.Con.Res. 428 (McCotter). Introduced June 13, 2006; referred to the Committee on International Relations. Expresses support for U.S. diplomatic personnel stationed at the U.S. Interests Section in Havana, Cuba. For Additional Reading CRS Report RL33551, Transportation, the Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, the Executive Office of the President, and Independent Agencies (TTHUD): FY2007 Appropriations , coordinated by [author name scrubbed] and [author name scrubbed]. CRS Report RL32905, Transportation, the Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, the Executive Office of the President, and Independent Agencies: FY2006 Appropriations , coordinated by [author name scrubbed] and [author name scrubbed]. CRS Report RL33412, Agriculture and Related Agencies: FY2007 Appropriations , coordinated by [author name scrubbed]. CRS Report RS20450, The Case of Elian Gonzalez: Legal Basics , by [author name scrubbed] (pdf). CRS Report RL33622, Cuba ' s Future Political Scenarios and U.S. Policy Approaches , by [author name scrubbed]. CRS Report RL32251, Cuba and the State Sponsors of Terrorism List , by [author name scrubbed]. CRS Report RL31740, Cuba: Issues for the 108 th Congress , by [author name scrubbed]. CRS Report RL30806, Cuba: Issues for the 107 th Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report RL30628, Cuba: Issues and Legislation In the 106 th Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances , by [author name scrubbed]. CRS Report RL30386, Cuba-U.S. Relations: Chronology of Key Events 1959-1999 , by [author name scrubbed] (pdf). CRS Report RS20468, Cuban Migration Policy and Issues, by [author name scrubbed]. CRS Report RS22173, Detainees at Guantanamo Bay , by [author name scrubbed]. CRS Report RL33499, Exempting Food and Agriculture Products from U.S. Economic Sanctions: Status and Implementation , by [author name scrubbed]. CRS Report RS22094, Lawsuits Against State Supporters of Terrorism: An Overview , by [author name scrubbed]. CRS Report 94-636, Radio and Television Broadcasting to Cuba: Background and Issues Through 1994 , by [author name scrubbed] and [author name scrubbed] (pdf). CRS Report RS21764, Restricting Trademark Rights of Cubans: WTO Decision and Congressional Response , by [author name scrubbed]. CRS Report RL31370, State Department and Related Agencies: FY2006 and FY2007 Appropriations and FY2008 Request , by [author name scrubbed]. CRS Report RL31258, Suits Against Terrorist States by Victims of Terrorism , by [author name scrubbed]. CRS Report RS21003, Travel Restrictions: U.S. Government Limits on American Citizens ' Travel Abroad , by [author name scrubbed] and [author name scrubbed]. CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases , by [author name scrubbed].

Since the early 1960s, U.S. policy toward Cuba under Fidel Castro has consisted largely of isolating the communist nation through comprehensive economic sanctions, which have been significantly tightened by the Bush Administration. Another component of U.S. policy has consisted of support measures for the Cuban people, including private humanitarian donations and U.S.-sponsored radio and television broadcasting to Cuba. While there appears to be broad agreement on the overall objective of U.S. policy toward Cuba—to help bring democracy and respect for human rights to the island—there are several schools of thought on how to achieve that objective: some advocate maximum pressure on Cuba until reforms are enacted; others argue for lifting some U.S. sanctions judged to be hurting the Cuban people; and still others call for a swift normalization of U.S.-Cuban relations. Fidel Castro's announcement in late July 2006 that he was temporarily ceding political power to his brother Raúl in order to recover from surgery has prompted some Members to call for re-examination of U.S. policy. In the 109th Congress, legislative initiatives included the approval of five human rights resolutions: H.Con.Res. 81, H.Res. 193, H.Res. 388, S.Res. 140, and S.Res. 469. P.L. 109-102 funded Cuba democracy projects in FY2006. Action on several FY2007 appropriations measures were not completed, so action will need to be completed in 2007: House-passed H.R. 5522 would have funded FY2007 democracy projects, and House and Senate versions of the bill had contrasting provisions on anti-drug cooperation; House-passed H.R. 5576 would have prohibited funds from being used to implement tightened restrictions on financing for agricultural exports to Cuba; the Senate version of H.R. 5384 would have liberalized travel related to the sale of agricultural and medical goods to Cuba; and H.R. 5522 and H.R. 5672 would have funded Cuba broadcasting. Other legislative initiatives not acted upon would have eased U.S. sanctions in various ways: suspension of sanctions after Hurricane Dennis (H.Con.Res. 206); overall sanctions (H.R. 208 and H.R. 579); overall travel (S. 894 and H.R. 1814); family visits (H.R. 2617); educational travel (H.R. 3064); cash in advance for U.S. agricultural sales (H.R. 1339 and S. 634); and facilitation of agricultural sales (H.R. 719 and S. 328). Other measures had provisions on Cuba's trademark registrations (H.R. 719, S. 328, H.R. 3372, S. 1604, H.R. 1689 and S. 69); Cuba broadcasting (S. 600, H.R. 2601); U.S. fugitives in Cuba (H.R. 2601, H.R. 332); sanctions related to Cuba's offshore oil development (H.R. 5292, S. 2682, S. 2795); participation in Cuba's offshore oil development (H.R. 5353, S. 2787); support for U.S. diplomats in Cuba (H.Con.Res. 428); repeal of the Cuban Adjustment Act (H.R. 5670); assistance to facilitate a peaceful transition in Cuba (S. 3769); and authorization of $5 million for scholarship and exchange programs (House-passed H.R. 2601). For additional information, see CRS Report RL33622, Cuba's Future Political Scenarios and U.S. Policy Approaches; CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances; CRS Report RL32251, Cuba and the State Sponsors of Terrorism List; and CRS Report RL33499, Exempting Food and Agriculture Products from U.S. Economic Sanctions: Status and Implementation.

Introduction Minority-serving institutions (MSIs) are institutions of higher education that serve high concentrations of minority students who, historically, have been underrepresented in higher education. MSIs tend to have relatively low educational and general expenditures and high enrollments of needy students. Generally, many such institutions have faced challenges in obtaining access to financial support, thus affecting their ability to enhance their academic offerings and institutional capabilities and ultimately serve their students. Federal higher education policy recognizes th e importance of such institutions in improving access for and increasing completion of underrepresented minorities and targets financial resources to them. Funding for MSIs is channeled through numerous federal agencies, and several of these funding sources are available to MSIs through grant programs authorized under the Higher Education Act of 1965, as amended (HEA; P.L. 89-329). Over the years, HEA support of MSI programs has expanded to include a wider variety of underrepresented groups, and in FY2016, MSI programs under the HEA were appropriated approximately $817 million, which helped fund more than 929 grants. For purposes of this report, MSIs include, but are not limited to, American Indian Tribally Controlled Colleges and Universities (TCCUs); Alaska Native and Native Hawaiian-serving institutions (ANNHs); predominantly Black institutions (PBIs); Native American-serving, nontribal institutions (NASNTIs); Asian American and Native American Pacific Islander-serving institutions (ANNAPISIs), historically Black colleges and universities (HBCUs), and Hispanic-serving institutions (HSIs). This report describes the several programs devoted to financially assisting MSIs under the HEA. This report does not attempt to describe all HEA programs for which an MSI may be eligible; rather, it aims to describe those programs that are directed specifically toward one or more types of MSIs. MSIs are eligible for other federal programs for which IHEs and nonprofit organizations are eligible if they meet the program eligibility criteria. This report first discusses how the various HEA MSI programs are funded. It then provides a description of each program, organized by the type of MSI to which the program is available. Included in each program description is a discussion of eligibility criteria for program participation; a description of authorized uses of financial awards; and administrative procedures, including a description of how funds are allocated among multiple institutions either via a competitive award process or a formula-based grant. Appendix A provides a list of acronyms used in this report. Appendix B details mandatory and discretionary appropriations for selected MSI programs authorized under the HEA. All programs discussed in this report are administered by the U.S. Department of Education. Funding for Minority-Serving Institutions Under the Higher Education Act Typically, many of the MSI programs authorized under the HEA are funded through annual discretionary appropriations. However, in recent years, mandatory appropriations have been provided to many of the programs, which were in addition to discretionary appropriations, in some cases. In 2007, with the College Cost Reduction and Access Act ( P.L. 110-84 ), Congress established the Strengthening Historically Black Colleges and Universities and Other Minority-Serving Institutions programs. The act created some new MSI programs and provided mandatory appropriations for both the newly authorized and the preexisting Title III-A and III-B MSIs programs for FY2008 and FY2009. The programs receiving the mandatory appropriations were strengthening TCCUs; strengthening ANNHs; strengthening PBIs; strengthening NASNTIs; strengthening ANNAPISIs; strengthening HBCUs; and HSI STEM. The Higher Education Opportunity Act (HEOA; P.L. 110-315 ) redesignated the Strengthening Historically Black Colleges and Universities and Other Minority-Serving Institutions programs under Title III, Part F of the HEA. The HEOA also authorized additional annual mandatory appropriations for Masters Degree Programs at HBCUs and PBIs and the Promoting Postbaccalaureate Opportunities for Hispanic American programs for each of fiscal years FY2009 through FY2014, programs that typically receive discretionary appropriations. Finally, the Student Aid and Fiscal Responsibility Act (SAFRA), as part of the Health Care and Education Reconciliation Act ( P.L. 111-152 ) extended the Title III-F mandatory appropriations for Title III-A, III-B, and HSI STEM programs through FY2019. Appendix B details mandatory and discretionary appropriations for each of these programs from FY2013 to FY2017. Programs Targeting Low-Income-Serving Institutions The Strengthening Institutions Program (SIP) provides grants to institutions of higher education that serve a high percentage of low-income students and that have low educational and general expenditures. It is the foundational program upon which many other HEA programs designed to aid minority-serving institutions (MSIs) are based. Background Since the HEA's inception in 1965, Congress has authorized grant programs to strengthen and support postsecondary institutions that, because of financial limitations, were struggling to survive. The original HEA Title III-A program was not specifically directed at MSIs, and in the 1986 reauthorization of the HEA, Congress found that the original program "did not always meet the specific development needs of historically Black colleges and universities and other institutions with large concentrations of minority, low-income students." Congress then amended the program to make institutions with high minority and low-income student concentrations eligible. In subsequent reauthorizations, Congress established several additional Title III-A programs with separate appropriations, each targeting different institutions serving specific types of minority students. Today, SIP grants are available to institutions that serve low-income students, regardless of minority enrollment, while separate Title III-A program grants are available to institutions that serve high concentrations of Native American, Alaska Native, Native Hawaiian, Black, Asian American and Native American Pacific Islander, and Hispanic students. This section of the report discusses the Strengthening Institutions Program. SIP's provisions and definitions also apply to several of the MSI-specific Title III-A programs. Strengthening Institutions Program The Strengthening Institutions Program (SIP) was authorized at the HEA's inception. Its purpose is to improve the academic quality and institutional management and increase the self-sufficiency of institutions with a high percentage of needy students and with low expenditures (financial limitations). The program provides competitive grants to eligible institutions of higher education (IHEs). SIP is funded through discretionary appropriations and receives the largest appropriation of the Title III-A programs. This section describes the basic eligibility criteria for institutions participating in SIP, authorized uses of grant monies, and SIP administration. Descriptions in this section are presented in greater detail than in each section for MSI-specific programs, as generally, unless otherwise noted in this report, other Title III-A and III-F program requirements and provisions mirror those of SIP. Eligibility The eligibility requirements for SIP are the basic eligibility criteria for several of the other Title III-A and III-F programs and are found in Section 312(b) of the HEA. In general, an institution meets SIP eligibility criteria (hereinafter referred to as HEA Section 312(b) requirements) if it has low educational and general expenditures (E&G); has a requisite enrollment of needy students; is legally authorized within its respective state to award bachelor's degrees, is a junior or community college, or is specified in Section 312(b); is accredited or pre-accredited by a Department of Education (ED)-recognized national or state accrediting agency; and is located within one of the 50 states, the Commonwealth of Puerto Rico, the District of Columbia, or the outlying areas. An institution has low E&G if the total amount expended by the institution for instruction and operation per full-time equivalent (FTE) undergraduate student is low, as compared to the average E&G per FTE at institutions that offer similar instruction. The Secretary has defined similar instruction as institutions within the same institutional sector (e.g., public four-year institutions). An institution meets the enrollment of needy students criterion if (1) at least 50% of its degree-, certificate-, or credential-seeking students receive need-based assistance under Title IV of the HEA (e.g., Federal Supplemental Educational Opportunity Grant, Federal Work Study, and Federal Perkins Loan, but not Subsidized Stafford Loans) in the second fiscal year preceding the fiscal year for which the determination is being made or (2) the percentage of its undergraduate degree-, certificate-, or credential-seeking students who were enrolled at least half-time and received Federal Pell Grants exceeded the median percentage for similar institutions. Branch campuses of institutions of higher education are eligible for SIP if the institution as a whole meets the eligibility requirements, even if the branch campus does not meet the state authorization or accreditation requirements. Branch campuses must, however, individually meet the needy student enrollment and low E&G requirements. Authorized Uses SIP grants are intended to assist institutions in improving "academic quality, institutional management, and fiscal stability ... in order to increase their self-sufficiency and strengthen their capacity to make a substantial contribution to the higher education resources of the Nation." To that end, Section 311(c) of the HEA lists several authorized activities for which grants can be awarded. Authorized activities include the purchase, rental, or lease of scientific or laboratory equipment for educational purposes; the construction, maintenance, renovation, and improvement of instructional facilities; the support of faculty exchanges, development, and fellowships to assist in attaining advanced degrees in the faculty's field of instruction; the development and improvement of academic programs; the purchase of library books, periodicals, and other educational materials; tutoring, counseling, and student services programs designed to improve academic success, retention, and completion, including innovative and customized courses that may include remedial education and English language instruction; financial literacy education or counseling; funds management, administrative management, and equipment acquisition for use in funds management; the joint use of facilities, such as laboratories and libraries; the establishment or improvement of a development office to strengthen or improve alumni and private sector contributions; the creation or improvement of facilities of Internet or other distance education technologies; other activities, approved by the Secretary of Education (Secretary), that contribute to the purposes of the program; and the establishment or enhancement of an endowment fund. Although institutions are allowed to establish or improve endowment funds with SIP grants, they may not use more than 20% of grant monies for such purposes. Additionally, if an institution does use SIP funds for endowment development, it must provide matching funds from nonfederal sources in an amount equal to or greater than the federal contribution. In awarding grants, statutory provisions direct the Secretary to give special consideration to institutions that propose to engage in faculty development, funds and administrative management, development and improvement of academic programs, equipment acquisition for the strengthening of funds management and academic programs, the joint use of facilities, and student services. Program Administration There is a two-step application process for participation in SIP. In step one, an institution applies to be designated as eligible under the HEA Section 312(b) eligibility criteria. If approved by the Secretary, the institution may then apply for a SIP grant. SIP grants are awarded through a competitive process. The SIP application must, among other requirements, detail the institution's comprehensive development plan, describe the policies it will use to ensure that the federal funds awarded will be used to supplement and not supplant funds that would have otherwise been made available for the authorized activities described in Section 311(b), provide for making at least one report annually to ED regarding the institution's progress towards achieving its objectives, and provide for fiscal control and fund accounting procedures necessary to ensure the proper disbursement and accounting for grant funds. Applications are selected based on the score of a review panel; the applications with the highest score are selected for funding. ED awards two types of SIP grants. Development grants, which are used to carry out activities to implement an institution's strategy for achieving growth and self-sufficiency, under this program are generally five years in length, unless otherwise requested. ED may also award one-year planning grants for the purpose of preparing plans and applications for SIP grants. Finally, each institution that receives a development grant under this part is subject to a two year wait-out period (i.e., they are ineligible for another SIP grant for two years after the date of the grant's termination). In awarding grants, the Secretary gives priority to applicants who are not already receiving development grants under another Title III-A program; however, grantees under other Title III-A programs (e.g., Strengthening PBIs) are prohibited from concurrently receiving funds under other Title III-A programs. Thus, in effect, SIP grantees cannot receive funds under other Title III-A programs. Additionally, SIP grantees cannot receive funds under Title III-B (HBCU and HBGIs programs) or Title V-A (HSI program) in the same fiscal year in which it receives a SIP grant. Institutions receiving SIP grants in a fiscal year, however, can receive a grant under any one type of the Title III-F programs in the same fiscal year. American Indian Tribally Controlled Colleges and Universities Programs Section 316 establishes the Strengthening American Indian Tribally Controlled Colleges and Universities (TCCUs) program, which was first authorized under the Higher Education Amendments of 1998 ( P.L. 105-244 ). It is the only HEA program specifically available to TCCUs and provides SIP-type grants to them. The program is intended to assist TCCUs in improving and expanding their capacity to serving American Indian students. Typically, Strengthening TCCU program grants are funded through discretionary appropriations under Title III-A. Additional mandatory appropriations are provided annually through FY2019 in Title III-F and are treated "as part of the amount appropriated ... to carry out section [316]"; therefore, in this report, the Title III-A and III-F TCCU programs are collectively referred to as the Strengthening TCCU program and are discussed in conjunction with one another, unless otherwise noted. Eligibility To qualify for a Strengthening TCCU grant, an institution of higher education must meet the HEA Section 312(b) requirements and qualify for funding under the Tribally Controlled Colleges and Universities Assistance Act of 1978 (TCCUAA) or the Navajo Community College Act (P.L. 92-189, as amended), or be cited in Section 532 of the Equity in Educational Land-Grant Status Act of 1994 (EELGSA). Institutions that qualify under the TCCUAA are institutions of higher education that are formally controlled, or have been formally sanctioned or chartered, by the governing body of an Indian tribe or tribes. Additionally, such institutions must have a majority of students who are Indians and must be operated for the purpose of meeting the needs of Indians. For the purposes of Strengthening TCCUs, an Indian student is a member of an Indian tribe or a biological child of a member of an Indian tribe, living or deceased. Institutions that qualify under the Navajo Higher Community College or EELGSA are specifically named in the relevant statute. Authorized Uses Strengthening TCCU grants must be used to carry out activities that improve an institution's ability to serve Indian students. The authorized uses for Strengthening TCCU grants include those authorized under SIP. Additionally, TCCUs are specifically authorized to use grant funds to acquire real property adjacent to their campuses on which they can construct facilities. Grant recipients are also permitted to establish or enhance programs designed to qualify students to teach in elementary and secondary schools, with a particular emphasis on teaching Indian youth, and to establish community outreach programs that encourage Indian elementary and secondary students to develop academic skills and interest in pursuing a postsecondary education. While TCCUs are allowed to use up to 20% of grant funds, like SIP grantees, to establish or increase endowments, they must provide nonfederal matching funds equal to federal funds. Allotments Prior to the Higher Education Opportunity Act of 2008 (HEOA; P.L. 110-315 ), the Strengthening TCCU program was a competitive grant program. The HEOA, however, transformed the competitive program into a largely formula-based grant program. Under the program, the Secretary is given the option to reserve up to 30% of fiscal year appropriations for the purpose of awarding competitive one-year grants for construction, maintenance, and renovation needs; these grants may not be less than $1 million each. After the Secretary awards such grants, 60% of the remaining appropriated funds are distributed among eligible TCCUs on a pro rata basis, based on the number of Indian student counts of the respective institutions. The remaining 40% is then distributed in equal shares to all eligible TCCUs. The minimum grant amount a recipient can be awarded is $500,000. Program Administration As with SIP, there is a two-step application process for participation in the Strengthening TCCU program. In step one, an institution applies to be designated as eligible under 312(b). In step two, institutions apply to the TCCU program and submit project plans. The application and project plan must contribute to the purposes of the program, not include unallowable activities, and meet any statutory provisions and regulations. If approved by the Secretary, the Secretary then makes an allotment to the institution based on the above-described formula. For formula-funded grants under this program, the performance period is five years. Institutions that receive grants under this section are not subject to the Section 313(d) two-year wait-out period. Additionally, TCCUs that receive grants under the Title III-A, Section 316 program are prohibited from receiving funds from other Title III-A programs, Title III-B programs (Strengthening HBCU program and Historically Black Graduate Institutions (HBGIs) program), or Title V-A (the HSI program) during the same fiscal year; however, in general, they may receive a grant under any of the Title III-F programs in the same fiscal year. Generally, institutions receiving a Title III-F TCCU grant may simultaneously receive a grant under another Title III-F program. Alaska Native and Native Hawaiian-Serving Institutions Programs Section 317 of the HEA establishes the Strengthening Alaska Native and Native Hawaiian-Serving Institutions (ANNHs) program, which was first authorized under the Higher Education Amendments of 1998 ( P.L. 105-244 ). It is the only HEA program specifically available to ANNHs and provides SIP-type grants to them. The program is intended to enable such institutions to improve and expand their ability to serve Alaska Natives or Native Hawaiians. Typically, Strengthening ANNH grants are funded through discretionary appropriations under Title III-A. Additional mandatory appropriations are provided annually through FY2019 in Title III-F and "shall be made available as grants under [Section 317ANNH program]." Therefore, in this report, the Title III-A and III-F ANNH programs are collectively referred to as the Strengthening ANNH program and are discussed in conjunction with one another, unless otherwise noted. Eligibility To qualify for a Strengthening ANNH grant, an institution of higher education must meet the HEA Section 312(b) requirements and must also have an enrollment of undergraduate students that is at least 20% Alaska Native students or at least 10% Native Hawaiian students. For purposes of the Strengthening ANNH program, a Native Alaskan is a citizen of the United States who is "of one fourth-degree or more Alaska Indian ... Eskimo, or Aleut blood, or a combination thereof." A Native Hawaiian is a citizen of the United States who is a "descendent of the aboriginal people who, prior to 1778, occupied and exercised sovereignty in the area that now comprises the State of Hawaii.... " Authorized Uses Strengthening ANNH grants must be used to assist an institution in planning, developing, undertaking, and carrying out activities to improve an institution's capacity to serve Alaska Natives or Native Hawaiians. The authorized uses for grants under these provisions are similar to those authorized under Section 311(b) of the HEA. Unlike other Title III-A or III-F programs, neither the HEA nor the regulations specifically permit or prohibit ANNHs from using grant funds to create or improve institutional endowments; however, in ED's grant application for FY2015, it appears that the use of up to 20% of grants awards was allowed for endowment investment. Program Administration As with SIP, there is a two-step award process for participation in the Strengthening ANNH program. First, an institution applies for Section 312(b) designation. If approved by the Secretary, the institution may then apply for a Strengthening ANNH grant. Strengthening ANNH grants are awarded through a competitive process. Applications are selected based on the score of a review panel, and the applications with the highest score are selected for funding. Strengthening ANNH grants are generally five years in length for general development grants and two years in length for grants used for facility renovation. ANNHs that receive grants under this program are not subject to the Section 313(d) two-year wait-out period. Institutions that receive Strengthening ANNH grants are prohibited from receiving funds under other Title III-A programs, Title III-B programs (Strengthening HBCU and HBGI), and Title V-A (HSI program) during the same fiscal year; however, in general, they may receive a grant under any of the Title III-F programs in the same fiscal year. Generally, institutions receiving a Title III-F ANNH grant may simultaneously receive a grant under another Title III-F program. Native American-Serving, Nontribal Institutions Programs Section 319 establishes the Strengthening Native American-Serving, Nontribal Institutions (NASNTIs) program, which was first authorized in 2007 under the College Cost Reduction and Access Act (CCRAA; P.L. 110-385 ). It is the only HEA program specifically available to NASNTIs and provides SIP-type grants to them. The program is intended to enable such institutions to improve and expand their ability to serve Native American and low-income students. Since 2010, Strengthening NASNTI program grants have been funded through discretionary appropriations under Title III-A. Mandatory appropriations are provided annually through FY2019 in Title III-F. In general, Title III-A and Title III-F NASNTI program grants are subject to the same eligibility criteria, authorized uses, and administrative procedures; therefore, in this report, the Title III-A and III-F NASTNTI programs are collectively referred to as the Strengthening NASNTIs program and are discussed in conjunction with one another, unless otherwise noted. Eligibility To qualify for a Strengthening NASNTIs program grant, institutions of higher education must meet the HEA Section 312(b) eligibility requirements and must also have an enrollment of undergraduate students that is at least 10% Native American students. A Native American is defined as an individual who is of a tribe, people, or culture indigenous to the United States. Additionally, an eligible institution cannot be a TCCU. Authorized Activities Title III-A and III-F NASNTI grants must be used to assist NASNTIs in planning, developing, and carrying out activities to improve their capacity to serve Native American and low-income individuals. The examples of authorized activities for NASNTI grants mirror the authorized uses under Section 311(b); however, NASNTIs cannot use grant monies to start or improve an endowment. Program Administration As with SIP, there is a two-step award process for institutions to receive grants under either the Title III-A or III-F NASNTI programs. In step one, an institution applies for eligibility by demonstrating it meets either the HEA Section 312(b) criteria for Title III-A NASNTI grants or the specific eligibility criteria set forth in Title III-F for those NASNTI grants. If approved by the Secretary, the institution may then apply for a NASNTI grant under the grant it wishes to receive. Both types of NASNTI grants are awarded through a competitive process. Applications are selected based on the score of a review panel, and the applications with the highest score are selected for funding. Title III-A NASNTI grants were first awarded in FY2010, and Title III-F NASNTI grants were first awarded in FY2008. Both types of grants are five years in length. The minimum award for a Title III-A NASNTI grant is $200,000; there is no statutorily set minimum grant amount under the Title III-F NASNTI program. Institutions that receive grants under the Title III-A or III-F NASNTI programs are not subject to the Section 313(d) two-year wait-out period. Institutions receiving a Title III-A NASNTI grant cannot receive funds under other Title III-A programs, Title III-B programs (Strengthening HBCU and HBGI), or Title V-A (HSI program) in the same fiscal year; however, in general, they may receive a grant under any one type of the Title III-F programs in the same fiscal year. Generally, institutions receiving a Title III-F NASNTI grant may simultaneously receive a grant under another Title III-F program. Asian American and Native American Pacific Islander-Serving Institutions Programs Section 320 establishes the Strengthening Asian American and Native American Pacific Islander-Serving Institutions (AANAPISIs) program, which was first authorized in 2007 under the College Cost Reduction and Access Act (CCRAA; P.L. 110-85 ). It is the only HEA program specifically available to AANAPISIs and provides SIP-type grants to them. The purpose of the program is to enable such institutions to improve and expand their ability to serve Asian Americans and Native American Pacific Islanders and low-income individuals. Section 320 Strengthening AANAPISI grants have been funded through discretionary appropriations since FY2009 under Title III-A. Additional mandatory appropriations are provided annually through FY2019 under Title III-F. In general, eligibility requirements, authorized uses, and administrative processes for Title III-A and Title III-F AANAPISI grants are the same; therefore, in this report, the Title III-A and Title III-F AANAPISI programs are referred to collectively as the Strengthening AANAPISI program and are discussed in conjunction with one another, unless otherwise stated. Eligibility To qualify for a Strengthening AANAPISI program grant under either Title III-A or III-F, institutions of higher education must meet the HEA Section 312(b) eligibility requirements. Additionally, at the time of application, an institution must have an enrollment of undergraduate students that is at least 10% Asian American students or Native American Pacific Islander students. For purposes of the Strengthening AANPISI program, an Asian American is an individual "having origins in any of the original peoples of the Far East, Southeast Asia, or the Indian subcontinent," and a Native American Pacific Islander is "any descendant of the aboriginal people of any island in the Pacific Ocean that is a territory or possession of the United States." Authorized Uses Strengthening AANAPISI grants awarded under Title III-A and Title III-F must be used to assist an institution in planning, developing, and carrying out activities that improve and expand the institution's capacity to serve Asian American and Native American Pacific Islanders (AANAPIs) and low-income individuals. Title III-A grants to AANAPISIs have authorized uses similar to the authorized uses under 311(b); however, AANAPISIs are also authorized to use grant funds to provide academic instruction in disciplines in which AANAPIs are underrepresented, to conduct research and data collection for AANAPI populations and subpopulations, and to establish partnerships with community-based organizations that serve AANAPIs. Title III-F grants to AANAPISIs can be used only for activities authorized under Section 311(c). Under both programs, grant recipients can use up to 20% of grant funds to establish or increase endowments, but they must provide matching nonfederal funds that are equal to the amount of federal funds. Program Administration As with SIP, there is a two-step award process for institutions to receive grants under either Title III-A or III-F Strengthening AANAPISI programs. First, an institution applies for designation as Section 312(b) eligible. If approved by the Secretary, the institution may then apply for either a Title III-A or III-F AANAPISI program grant. Grants under both programs are awarded through a competitive process. Applications are selected based on the score of a review panel, and the applications with the highest score are selected for funding. Strengthening AANAPISI grants are generally five years in length. Additionally, AANAPISIs that receive grants under either the Title III-A or the Title III-F program are not subject to the Section 313(d) two-year wait-out period. Institutions that receive a Strengthening AANAPISI grant under Title III-A in a fiscal year are prohibited from receiving funds under other Title III-A programs, Title III-B (Strengthening HBCU and HBGI programs), or Title V (HSI program and Promoting Postbaccalaureate Opportunities for Hispanic Americans (PPOHA)) in the same fiscal year; however, in general, they may receive a grant under any of the Title III-F programs in the same fiscal year. Generally, institutions receiving a Title III-F ANNAPISI grant may simultaneously receive a grant under another Title III-F program. Historically Black Colleges and Universities Programs Most historically Black colleges and universities (HBCUs) were established between 1867 and 1900 with the purpose of serving the educational needs of Black Americans. Before HBCUs were established, and to a certain extent afterwards, Black Americans were generally denied admission to traditionally white institutions. As a result of these practices, HBCUs became a primary means for providing postsecondary education to Black Americans. As of 2015, there were 97 HBCUs located in 19 states, predominantly in the Southeast; the District of Columbia; and the U.S. Virgin Islands. They include private and public, two-year and four-year institutions. HBCUs are funded under Title III-B of the HEA. At various points in time, HBCUs were provided funding under HEA Title III, but it was not until the Higher Education Amendments of 1986 ( P.L. 99-498 ) that a separate HBCU program was established under Title III-B. In establishing the Title III-B HBCU program, Congress found that many HBCUs were struggling to survive because of financial limitations and that "the current state of Black colleges and universities [was] partly attributable to the discriminatory actions of the States and the Federal Government." The HBCU program was meant to address these issues and to ensure HBCUs' participation in providing equality in education. HEA Title III-B authorizes programs for both undergraduate and graduate and professional programs at eligible HBCUs. Section 323, the Strengthening HBCUs program, authorizes the Secretary to award formula-based grants to eligible HBCUs for activities to strengthen academic, administrative, and fiscal capabilities; these grants are typically available through discretionary appropriations. The Historically Black Graduate Institutions (HBGIs) program, Section 326, provides funds for formula-based grants to specifically listed graduate and professional programs at HBCUs for authorized activities similar to those under Section 323, typically with discretionary funds. Title III-F authorizes additional appropriations for the Section 323 eligible institutions. In addition to the Title III-B and Title III-F programs, Title VII, Part A, Subpart 4 of the HEA authorizes Masters Degree Programs at HBCUs, which provides grants to specifically listed institutions that make a substantial contribution to the graduate education of Black Americans at the master's degree level. Finally, the Historically Black College and University Capital Financing (HBCU Cap Fin) program assists HBCUs in obtaining low-cost capital financing for campus maintenance and construction projects. This section of the report discusses both of the Strengthening HBCU Program, the HBGI, Masters Degree Programs at HBCUs, and the HBCU Cap Fin program, including eligibility criteria, authorized uses, and program administration. Strengthening Historically Black Colleges and Universities Section 323 authorizes the Strengthening Historically Black Colleges and Universities program, which provides institutional grants to HBCUs. The program is intended to enable HBCUs to participate in activities that strengthen their academic, administrative, and fiscal capabilities. While the Strengthening HBCU program is similar in purpose and structure to the Title III-A programs in many ways, it is also markedly different from them. Unlike most of the Title III-A programs, which are competitive, the Title III-B Strengthening HBCU program is formula-funded. Additionally, HBCUs are not required to meet many of the Title III-A eligibility requirements related to educational and general expenditures or a requisite number of needy students. Typically, the Strengthening HBCUs program is funded through discretionary appropriations under Title III-B. Additional mandatory appropriations are provided through FY2019 in Title III-F. The Title III-F authorizing language states that the mandatory funds shall be made available to eligible HBCUs under Title III-B and shall be allotted in the same manner and for the same authorized purposes; therefore, in this report, the Title III-B Strengthening HBCU program and Title III-F Strengthening HBCU programs are collectively referred to as the Strengthening HBCUs program and are discussed in conjunction with one another. Eligibility HBCUs eligible for grants under HEA Title III programs are known as Part B institutions. In this report, the terms HBCU and Part B institution are used interchangeably. A Part B institution is defined as one established before 1964; with a primary mission that was, and is, the education of Black Americans; and that is accredited or preaccredited by an ED-recognized accrediting agency. Additionally, the accompanying regulations require that an eligible Part B institution be legally authorized by the state in which it is located to operate as a junior or community college or to award bachelor's degrees. Institutions that were established after 1964 may also qualify as eligible Part B institutions. To do so, they must (1) have been a branch campus of a southern institution of higher education that, prior to September 30, 1986, received a grant as an institution with special needs under HEA Section 321; and (2) have been an institution formally recognized by the National Center for Education Statistics as an HBCU but that, on or after the date the enactment of the Strengthening HBCUs program (October 17, 1986), was determined not to meet the newly established Part B eligibility criteria. Authorized Activities In general, many of the authorized activities listed in Section 323 mirror those authorized under the Strengthening Institutions Program. For example, Part B institutions may use grants for purchasing or renting laboratory equipment, constructing or renovating instructional facilities, or tutoring or counseling students to improve academic success. However, several additional uses are specified in Section 323. These additional authorized uses include establishing or enhancing a program of teacher education designed to qualify students to teach in a public elementary or secondary school in the states and that includes preparation for teacher certification; establishing community outreach programs that will encourage elementary and secondary students to develop the academic skills and interest to pursue a postsecondary education; and acquiring real property in connection with the construction, renovation, or addition to or improvement of campus facilities. Part B institutions are also authorized to use up to 20% of grant funds to establish or increase endowments. If an institution chooses to do so, it must provide nonfederal matching funds that are equal to or greater than the federal funds. Allotments Strengthening HBCU grants are formula-based, such that each eligible Part B institution that meets the eligibility criteria and submits a qualifying application may receive a grant award. For amounts appropriated for these grants, the Secretary must allot to each institution a sum 1. that bears a ratio equal to 50% of the number of Federal Pell Grant recipients in attendance at the institution at the end of the preceding academic year to the total number of Federal Pell Grant recipients at all Part B institutions; 2. that bears a ratio equal to 25% of the number of an institution's graduates for the academic year to the number of graduates for all Part B institutions; 3. that bears a ratio equal to 25% of the percentage of an institution's graduates who are admitted to and in attendance at, within five years of graduating with a bachelor's degree, a graduate or professional school in a degree program in disciplines in which Blacks are underrepresented to the percentage of such graduates per institution from all Part B institutions. If the amount of a grant to be awarded to an institution, based on the above formula, is greater than $250,000 and less than $500,000, then the Secretary must award the institution $500,000. If the amount of a grant to be awarded to an institution is less than or equal to $250,000, then the Secretary must award the institution $250,000. Additionally, if the amounts appropriated in any fiscal year are insufficient to make these minimum allotments to each eligible institution, then the minimum allotments are ratably reduced. Finally, if ED determines that an individual institution's allotment for any fiscal year is not needed by that institution, ED may redistribute the unneeded funds to other HBCUs as ED determines appropriate. Finally, Howard University and the University of the District of Columbia may not receive allotments if either institution's allotment under criteria 2 and 3 is less than the amounts they would receive under their permanent annual appropriations. Program Administration The award process for Strengthening HBCU grants is a multi-step process. First, an institution must be designated by ED as a Part B institution. ED maintains a list of Part B institutions. If an institution has been designated as a Part B institution, it must then submit to ED the data required to calculate the formula allotments. Finally, at a separate time, the institution submits a project plan to ED, which must describe the institution's proposed activities, not include unallowable activities, and meet any statutory provisions and regulations. If approved by the Secretary, the Secretary then makes an allotment to the institution based on the above-described formula. Program grants are five years in length. Any funds paid to an institution that are not used within the five-year time period can be carried over and expended during the succeeding five-year period, so long as those funds are obligated for the same purpose. Finally, institutions receiving a Title III-B Strengthening HBCU grant in a fiscal year cannot receive funds under any Title III-A, III-F, Title V (HSI program), or Title VII (Masters Degrees at PBIs) program not specifically established for HBCUs in the same fiscal year. Historically Black Graduate Institutions Section 326 of the HEA authorizes the Historically Black Graduate Institutions (HBGIs) program. As with the Strengthening HBCU program, the purpose of the HBGI program is to enable such institutions to participate in activities that strengthen their academic, administrative, and fiscal capabilities. Like the Strengthening HBCU program, the HBGI program has been funded through discretionary appropriations. However, unlike institutions eligible under the Strengthening HBCU program or most of the Title III-A programs, Title III-F does not provide additional mandatory funding for the HBGI program. Eligibility All institutions or graduate programs eligible for HBGI grants are specifically listed in the HEA. HBGI grants are available to postgraduate institutions or institutions offering "qualified graduate programs" that have been determined by ED to be "making a substantial contribution to the legal, medical, dental, veterinary, or other graduate education opportunities in mathematics, engineering, or the physical or natural sciences for Black Americans." Qualified graduate programs are graduate or professional programs that provide a program of instruction in law, physical or natural sciences, engineering, mathematics, psychometrics, or other scientific disciplines in which African Americans are underrepresented and in which students are enrolled at the time of application for the grant. Originally, five institutions or schools were listed as eligible under Section 326, and over the years, Congress has designated several other schools and programs as eligible to receive HBGI grants. Prior to passage of the Higher Education Opportunity Act of 2008 (HEOA; P.L. 110-315 ), 18 institutions, schools, and programs were specified in Section 326 and, therefore, were eligible for HBGI grants. Those institutions, schools, and programs were Morehouse School of Medicine, Meharry Medical School, Charles R. Drew Postgraduate Medical School, Clark-Atlanta University, Tuskegee University School of Veterinary Medicine and other qualified graduate programs, Xavier University School of Pharmacy and other qualified graduate programs, Southern University School of Law and other qualified graduate programs, Texas Southern University School of Law and School of Pharmacy and other qualified graduate programs, Florida Agricultural and Mechanical University School of Pharmaceutical Sciences and other qualified graduate programs, Morgan State University qualified graduate programs, Hampton University qualified graduate programs, Alabama Agricultural and Mechanical University qualified graduate programs, North Carolina Agricultural and Technical State University qualified graduate programs, University of Maryland Eastern Shore qualified graduate programs, Jackson State University qualified graduate programs, Norfolk State University qualified graduate programs, and Tennessee State University qualified graduate programs. In 2008, the HEOA amended Section 326 of the HEA to include six additional postgraduate schools or programs that are now also eligible for HBGI grants. The distinction between the pre- and post-HEOA schools and program is important for award allocation purposes, which are discussed later in this report. The six post-HEOA schools and programs are Alabama State University qualified graduate programs, Prairie View Agricultural and Mechanical University qualified graduate programs, Delaware State University qualified graduate programs, Langston University qualified graduate programs, Bowie State University qualified graduate programs, and University of the District of Columbia David A. Clarke School of Law. Authorized Activities In general, many of the authorized uses of HBGI program grants are similar to those authorized under the Strengthening Institutions Program of Title III-A. For example, HBGI grants may be used for purchasing or renting laboratory equipment, constructing or renovating instructional facilities, or tutoring or counseling students to improve academic success. However, several other uses for HBGI grants are specified in Section 326. These additional authorized uses include scholarships, fellowships, or other financial assistance for needy graduate and professional students to permit them to enroll in and complete doctoral degrees in disciplines in which African Americans are underrepresented; acquisition of real property that is adjacent to the campus and in connection with the construction or renovation of campus facilities; and development of a new qualified graduate program, so long as the institution does not use more than 10% of its HBGI grant for such a purpose. HBGI grant recipients are allowed to establish or maintain endowment funds with HBGI grants; however, in doing so, they must comply with the provisions for Endowment Challenge Grants (see subsequent entitled section) set forth in HEA Section 331. Among other requirements in Section 331, HBGI grant recipients that wish to use grant monies for endowment funds must provide nonfederal matching funds equal to the federal funds provided. Allotments The HBGI program specifies how funds are to be allotted to institutions based on the amount of funds appropriated by Congress each year. Section 326 specifies that the first $56.9 million (or lesser amount appropriated) is available only to the 18 pre-HEOA eligible institutions, schools, and programs, and grant amounts must be at least as much as each institution's grant amount in FY2008. Any amount appropriated that is greater than $56.9 million and less than $62.9 million is available only to the six institutions or programs added to the statute by the HEOA. Finally, any amount appropriated over $62.9 million is made available to any of the eligible institutions, schools, or programs pursuant to a formula to be developed by ED that uses the following elements: the ability of an institution, school, or program to match federal funds with nonfederal funds; the number of students enrolled in the program for which funding is being received; the average cost of education per student for all full-time graduate and professional students enrolled in the eligible professional or graduate school; the number of students in the previous year who received their first professional or doctoral degree from the programs for which funding was received in the previous year; and the contribution, on a percentage basis, of the programs for which the institution is eligible to receive funds to the total number of African Americans receiving graduate or professional degrees in the professions or disciplines related to the programs for the previous year. In FY2016, for the first time, program appropriations exceeded $62.9 million. Specifically, Congress appropriated approximately $63.2 million. ED has not yet developed an allocation formula for this additional amount. Finally, grants in excess of $1 million cannot be made under the HBGI program unless the applicant provides assurances to ED that 50% of the cost of the purposes for which the grant is made will be paid from nonfederal sources. An award recipient is not required to match any portion of the first $1 million awarded. Program Administration The HBGI program award process comprises a single step. Eligible institutions, schools, and programs need only submit an application to ED requesting funds and detailing proposed project plans for those funds. The application and project plans must contribute to the purposes of the program, not include unallowable activities, and meet any statutory provisions and regulations. If approved by the Secretary, the Secretary then makes an allotment to the institution based on the above-described formula. HBGI program grants are five years in length. Funds awarded must be obligated during the five-year grant period and must be expended within 10 years of the start of the 5-year grant period. An HBGI grant recipient cannot receive more than one grant under this program in any fiscal year. Institutions that are eligible for and receive awards under the Promoting Postbaccalaureate Opportunities for Hispanic Americans Program (PPOHA), the Masters Degree Programs at HBCUs Program, or the Masters Degree Programs at PBIs Program are ineligible to receive grants under the HBGI program in the same fiscal year. Finally, in general, institutions receiving an HBGI grant in a fiscal year cannot simultaneously receive funds under a Title III-A, Title III-F, or Title V (the HSI program) program not specifically established for HBCUs. Masters Degree Programs at Historically Black Colleges and Universities In 2008, the Higher Education Opportunity Act (HEOA; P.L. 110-315 ) established Masters Degree Programs at Historically Black Colleges and Universities under Title VII, Part A, Subpart 4. The program seems to have been established to address concerns that the Title III HBCU, PBI, and HBGI programs were limited in scope and did not extend eligibility to a variety of graduate opportunities for Black Americans. The Title VII-A-4 program is intended to assist institutions in improving graduate education opportunities at the master's level for Black students in a variety of fields of study. The program is funded through discretionary appropriations under Title VII-A-4, and was provided with mandatory appropriations for FY2009-FY2014 under Title VIII. Prior to FY2017, the program had not received discretionary appropriations. The program was provided mandatory appropriations annually for FY2009 through FY2014. Authorization for mandatory appropriations lapsed at the end of FY2014, and for two years the program did not receive funds. In FY2017, discretionary appropriations for the programs were provided, totaling $7,500,000. HEA Section 723 specifically authorizes Masters Degree Programs at Historically Black Colleges and Universities (Masters Degrees at HBCUs). The program's purpose is to improve graduate education opportunities at the master's level in mathematics, engineering, physical or natural sciences, computer science, information technology, nursing, allied health, or other scientific disciplines for Black Americans. Eligibility Masters Degrees at HBCUs program grants are available to those institutions specifically listed in the HEA that have been determined "to be making a substantial contribution to graduate education opportunities" for Black Americans at the master's level in one of the several educational disciplines listed above. None of the institutions listed as eligible for the HBGI program (Title III-B, Section 326) are listed as eligible for the Masters Degrees at HBCUs program. Currently, 18 institutions are eligible for the Masters Degrees at HBCUs program; they are Albany State University, Alcorn State University, Claflin State University, Coppin State University, Elizabeth City University, Fayetteville State University, Fisk University, Fort Valley State University, Grambling State University, Kentucky State University, Mississippi Valley State University, Savannah State University, South Carolina State University, University of Arkansas at Pine Bluff, Virginia State University, West Virginia State University, Wilberforce University, and Winston-Salem State University. Although each of these institutions is eligible to receive funding, grants under this program must be used to support a graduate school or a qualified master's degree program at the institution. A qualified master's degree program is one that provides a program of instruction in mathematics, engineering, science, physical or natural sciences, computer science, information technology, nursing, allied health, or other scientific disciplines in which African Americans are underrepresented. Students must be enrolled in the program at the time of application for a grant, unless it is a new program, in which case, the institution cannot use more than 10% of the grant for the new program. Authorized Uses Masters Degrees at HBCUs program grants are intended to enable eligible institutions to develop and enhance their capacity for graduate education and opportunities for Black Americans and low-income students. In general, the program activities authorized under the Masters Degrees at HBCUs program are the same as those authorized under the HBGI program. For instance, Masters Degrees at HBCUs program grants may be used for purchasing or renting lab equipment, constructing or improving classrooms and other instructional facilities, or tutoring students. As with the HBGI program, grants under this program can also be used for scholarships, fellowships, or other financial assistance for needy graduate students to permit the enrollment of the students in, and completion of, a master's degree in mathematics, engineering, the physical or natural sciences, computer science, information technology, nursing, allied health, or other scientific disciplines in which African Americans are underrepresented; the acquisition of real property that is adjacent to the campus and in connection with the construction or renovation of campus facilities; and the development of a new qualified graduate program, so long as the institution does not use more than 10% of its grant for such a purpose. Institutions may also use program grants to establish or maintain endowment funds. However, in doing so, they must comply with the provisions for Endowment Challenge Grants set forth in HEA Section 331. Among other requirements, Masters Degrees at HBCUs grant recipients that wish to use grant monies for endowment funds must provide nonfederal matching funds equal to the federal funds provided. Allotments Masters Degrees at HBCUs program grants are formula-based. Section 723 specifies that, subject to available appropriations, no grant awarded under the Masters Degrees at HBCUs program shall be less than $500,000. If an institution receives a grant that is greater than $1 million, however, it must provide assurances that 50% of the cost of a grant project will be paid with nonfederal funds. The first $9 million (or lesser amount) appropriated are available only to the 18 institutions currently listed in Section 723(b) for the purposes of making the $500,000 minimum grants. If the amount appropriated is insufficient to pay the minimum grant amount to each eligible institution, then each institution's award is ratably reduced. If other institutions are subsequently added to the list of eligible institutions, they are entitled to the minimum grant amount, unless such funds are not appropriated. In that case, the 18 institutions currently listed receive funding priority and subsequently added institutions' awards are ratably reduced. Any appropriations greater than $9 million are available to each of the currently listed 18 institutions based on a formula, to be determined by ED. As of FY2017, the appropriation has not exceeded $9 million. The formula for appropriations greater than $9 million uses the following elements: the ability of an institution to match federal funds with nonfederal funds; the number of students enrolled in the qualified master's degree program in the previous academic year; the average cost of attendance per student for all full-time students enrolled in the qualified master's degree program; the number of students in the previous year who received a degree in the qualified master's degree program; and the contribution, on a percent basis, of the master's level programs for which the institution is eligible to receive funds to the total number of African Americans receiving master's degrees in the disciplines related to the institution's programs for the previous year. Notwithstanding the above formula to allocate funds, no eligible institution that received a grant under the program for FY2009 and that is eligible to receive a grant in subsequent years shall receive a grant that is less than the amount received in FY2009. However, this hold harmless rule does not apply if the amount appropriated for a fiscal year is insufficient to provide such grants to all such institutions or if an institution is unable to provide sufficient matching funds. Program Administration Like the HBGI award process, the Masters Degrees at HBCUs award process is a single step. Eligible institutions need only submit an application to ED requesting funds and detailing proposed project plans for those funds. The application and project plans must contribute to the purposes of the program, not include unallowable activities, and meet any statutory provisions and regulations. If approved by the Secretary, the Secretary then makes an allotment to the institution based on the above-described formula Program grants are no longer than six years in length, but grants may be periodically renewed for a period determined by the Secretary. Additionally, an institution can only receive one grant per fiscal year under this program. An institution that is eligible for and receives an award under the HBGI, PPOHA, or Masters Degree Programs at PBIs programs in a fiscal year is ineligible to receive grants under the Masters Degrees at HBCUs program in the same fiscal year. An institution receiving a Masters Degree Programs at HBCUs grant may not concurrently receive a Title III-A or V-A grant but may concurrently receive a Title III-B (Strengthening HBCUs program) grant and generally may concurrently receive a Title III-F grant. Historically Black College and University Capital Financing The Historically Black College and University Capital Financing Program (HBCU Cap Fin) is a loan guarantee program that was established to provide federal assistance to HBCUs in obtaining low-cost capital financing for campus maintenance, renovation, and construction projects. It was authorized by the Higher Education Amendments of 1992 ( P.L. 102-325 ). The extension of such loans is intended to help HBCUs continue educating African Americans and low-income, educationally disadvantaged Americans. When enacting the legislation, Congress found that the academic and residential facilities on many HBCU campuses suffered from neglect and deferred maintenance. Congress also found that HBCUs were often unable to obtain financing to perform needed maintenance and construction projects because of their small enrollments, limited endowments, and other financial risk factors. To remedy this situation, Congress enacted HBCU Cap Fin to help provide HBCUs with access to low-cost capital financing. HBCU Cap Fin provides HBCUs with access to capital financing by issuing federal guarantees on the full principal and interest of qualified bonds, the proceeds of which are used for capital financing loans. Eligibility Institutions eligible for HBCU Cap Fin are those eligible as Part-B institutions under the Strengthening HBCU program, as defined in HEA Section 322(2). Howard University is specifically excluded from program eligibility, while Lincoln University of Pennsylvania is specifically included in program eligibility. An HBCU applicant wishing to receive a loan under the program must undergo a credit review to determine whether it is qualified to receive a loan under the program. Authorized Uses HBCU Cap Fin loans provide low-cost financing for capital projects to HBCUs. Authorized capital projects include the repair, renovation, or, in exceptional circumstances the construction or acquisition of a classroom facility, library, dormitory, laboratory, or other facility customarily used by institutions of higher education for instructional or research purposes or the housing of students, faculty, and staff; an institutional administration facility or student center; instructional equipment and any capital equipment or fixture related to the facilities described above; a maintenance, storage, or utility facility that is essential to the operation of a facility; real property or any interest therein; a facility designed to provide primarily outpatient health care to students and faculty; physical infrastructure essential to support projects authorized under the HEA, including roads, sewer and drainage systems, and other utilities; and any other facility or equipment essential to maintaining accreditation. Program Administration Rather than directly providing capital financing loans to HBCUs, ED contracts with a private, for-profit corporation to act as the Designated Bonding Authority (DBA) and to operate HBCU Cap Fin. The DBA issues taxable bonds on behalf of HBCU borrowers, and ED guarantees full payment on the qualified bonds issued by the DBA. The DBA then sells the bonds to a third party, and bond proceeds are then used by the DBA to provide loans to eligible HBCUs at interest rates that are slightly above the federal government's cost of borrowing. The HEA limits the program to an outstanding balance of $1.1 billion in bonds and unpaid interest. HEA Section 344(a) provides that no more than two-thirds of this limit may be held on behalf of private HBCUs, and no more than one-third may be held on behalf of public HBCUs; however, in recent years, appropriations acts have authorized ED to make programs loans to support both public and private HBCUs, without regard to these statutory limitations. Loan Terms The HEA sets forth specific loan terms under HBCU Cap Fin, under which all parties must operate. These statutorily prescribed terms include the percentage of loan funds an HBCU may use for capital projects and the parties' recourses in the event of a delinquency or default. HBCUs must use at least 95% of an HBCU Cap Fin loan to complete one or more of the statutorily authorized capital projects or to refinance a prior obligation, the proceeds of which were used to finance a capital project. The remaining 5% of the loan must be deposited into a pooled escrow account. The escrow account is used to cover any delinquencies or defaults by an institution in the program. If no institution defaults during the period in which the participating HBCU has an outstanding loan, the HBCU will receive the remainder of its escrow within 120 days of its final scheduled loan repayment. If an HBCU is delinquent on an HBCU Cap Fin loan, the DBA may assist the HBCU in making the payment within 45 days. If after that time, the HBCU is still delinquent or defaults on the loan, the DBA draws funds from the pooled escrow account to make payments on behalf of the HBCU. If the pooled escrow account is exhausted, ED will make payments according to the insurance agreement with the DBA. ED then collects remuneration directly from the delinquent or defaulted HBCU or disposes of the HBCU's collateral. While the statutory provisions of HBCU Cap Fin set forth several specific loan terms, many are left to the parties to negotiate. Such terms include interest rate, payment terms, frequency of payments, and the length of the loan. HBCU Capital Financing Advisory Board The HBCU Capital Financing Advisory Board (Advisory Board) provides advice and counsel to ED and the DBA on the most efficient means of implementing construction financing on HBCU campuses. It also advises Congress on the progress made in implementing HBCU Cap Fin. The Advisory Board is composed of 11 members who are appointed by the Secretary. The Advisory Board members are the Secretary or the Secretary's designee; three presidents of private HBCUs; three presidents of public HBCUs; the president of the United Negro College Fund, Inc., or the president's designee; the president of the National Association for Equal Opportunity in Higher Education, or the designee of the Association; the executive director of the White House Initiative on HBCUs; and the president of the Thurgood Marshall College Fund, or the president's designee. The term of service for each president of an HBCU (public or private) that serves on the Advisory Board is three years. The term of service for all other Advisory Board members is the length of the tenure in their other professional capacities. Predominantly Black Institutions Programs Predominantly Black Institutions (PBIs) are IHEs that enroll a high concentration of Black American students and that also enroll a high concentration of low-income or first-generation college students. Unlike HBCUs, PBIs were not necessarily established to serve the educational needs of Black Americans; additionally, their date of establishment need not fall within a certain timeframe. Two HEA programs are authorized specifically to assist PBIs; they are the Strengthening PBIs program and Masters Degree Programs at PBIs. This section discusses each of these programs, including their eligibility criteria, authorized uses of grant monies, and program administration. Strengthening Predominantly Black Institutions Title III-A, Section 318, of the HEA establishes the Strengthening Predominantly Black Institutions (PBIs) program, which was first authorized in 2007 by the College Cost Reduction and Access Act (CCRAA; P.L. 110-84 ) and which provides SIP-type grants to PBIs. The program is intended to assist PBIs in expanding educational opportunities. Since FY2010, the Title III-A Strengthening PBI program grants have been funded through annual discretionary appropriations under Title III-A. Additional mandatory appropriations are provided annually through FY2019 under Title III-F. Grants awarded under the Title III-A program are formula-based; grants awarded under the Title III-F program are competitive. Typically, eligibility requirements, authorized uses, and administrative processes for Title III-A formula PBI program and Title III-F competitive PBI program are the same. When discussed together, they are referred to as the Strengthening PBI programs. Eligibility Eligibility requirements for Strengthening PBI grants vary appreciably from eligibility requirements for the other Title III-A programs. To qualify for either Strengthening PBI program, institutions of higher education must meet the HEA Section 318(b)(1) requirements, rather than the Section 312(b) requirements that institutions participating in the other Title III-A programs are required to meet. Under Section 318(b)(1), institutions must have low educational and general expenditures (E&G) per full-time equivalent undergraduate as compared to institutions that offer similar instruction, be accredited or preaccredited by an ED-recognized accrediting agency, and have authorization within their respective states to award a bachelor's degree or associate's degree. In addition to the Section 318(b)(1) requirements, an institution's undergraduate student enrollment must be at least 40% Black American students and must have a requisite "enrollment of needy students." The Section 318(b)(1) "enrollment of needy students" criterion means that at least 50% of an institution's undergraduate students enrolled in an academic program leading to a degree 1. were Federal Pell Grant recipients in the second fiscal year preceding the fiscal year for which the determination is made; 2. come from families that receive benefits under a means-tested federal benefit program; 3. attended a public or private nonprofit secondary school (a) that was in a school district of a local educational agency that was eligible for assistance under Title I, Part A of the Elementary and Secondary Education Act of 1965 (ESEA) for any year during which the student attended the school and (b) that was determined by the Secretary to be one in which the enrollment of children meeting a measure of poverty under Section 1113(a)(5) of the ESEA exceeded 30% of the total enrollment; or 4. are first-generation college students and a majority of such first-generation college students are low-income individuals. Once an institution qualifies as an eligible institution under the Section 318(b)(1) criteria, it must then be designated as a PBI. A PBI is defined as an eligible institution with not less than 1,000 undergraduate students, at which not less than 50% of the enrolled undergraduates are low-income individuals or first-generation college students, and at which not less than 50% of the undergraduates are enrolled in programs that lead to a bachelor's or associate's degree. Authorized Uses Authorized uses differ between the Title III-A formula PBI program and the Title III-F competitive PBI program. The Title III-A formula PBI program mandates required activities to be funded and authorizes additional uses for such grants. Title III-F competitive PBI grants have a different set of authorized uses from those authorized for Title III-A formula PBI grants. Title III-A PBIs that receive Title III-A formula PBI grants must use them for the following purposes: to plan, develop, undertake, and implement programs to enhance grantee's capacity to serve more low- and middle-income Black American students; to expand higher education opportunities for students eligible to participate in programs under Title IV of the HEA by encouraging college preparation and student persistence in secondary education; and to strengthen the financial ability of the grantee institution to serve the academic needs of low- and middle-income Black American students and Title IV eligible students. Additional grant activities that are authorized under Section 318 include most of the activities authorized under the Title III-A Strengthening Institutions Program (SIP), academic instruction in disciplines in which Black Americans are underrepresented, establishment or enhancement of a teacher education program designed to qualify students to teach in a public elementary or secondary school, and establishment of community outreach programs designed to encourage elementary and secondary school students to develop the academic skills and the interest to pursue postsecondary education. PBIs are also allowed to use Title III-A formula PBI grants to fund construction and maintenance projects; however, not more than 50% of a grant may be used for such purposes. Finally, PBIs are allowed to use up to 20% of Title III-A grant funds to establish or increase endowments. If a PBI chooses to do so, it must provide nonfederal matching funds that are equal to or greater than the federal funds. Title III-F Authorized uses of Title III-F competitive PBI grants differ from their Title III-A formula PBI counterparts. Title III-F competitive PBI grants must be used for programs in science, technology, engineering, or mathematics (STEM); health education; internationalization or globalization; teacher preparation; or improving educational outcomes of African American males. Title III-A Allotments Unlike most other Title III-A programs, Title III-A PBI grants are formula-based, such that each institution that applies and meets the eligibility and application requirements receives a grant. After an institution has been designated a Section 318(b) eligible institution, it must submit data relevant to the Title III-A PBI grant formula. The Secretary then reviews these data and allots funds accordingly among all such institutions. For amounts appropriated for these grants, the Secretary must allot to each eligible institution submitting formula data a sum that bears a ratio equal to 50% of the number of Federal Pell Grant recipients in attendance at the institution at the end of the preceding academic year to the total number of Federal Pell Grant recipients "at all such institutions" at the end of the preceding year; that bears a ratio equal to 25% of the number of an institution's graduates for the academic year to the number of graduates of all such institutions for the academic year; and that bears a ratio equal to 25% of the percentage of graduates from the institution who are admitted to and in attendance at, not later than two years after graduation with an associate's or bachelor's degree, a bachelor's degree-granting institution or a graduate or professional degree program, respectively, in disciplines in which Black American students are underrepresented to the percentage of all graduates for all such institutions. Notwithstanding the above formula, grants to each eligible PBI must be at least $250,000. If the amounts appropriated in any fiscal year are insufficient to make these minimum grants, then the minimum amount is ratably reduced. If ED determines that an individual institution's allotment for any fiscal year is not needed by that institution, ED may redistribute the unneeded funds to other PBIs as ED determines appropriate. Program Administration Like other Title III-A programs, there is a two-step award process for the Title III-A formula PBI program. First, an institution wishing to receive assistance must be designated by ED as an eligible institution that meets the Section 318(b)(1) eligibility criteria. If an institution is designated as an eligible institution, during the second step of the award process, the institution must demonstrate that it meets the additional criteria of the statutory definition of a PBI and submit a proposed project plan to ED. The project plan must contribute to the purposes of the program, not include unallowable activities, and meet any statutory provisions and regulations. If approved by the Secretary, the Secretary then makes an allotment to the institution based on the above-described formula. Unlike other Title III-A program participants, PBIs receiving grants under this section are subject to a two-year wait-out period. A grantee must return any grant funds not expended within 10 years of an award. Grants awarded to PBIs under Title III-F are competitive. Of the amounts made available each year, 25 competitive grants in the amount of $600,000 each are awarded. Applicants for the Title III-F competitive PBI grant must also go through the two-step award process described above, which includes being designated as an eligible PBI per Section 318(b)(1). Applicants must then submit a project plan to ED and prove that it meets the additional criteria of the statutory definition of PBI. However, because Title III-F PBI grants are competitive, project plans are selected based on the score of a review panel, and the project plans with the highest score are selected for funding. Institutions receiving Title III-A formula PBI grants may not receive grants under other Title III-A programs, Title III-B (Strengthening HBCU and HBGI programs), Title V-A (HSI program) or the Howard University program during the same fiscal year; however, in general, they may receive a grant under any of the Title III-F programs in the same fiscal year. Generally, institutions receiving a Title III-F PBI grant may simultaneously receive a grant under another Title III-F program. Unlike other Title III-F programs, institutions receiving a Title III-F competitive PBI grant are specifically prohibited from also receiving a Title III-B or Title V-A grant in the same fiscal year. Masters Degree Programs at Predominantly Black Institutions In 2008, the Higher Education Opportunity Act (HEOA; P.L. 110-315 ) established Masters Degree Programs at Predominantly Black Institutions (Masters Degrees at PBIs) under Title VII, Part A, Subpart 4 (Section 724). The program's purpose is to improve graduate education opportunities at the master's level in mathematics, engineering, physical or natural sciences, computer science, information technology, nursing, allied health, or other scientific disciplines for Black Americans. The program is provided authorization for discretionary appropriations under Title VII-A-4 but has never received funds under this authority. Authorization for mandatory appropriations, and mandatory appropriations, were provided for the program under Title VIII for FY2009-FY2014. Authorization for mandatory appropriations lapsed at the end of FY2014. In general, the Masters Degrees at PBIs program operates in the same way as the Masters Degrees at HBCUs program. This section will discuss elements of the Masters Degrees at PBIs program and will highlight which provisions of the program differ from the Masters Degrees at HBCUs program, for all other provisions, see the section of this report titled "Masters Degree Programs at Historically Black Colleges and Universities." Eligibility Masters Degrees at PBIs program grants, like Masters Degree at HBCUs program grants, are available to those institutions that have been determined "to be making a substantial contribution to graduate education opportunities at the master's level in mathematics, engineering, the physical or natural sciences, computer science, information technology, nursing, allied health, or other scientific disciplines for Black Americans." All eligible institutions for this program are specifically listed in the HEA. Currently, five institutions are eligible for the Masters Degrees at PBIs program; they are Chicago State University; Washington Adventist University; Long Island University, Brooklyn campus; Robert Morris University, Illinois; and York College, The City University of New York. Also like the Masters Degrees at HBCUs program, grants awarded under this program must be used to support a graduate school or a qualified master's degree program. Authorized Uses The authorized uses of grants awarded under the Masters Degrees at PBIs program are the same as the authorized uses of grants awarded under the Masters Degrees at HBCUs program. Allotments Masters Degrees at PBIs grants are formula-based and awarded in a manner similar to grants awarded under the Masters Degrees at HBCUs program. Subject to appropriations, no grant awarded under the Masters Degrees at PBIs program shall be less than $500,000. If an institution receives a grant that is greater than $1 million, however, it must provide assurances that 50% of the cost of a grant project will be paid with nonfederal funds. The first $2.5 million (or lesser amount) appropriated is available only to the five institutions currently listed in Section 724 for the purposes of making the $500,000 minimum grants. If the amount appropriated is insufficient to pay the minimum grant amount to each institution, then each institution's award is ratably reduced. If other institutions are subsequently added to the list of eligible institutions, they are entitled to the minimum grant amount, unless such funds are not appropriated. In that case, the five institutions currently listed receive funding priority and subsequently added institutions' awards are ratably reduced. Any appropriations greater than $2.5 million are available to each of the currently listed five institutions based on a formula, determined by ED, that uses the same elements as the formula for the Masters Degrees at HBCUs program. Masters Degrees at PBIs also has the same hold harmless rule as Masters Degrees at HBCUs: notwithstanding the above method to allocate funds, no eligible institution that received a grant under the program for FY2009 and that is eligible to receive a grant in a subsequent year shall receive a grant that is less than the amount received in FY2009. However, this hold harmless rule does not apply if the amount appropriated for a fiscal year is insufficient to provide such grants to all such institutions or if an institution is unable to provide sufficient matching funds. Program Administration Administration of the Masters Degrees at PBIs program also mirrors the administration of the Masters Degrees at HBCUs program. The award application process, grant duration, and limit of one grant per institution per fiscal year are the same. Additionally, an institution that is eligible for and receives an award under the HBGI, PPOHA, or Masters Degree Programs at HBCUs programs in a fiscal year is ineligible to receive grants under the Masters Degrees at PBIs program in the same fiscal year. An institution receiving a Masters Degree Programs at PBIs grant may not concurrently receive a Title III-A grant, a Title III-B (Strengthening HBCUs program) grant, or a Title V-A (HSI program) grant, but may generally receive a Title III-F grant. Hispanic-Serving Institutions Programs Under the Higher Education Amendments of 1992 ( P.L. 102-325 ), Congress created the Developing Hispanic-Serving Institutions (HSIs) Program under HEA Title III-A. Under the Higher Education Amendments of 1998 ( P.L. 105-244 ), the Developing HSI program was moved to its own title, HEA Title V. In moving the HSI program to Title V, Congress stated, "[I]n recognition of the importance of finding new ways of serving our Nation's rapidly growing Hispanic community, [Congress] has created a new part within Title V dedicated solely to supporting the needs of Hispanic-Serving Institutions." The purpose of the program was and is to expand educational opportunities for and improve the academic attainment of Hispanic students and to enhance the institutional stability of institutions that are educating the majority of Hispanic college students. Currently, Title V is divided into two parts. Part A contains the HSI program, which provides grants to HSIs to support and expand educational opportunities for Hispanic students and is similar to the various HEA Title III-A and III-B MSI programs. Part B contains the Promoting Postbaccalaureate Opportunities for Hispanic Americans program, which assists in expanding postbaccalaureate education opportunities for Hispanic students. Title III-F contains the HSI Science, Technology, Engineering, and Mathematics and Articulation Program (HSI STEM), which assists in increasing the number of Hispanic and low-income students attaining degrees in STEM fields and in the development of transfer and articulation agreements between two-year and four-year institutions in STEM fields. Although HSI STEM is not part of Title V, grants made under HSI STEM are generally subject to the same requirements as grants made under the Title V-A HSI program; therefore, Title V-A and Title III-F HSI STEM will be addressed in the same section of this report. This section of the report will discuss each of the three HSI programs; for each program, this report will discuss eligibility criteria, authorized uses, and program administration. Title V-A: Hispanic Serving Institutions Section 501 of the HEA establishes the Hispanic Serving Institutions (HSI) program. The purpose of the program is to expand educational opportunities for Hispanic students and to enhance academic offerings and institutional stability at HSIs. The HSI program is funded through annual discretionary appropriations. Eligibility To qualify for an HSI program grant, institutions of higher education must meet the HEA Section 312(b) criteria. Additionally, an institution must have an enrollment of undergraduate full-time equivalent (FTE) students that is at least 25% Hispanic students at the end of the award year immediately preceding the date of application for a grant. A Hispanic student is one of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish culture or origin. Branch campuses of institutions of higher education are eligible for the HSI program if the institution as a whole meets the eligibility requirements, even if the branch campus does not meet the state authorization or accreditation requirements. Branch campuses must, however, individually meet the needy student enrollment and low E&G requirements. Authorized Uses HSI program grants are intended to assist institutions in planning, developing, undertaking, and carrying out programs to improve institutions' ability to serve Hispanic and low-income students. Authorized uses of HSI program grants largely mirror the authorized uses of Title III-A SIP grants. However, HSI program grants are authorized for several additional activities, including articulation agreements and student support programs designed to facilitate the transfer of students from two-year to four-year institutions; establishing or enhancing teacher education programs designed to qualify students to teach in public elementary and secondary schools; establishing community outreach programs that encourage elementary and secondary school students to develop academic skills and the interest to pursue postsecondary education; and expanding the number of Hispanic and other underrepresented graduate and professional students that can be served by an institution through expanding institutional resources and courses offered. Like the Title III-A programs, HSIs are permitted to use up to 20% of grant funds to establish or improve an endowment, but they must provide nonfederal matching funds equal to or greater than the amount of federal funds used. Program Administration As with many of the Title III-A programs, there is a two-step award process for institutions to receive HSI program grants. First, an institution applies for designation as a Section 312(b)/Section 502 eligible institution. If approved by the Secretary, the institution may then apply for an HSI program grant. Grants under this program are awarded through a competitive process. Applications are selected based on the score of a review panel, and the applications with the highest score are selected for funding. HSI program grants are five years in length. HSIs that receive grants under this program are not subject to a wait-out period. Unlike many of the other MSI programs, institutions may simultaneously receive multiple HSI program grants. Additionally, institutions that receive grants under this program are prohibited from receiving grants under any Title III-A or Title III-B program for the duration of its HSI program grant; however, in general, they may receive a grant under any of the Title III-F programs in the same fiscal year. Generally, institutions receiving an HSI STEM Title III-F grant may simultaneously receive a grant under another Title III-F program. Title III-F: HSI STEM and Articulation Programs HEA Title III-F authorizes the HSI Science, Technology, Engineering, and Mathematics and Articulation Program (HSI STEM). This is a competitive grant program funded with annual mandatory appropriations through FY2019. HSIs eligible under the Title V-A HSI program are also eligible for HSI STEM grants. Although grants can be used for any authorized purpose listed under Title V-A, priority is given to applicants that propose to (1) increase the number of Hispanic and low-income students attaining degrees in STEM fields and (2) develop model transfer and articulation agreements between two-year HSIs and four-year institutions in STEM fields. The administration of the HSI STEM program generally mirrors that of the Title V-A HSI program. Title V-B: Promoting Postbaccalaureate Opportunities for Hispanic Americans HEA Section 511 establishes the Promoting Postbaccalaureate Opportunities for Hispanic Americans (PPOHA) program, which was first authorized in 2008 under the Higher Education Opportunity Act (HEOA; P.L. 110-315 ). The purpose of the program is to enable HSIs to expand postbaccalaureate educational opportunities for Hispanic students. Since FY2009, PPOHA program grants have been funded through discretionary appropriations under Title V-B. In FY2009, Congress provided $10 million for PPOHA within the Fund for the Improvement of Postsecondary Education (FIPSE) appropriation account. Mandatory appropriations were provided annually for FY2009 through FY2014 under Title VIII-AA, Section 898. Authorization for mandatory appropriations lapsed at the end of FY2014. Eligibility To qualify for a PPOHA grant, an institution of higher education must meet the same criteria as for the HSI program, and it must offer a postbaccalaureate certificate or degree-granting program. Authorized Uses The PPOHA program is intended to expand postbaccalaureate opportunities and academic offerings for, and improve the academic attainment of, Hispanic and low-income students. Authorized uses of PPOHA grants include one or more of the following activities: the purchase, rental, or lease of scientific or laboratory equipment for educational purposes; the construction, maintenance, renovation, or improvement of classrooms, libraries, laboratories, and other instructional facilities, including the purchase and rental of telecommunications equipment or services; the purchase of library books, periodicals, technical and scientific journals, and other educational materials; support for faculty exchanges, development, and research; curriculum development and academic instruction; the creation or improvement of facilities for distance education; collaboration with other IHEs to expand postbaccalaureate educational offerings; and other activities that serve the purposes of the program and that are approved by the Secretary. Additionally, a PPOHA grant can be used to provide direct financial assistance to Hispanic and low-income postbaccalaureate students. Types of assistance offered can include scholarships, assistantships, fellowships, travel expenses for graduate students at professional conferences, funds for students to conduct research, and other forms of financial assistance. Institutions may use up to 20% of their PPOHA grant for direct student financial assistance. Program Administration Like the HSI program, there is a two-step award process for institutions to receive PPOHA grants. First, an institution applies for designation as an eligible institution. If approved by the Secretary, the institution may then apply for PPOHA program assistance. Grants under the program are awarded through a competitive process. Applications are selected based on the score of a review panel, and the applications with the highest score are selected for funding. Grant awards provided under this program may not exceed five years in length. Institutions are prohibited from receiving more than one grant under this program in a fiscal year, and an institution receiving a PPOHA grant in a fiscal year cannot also receive an HBGI, Masters Degrees at HBCUs, or Masters Degrees at PBIs program grant in the same fiscal year. An institution receiving a PPOHA grant may not concurrently receive a Title III-A or III-B grant but may concurrently receive a Title V-A Strengthening HSIs grant. In addition, an institution receiving a PPOHA grant generally may receive a Title III-F grant. Additional Programs Additional programs are available specifically to MSIs under the HEA. These programs are not targeted to a specific type of MSI but, rather, are available to most IHEs with a high concentration of minority students. Two such programs are the Endowment Challenge Grant and the Minority Science and Engineering Improvement Program. Endowment Challenge Grants The Endowment Challenge Grant program under HEA Title III-C provides matching grants to eligible institutions to either establish or increase endowments and to increase self-sufficiency at such institutions. Eligible institutions are those that are eligible under HEA Title III-A and Title III-B and institutions of higher education that make substantial contributions to postgraduate medical educational opportunities for minority and economically disadvantaged students. Grants under this program may not exceed $1 million, and recipients must provide nonfederal matching funds equal to the amount of federal funds provided. This program has not been funded since FY1995. Minority Science and Engineering Improvement Program The Minority Science and Engineering Improvement Program (MSEIP) was first authorized in the National Science Foundation Act of 1950 (P.L. 81-507), and its administration was transferred to the Department of Education under HEA Title III-E by the Department of Education Organization Act of 1979 ( P.L. 96-88 ). In creating the program, Congress had found that minority-serving institutions provide important educational opportunities for minority students, particularly in science and engineering fields, but that such institutions often face significant limitations in resources and, therefore, lag behind in program offerings and student enrollment. To counter this, MSEIP was established to provide grant-based assistance to predominantly minority institutions to effect long-term improvements in science and engineering education. Additionally, MSEIP is intended to increase the number of underrepresented ethnic minorities, particularly minority women, in science and engineering careers. This section of the report first discusses general MSEIP eligibility criteria and then details the four types of MSEIP grants. Included in the discussion of each grant type are specific eligibility criteria, and authorized uses. Finally, this section of the report then discusses how MSEIP as a whole is administered. Eligibility MSEIP grants, generally, are available to a variety of entities, not just institutions of higher education. However, MSEIP is divided into four categories of grants, each of which is used to address specific issues in science and engineering educational opportunities for minority students. Only certain entities that are eligible for MSEIP grants generally are eligible for each specific type of MSEIP grant, as determined by ED, through regulations. In general, Section 361 lists the following entities as eligible for MSEIP grants: Public and private nonprofit minority-serving institutions of higher education that either (1) award bachelor's degrees or (2) award associate's degrees and have a curriculum that includes science or engineering subjects and that enter into partnerships with public or private nonprofit IHEs that award bachelor's degrees in science and engineering. Nonprofit science-oriented organizations, professional scientific societies, and bachelor's degree awarding IHEs, all of which must provide a needed service to a group of minority-serving institutions or provide in-service training for project directors, scientists, and engineers from minority-serving institutions. Consortia of organizations that provide needed services to one or more minority-serving institution. Consortia membership may include (1) public and private nonprofit IHEs that have a science or engineering curriculum; (2) IHEs that have a graduate or professional program in science or engineering; (3) research laboratories of or under contract with the Department of Energy, the Department of Defense, or the National Institutes of Health; (4) relevant offices of the National Aeronautics and Space Administration, National Oceanic and Atmospheric Administration, National Science Foundation, and National Institute of Standards and Technology; (5) quasi-governmental entities that have a significant scientific or engineering mission; or (6) IHEs with state-sponsored centers of research in science, technology, engineering, and mathematics fields. For purposes of MSEIP grants, HEA Section 365 defines a minority-serving institution as an IHE with an enrollment of a single minority, or a combination of minorities, that exceeds 50% of the total enrollment. The definition of minority includes American Indian, Alaskan Native, Black (not of Hispanic origin), Hispanic (including persons of Mexican, Puerto Rican, Cuban, and Central or South American origin), Pacific Islander, or another ethnic group that is underrepresented in science and engineering. Although each of the above types of entities is eligible for MSEIP grants generally, ED has set regulations that direct which entities are eligible for specific types of MSEIP grants. Grant Types MSEIP is broken into four different grant types, each of which is intended to serve specific objectives. The four grant types are institutional grants, cooperative grants, design project grants, and special project grants. Institutional Grants Institutional grants are awarded for projects that support the implementation of a comprehensive science improvement plan. Such plans may include any combination of activities for improving the preparation of minority students for careers in sciences. Specifically authorized uses for institutional grants include, but are not limited to, faculty development programs and the development of curriculum materials. ED has determined that eligibility for institutional grants is limited to public and private nonprofit minority-serving institutions of higher education and consortia of such institutions. Cooperative Grants Cooperative grants are awarded for projects that assist groups of public and private nonprofit accredited IHEs to work together to conduct a science improvement project. Specifically authorized uses for cooperative grants include, but are not limited to assisting institutions in sharing facilities and personnel; disseminating information about established programs in science and engineering; supporting cooperative efforts to strengthen the institution's science and engineering programs; and carrying out a combination of the above listed activities. ED regulations limit cooperative grant eligibility to groups of nonprofit accredited colleges and universities. The primary fiscal agent of each group must be an eligible minority-serving institution, as defined in Section 365. Design Project Grants Design project grants are awarded for projects that "assist minority institutions that do not have their own appropriate resources or personnel to plan and develop long-range science improvement programs." Specifically authorized uses for design project grants include, but are not limited to, developing planning, management, and evaluation systems or developing plans for initiating scientific research and for improving an institution's capacity for scientific research. Funds for design project grants may be used to pay the salaries of faculty involved in a project; however, not more than 50% of the funds can be used during any academic year for such purposes. ED regulations do not limit eligibility for design project grants beyond statute; therefore, unless otherwise determined by ED, design project grants are available to all MSEIP-eligible entities listed under HEA Section 361. Special Project Grants There are two types of special project grants. The first is available only to minority-serving institutions. Grants must support activities that either improve the quality of training in science and engineering or enhance research capabilities at minority-serving institutions. The second type of special project grant is available to any MSEIP-eligible entity. These grants must either provide a needed service to a group of minority-serving institutions or provide training for project directors, scientists, and engineers from minority-serving institutions. Authorized uses for either type of special project grant include, but are not limited to advanced science seminars; science faculty workshops and conferences; faculty training to develop science research or education skills; science education research; programs for visiting scientists; preparation of films or audio-visual materials in science; development of learning experiences in science beyond those normally available to minority institutions; development of pre-college enrichment activities in sciences; or other activities that address barriers to the entry of minorities into science. Program Administration Like many of the HEA Title III-A and III-B grant programs, all types of MSEIP grants are competitively awarded. MSEIP funding is provided through annual discretionary appropriations. Unlike many other HEA Title III grant programs, the MSEIP award process consists of a single step. To apply, applicants must submit a proposed project plan for the relevant MSEIP grant. Applications are selected based on the score of a review panel, and the applications with the highest score are selected for funding. In awarding grants, ED is required to give priority to applicants who have not previously received funding under MSEIP and to previous grantees with a proven record of success. ED can also give priority to applicants that contribute to achieving balance across geographic regions, academic disciplines, and project types among all projects that are funded. Appendix A. List of Acronyms The following is a list of acronyms that have been used throughout this report. Appendix B. Appropriations for Selected HEA-Authorized MSI Programs Table B-1 of this appendix lists the authorizations and discretionary and mandatory appropriations for selected HEA-authorized MSI programs, from FY2013 to FY2017.

Minority-serving institutions (MSIs) are institutions of higher education that serve high concentrations of minority students who, historically, have been underrepresented in higher education. Many MSIs have faced challenges in securing adequate financial support, thus affecting their ability to develop and enhance their academic offerings and ultimately serve their students. Federal higher education policy recognizes the importance of such institutions and targets financial resources to them. Funding for MSIs is channeled through numerous federal agencies, and several of these funding sources are available to MSIs through grant programs authorized under the Higher Education Act of 1965, as amended (HEA; P.L. 89-329). Over the years, HEA programs that support MSIs have expanded and now include programs for institutions serving a wide variety of student populations. In FY2016, MSI programs under the HEA were appropriated approximately $817 million, which helped fund more than 929 grants to institutions. Currently, the HEA authorizes several programs that benefit MSIs: Title III-A authorizes the Strengthening Institutions Program, which provides grants to institutions with financial limitations and a high percentage of needy students. Title III-A also authorizes separate similar programs for American Indian tribally controlled colleges and universities; Alaska Native and Native Hawaiian-serving institutions; predominantly Black institutions (PBIs); Native American-serving, nontribal institutions; and Asian American and Native American Pacific Islander-serving institutions. Grants awarded under these programs assist eligible institutions in strengthening their academic, administrative, and fiscal capabilities. These programs are typically funded through annual discretionary appropriations, but additional annual mandatory appropriations are provided through FY2019 under Title III-F. Title III-B authorizes the Strengthening Historically Black Colleges and Universities (HBCUs) program and the Historically Black Graduate Institutions program, both of which award grants to eligible institutions to assist them in strengthening their academic, administrative, and fiscal capabilities. These programs are typically funded through annual discretionary appropriations; however, additional annual mandatory appropriations are provided for HBCUs through FY2019. Title III-C authorizes the Endowment Challenge Grant program, which has not been funded since FY1995. Title III-D authorizes the HBCU Capital Financing Program, which assists HBCUs in obtaining low-cost capital financing for campus maintenance and construction projects and is generally funded through annual discretionary appropriations. Title III-E authorizes the Minority Science and Engineering Improvement Program, which provides grants to MSIs and other entities to effect long-term improvements in science and engineering education and is funded through annual discretionary appropriations. Title III-F provides additional annual mandatory appropriations through FY2019 for many of the Title III-A and Title III-B MSI programs. It also provides mandatory appropriations through FY2019 for the Hispanic-serving institutions (HSIs) Science, Technology, Engineering, and Mathematics (STEM) Articulation Program, which provides grants to HSIs to increase the number of Hispanic students in STEM fields and to develop model transfer and articulation agreements. Title V authorizes the HSI program and the Promoting Postbaccalaureate Opportunities for Hispanic Americans (PPOHA), both of which award grants to eligible institutions to assist them in strengthening their academic, administrative, and fiscal capabilities. Typically, both programs are funded through annual discretionary appropriations, but additional annual mandatory appropriations were provided for the PPOHA program from FY2009 through FY2014. Title VII-A-4 authorizes Masters Degree Programs at HBCUs and PBIs, which provide grants to select HBCUs and PBIs to improve graduate educational opportunities. Typically, both programs are funded through annual discretionary appropriations, but additional annual mandatory appropriations were provided for both programs from FY2009 through FY2014.

Energy Efficiency and Conservation When an energy conversion device, such as a household appliance or automobile engine, undergoes a technical change that enables it to provide the same service (e.g, cooling, lighting, motor drive) while using less energy it is said to have increased "energy efficiency." The energy-saving result of the efficiency increase is often called "energy conservation." The energy efficiency of buildings can likewise be increased through the use of certain design changes such as more insulation, thermal windows, improved ventilation, and solar orientation. Energy efficiency is often viewed as interchangeable with energy supply options like electric generation, oil, or natural gas. Energy efficiency can also reduce energy resource use and associated environmental impacts—like CO 2 emissions from power plants. Electricity-Efficiency Potential Baseline improvements in energy efficiency occur over time as an economic response to changes in energy prices, the availability of new technology, turnover in end-use equipment, and other factors. However, conservation studies since the OPEC oil embargoes of the 1970s have identified substantial potential for energy efficiency improvements above baseline levels. One seminal analysis in 1976 stated technical fixes in new buildings can save 50 percent or more in office buildings and 80 percent or more in some new houses.... [B]y 1990, improved design of new buildings and modification of old ones could save a third of our current total national energy use—and save money too. A 1981 study by the Solar Energy Research Institute likewise found that "through energy efficiency, the U.S. can achieve a full-employment economy and increase worker productivity, while reducing national energy consumption by nearly 25 percent." The study further concluded that "the consumption of electricity can be reduced to a point where, on a national basis, demands through the end of the [twentieth] century can be met with generating equipment now operating or in advanced stages of construction." More recent studies continue to identify significant electricity conservation potential. The "Five Lab Study" in 1997 estimated a technical electricity savings potential of approximately 23%, and a maximum "achievable" potential of 15% among residential and commercial buildings, assuming aggressive policies promoting conservation and a $50/metric tons (1993 dollars) carbon cost. A 2004 meta-analysis by the American Council for an Energy-Efficient Economy of several regional studies reported a technical electricity conservation potential of 33%, and an achievable potential of 24% over a 5 to 15 year time horizon, depending upon the study. The U.S. Department of State's 2006 Climate Action Report concludes that "by using commercially available, energy-efficient products, technologies, and best practices, many commercial buildings and homes could save up to 30 percent on energy bills." Impacts from Electricity-Efficiency Initiatives Both federal and state agencies have implemented a multitude of electricity efficiency initiatives over the last 40 years to capture energy efficiency potential in the electricity sector. These initiatives have included appliance, equipment, and building efficiency standards; electric utility-administered conservation incentives; consumer information campaigns; and other initiatives. Notwithstanding these efforts, the levels of incremental electricity conservation actually achieved since the 1970s have been more modest than the 25%-30% suggested in conservation potential studies. A 2004 analysis examining a comprehensive range of both federal and utility-sponsored conservation and energy efficiency programs (including federal efficiency standards) administered through 2000 concluded as follows: [P]rograms for which ex post quantitative estimates of energy savings exist are likely to have collectively saved up to 4.1 quads of electricity annually. These estimates typically reflect the cumulative effect of programs (e.g., all appliance efficiency standards, past and present) on annual energy consumption. This total energy savings represents about 6% of annual nontransportation energy consumption.... A study of California's 2001 energy demand reduction initiative (promoted heavily as an emergency measure to avoid blackouts during the state's electricity crisis) reported 6% reduced electricity usage compared to the prior year, although only 25%-30% of this reduction was "attributable to savings from energy efficiency or onsite generation projects ... likely to persist for many years." Consistent with these studies, a 2008 analysis by EPRI projected a "realistic" U.S. electricity savings potential of 7% beyond baseline levels which would occur without additional market intervention. Uncertainty about the Efficiency Opportunity Taken together, the studies of technical conservation potential and actual conservation impacts suggest a perpetual opportunity for incremental electricity conservation on the order of 25%—more than four times the savings such programs have actually realized. Moving beyond the 5% to 7% electricity savings range has been a persistent challenge to conservation proponents, primarily because of the diffuse nature of the efficiency opportunity and the economic complexity of decision making and capital investment by electricity consumers. Students of end-use markets have long been puzzled by the lack of adoption of ostensibly cost-effective energy efficiency technologies. A rich literature has developed around this question, and evidence for various barriers to adoption of efficiency technologies is widespread. Among the barriers to energy efficiency analysts have identified are– limited market availability of new efficiency measures, incomplete consumer information about efficiency options, insufficient capital for efficiency investments, fiscal or regulatory policies discouraging efficiency investments, builder focus on first costs vs. lifecycle costs, lack of consumer focus on energy costs relative to other costs, and energy prices not reflecting the full social costs of energy supply. Conservation advocates and federal policy makers have proposed a range of additional policy approaches to further overcome these barriers, but there is limited consensus on which policies would be effective and how much additional conservation they might achieve. As a study of conservation barriers from Lawrence Berkeley National Laboratory concluded– Although these rationales provide a basis for some type of intervention, we acknowledge that they do not justify any particular intervention.... [W]e suggest that differences of opinion about the appropriateness of public policies stem not from disputes about whether market barriers exist, but from different perceptions of the magnitude of the barriers and the efficacy and (possibly unintended) consequences of policies designed to overcome them.... There have been numerous legislative proposals to promote electricity efficiency and conservation. The key uncertainty faced by all of them, and future conservation proposals, is whether, as a whole, they may cost-effectively capture much more of the "latent" electricity conservation potential than such programs have done in the past. Carbon control studies which project electricity efficiency savings on the order of 5% to 10% over a 20-year time frame appear consistent with U.S. conservation program experience, and may be aided by any future costs of CO 2 emissions if they are reflected in electricity prices. Unlike large physical infrastructure, however, such as power plants or electric transmission lines, conservation impacts do not necessarily "scale up" to achieve greater impacts simply by increasing the size or funding of a given conservation program. Efficiency potential is also extremely diffuse—existing literally at the individual light socket level in nearly every household. Consequently, policy makers seeking large conservation impacts may need to try alternative or more aggressive policies (e.g., very strict building efficiency codes) with little track record upon which to base projections of future effectiveness. Renewable Energy Renewable energy supplies in the electricity sector typically include the following types of power plants: geothermal, solar, wind, biomass, and municipal solid waste/landfill gas. Many carbon control advocates and federal policy makers have high expectations for the potential of renewable generation to help reduce CO 2 emissions in the United States. The widely publicized Pickens Plan, for example, announced by T. Boone Pickens in July, 2008, envisions deploying enough wind generation in the Great Plains states to produce 20% of U.S. electricity by 2018. The Obama-Biden presidential campaign similarly pledged to establish a federal Renewable Portfolio Standard requiring that 25 percent of electricity consumed in the U.S. be "derived from clean, sustainable energy sources, like solar, wind, and geothermal" by 2025. Some groups have advocated even more aggressive targets for U.S. renewable power development. Others are less optimistic. EPRI, for example, assumes renewable sources (excluding hydroelectric generation) could contribute 9% of electricity production in the electric power sector by 2030. According to the Energy Information Administration (EIA), biomass and wind generation are the two types of renewable power with the greatest overall economic potential, and therefore, the greatest potential to reduce CO 2 emissions. Biomass and wind power are inherently different technologies, however, so they face distinct uncertainties related to their potential expansion under a national program of carbon control. They are discussed, in turn, in the following sections. Wind Power Wind power does not consume fuel and produces no CO 2 , so it is an extremely attractive technology for CO 2 mitigation in the electricity sector. Wind generation technology is also fairly mature. It has been deployed commercially throughout the United States—albeit with federal assistance in the form of renewable energy production tax credits and state renewable energy portfolio standards. Wind plants accounted for just over 1% of U.S. electricity generation in 2008. A 1991 study of available U.S. wind resources by Pacific Northwest Laboratory concluded that "the wind electric potential that could be extracted with today's technology ... across the United States is equivalent to about 20% of the current U.S. electric consumption." A 2003 analysis by the National Renewable Laboratory similarly concluded that "by 2050, wind could account for about 25 percent of all generation in the U.S." Consistent with these technical assessments, the Department of Energy (DOE) recently examined the practical possibility of 20% wind power production in the United States by 2030 (a longer time frame than either the Pickens or Obama-Biden campaign proposals). The DOE report concluded that a "20% Wind Scenario in 2030, while ambitious, could be feasible." Transmission Requirements Although studies have identified substantial untapped wind power potential for the United States, the rapid expansion of U.S. wind generation faces significant challenges. According to the DOE, these challenges are related to the integration of intermittent wind power into regional electricity control areas, cost reduction and efficiency improvement for wind turbine technology, and wind facility siting issues. The principal challenge the DOE identifies, however—and, according to many experts, the principal uncertainty facing wind power—is "investment in the nation's transmission system." As Figure 2 shows, the nation's most abundant wind resources tend to be located far from population centers where the electricity is needed. Consequently, wind generators require a robust transmission grid to move power to the market. But the U.S. transmission network is constrained, significantly limiting the availability of transmission capacity to new wind farms. Transmission owners, in agreement with the DOE, have pointed to transmission grid constraints as the single greatest impediment to aggressive wind power expansion. Although there is sufficient evidence showing that wind generation can be reliably integrated into the electricity system, ... obstacles to new generation sources continue to exist due to the lack of adequate transmission system access. The remoteness of wind sources, an underinvested transmission infrastructure, and lack of workable transmission investment policies all hinder the development of wind power in the US. The DOE study estimates that to achieve 20% wind energy in the United States would involve building "more than 12,000 miles of additional transmission, at a cost of approximately $20 billion in net present-value terms." A similar conceptual transmission plan by the American Electric Power Company (AEP) to integrate 20% wind energy estimated that 19,000 miles of new 765 kV transmission lines would be needed, with a net present value of $26 billion. While such plans put a needed focus on some of the specific requirements for a U.S. transmission upgrade, marshaling the level of investment to expand transmission capacity quickly could stress the supply and price of materials, labor, and other resources. Any wind power project requiring the construction of extensive new transmission infrastructure from remote to populated areas also could face concerted community opposition to the siting of those transmission lines. Public challenges to electric transmission projects have long been considered among the most serious and most intractable challenges in the U.S. energy sector. With wind projects in mind, Congress included provisions increasing federal authority to approve interstate electric transmission projects in the Energy Policy Act of 2005 ( P.L. 109-58 § 1221). Nonetheless, challenges continue to delay or prevent new transmission development in some regions. Transmission Grid Uncertainty If U.S. wind power is beginning to face transmission constraints at only 1% of total U.S. electricity production, analysts raise concerns about the practicality of transmitting 20 times that amount of wind power in the near term. In its 2007 wind program plans, for example, the DOE itself states that large wind power deployment projections "seem too good to be true." A 2008 New York Times assessment makes the point more strongly: "Experts say that without a solution to the grid problem, effective use of wind power on a wide scale is likely to remain a dream." The key uncertainty for wind power then, is whether the electric grid, after decades of under-investment, will expand sufficiently to support a rapid expansion of wind power. Biomass Power Generation Biomass power plants are combustion power plants that effectively recycle the CO 2 they emit through carbon sequestration in the crops grown (continuously) for fuel. Crops take up carbon dioxide from the air via photosynthesis as they grow and release it to the air when they are burned, so they cause no net increase in atmospheric CO 2 . Currently, most biomass power plants are fueled with waste materials from farming, forestry, and manufacturing (e.g., paper mill byproducts), although future expansion of biomass generation is expected to rely increasingly on dedicated fuel crops, such as poplar and switchgrass. Biomass power plants accounted for 1.3% of U.S. electricity generation in 2008. Biomass Fuel Supply The principal factor which constrains the potential expansion of biomass power in the United States is the availability of biomass fuel. Biomass crops dedicated for power generation require land to grow—potentially in competition with food crops, lumber, and other traditional crops. Up to a point, such competition may not be a significant barrier to growth, since biomass power producers can use more waste from existing agricultural production (e.g., corn stalks) or grow fuel crops on U.S. lands not currently in agricultural production. A 2002 analysis by the Energy Information Administration concluded that U.S. biomass power generation capacity could increase by a factor of ten (from approximately 7 GW to 70 GW) through 2020 and not conflict with land requirements for existing crop production. A 2005 analysis by the Department of Agriculture similarly concluded that forestland and cropland had the potential to support a seven-fold increase in the amount of biomass consumed for "bioenergy and biobased products." Biomass Fuel Uncertainty While studies like those above seem to support the potential expansion of biomass power production, others contradict them, raising critical questions about the limits of biomass fuel supply in the United States. As a 2008 RAND report states, "the cost and supply of future biomass feedstocks are highly uncertain factors." This uncertainty is exacerbated by the possible expansion of biomass demand for transportation fuels such as ethanol and biodiesel—also motivated by CO 2 abatement objectives, but in the transportation sector. To the extent that biomass for power and biomass for liquid fuels are pursued aggressively and concurrently, overall competition for U.S. agricultural resources may become a serious concern. The significant resulting increase in biomass usage would require harvesting various energy crops at a scale that vastly exceeds current practice. Greatly increased biomass production could be accompanied by adverse environmental and economic impacts due to land conversion. Adverse impacts limiting biomass production for electric power could include increases in food prices. Some analysts, for example, have argued that corn price increases could be partly linked to the diversion of U.S. corn crops from food and feedstock supply to fuel ethanol production. Biomass crops could also compete for land with forest carbon sequestration, the latter likely to increase in importance as a source of valuable CO 2 emissions offsets under future carbon control policies. Some analysts have suggested that biomass fuel or food crops could be imported to alleviate domestic land constraints, but such imports would raise other concerns about U.S. energy and food supply independence. A 2007 MIT study concluded, If we restrict USA biofuels to those produced domestically, as much as 500 million acres of land would be required in the USA for biofuels production.... The result would be that the USA would need to become a substantial agricultural importer. This suggests that the idea that biomass energy represents a significant domestic energy resource in the USA is misplaced. Carbon release from previously untilled lands and from agricultural processing are other factors which may reduce the life cycle CO 2 benefits, and therefore the economic potential, of rapid biomass crop expansion. Nuclear Power Generation Nuclear power has been a significant part of the U.S. electricity sector for decades. The U.S. nuclear power industry currently comprises 104 licensed reactors at 65 plant sites in 31 states and generates about 20% of the nation's electricity. Although no nuclear power plants have been ordered in the United States since 1978, and more than 100 reactors (all ordered after 1973) have been canceled, nuclear power is receiving renewed interest, prompted by a spike in fossil fuel prices, new federal subsidies and incentives—and possible CO 2 mitigation policies. As of September 30, 2008, the Nuclear Regulatory Commission had received, or anticipated receiving, license applications for 20 new nuclear reactor projects comprising 30 reactors in total. Because nuclear power generation is an established technology and produces virtually no direct CO 2 emissions, an expansion of U.S. nuclear power is viewed by many as essential for reaching long term CO 2 mitigation goals. For example, in recent remarks before the Governor's Global Climate Summit, President-elect Obama stated that "we will tap nuclear power" as one way to help "build a clean energy future." Likewise the Intergovernmental Panel on Climate Change Fourth Assessment Report states that "[n]uclear energy ... could make an increasing contribution to carbon free electricity and heat in the future." EPRI proposes a 64% net increase in U.S. nuclear generating capacity, over four times the capacity addition in EIA's reference forecast, by 2030. A 2003 study by MIT postulates a 300% net increase in U.S. nuclear power capacity by 2050. Nuclear Power Construction Uncertainty Although nuclear energy proponents have high hopes for growth in this sector, not all groups concerned about climate change favor nuclear power as a key element of U.S. carbon control. The Natural Resources Defense Council, for example, argues that nuclear power may be too costly relative to clean energy alternatives, and may present unacceptable risks of nuclear proliferation and environmental damage from radioactive waste. Other analysts raise questions about long-term nuclear fuel supply constraints, plant safety and security, and public acceptance. These are all vital questions, any one of which could influence the viability of a U.S. nuclear resurgence. Perhaps a more fundamental uncertainty, however, even if these questions were resolved, is whether nuclear power plants could be constructed quickly enough to significantly reduce U.S. carbon emissions in a 20-year (or longer) time frame. Uncertainty arises about the possible pace of U.S. nuclear expansion because nuclear power plants are large, complex, and must go through a lengthy and rigorous siting approval process. Furthermore, global capability to construct nuclear plants has diminished since the 1980s. A 2001 DOE analysis concluded that, because of limited growth in the nuclear sector over many years, there had been a "gradual erosion" in important nuclear infrastructure elements, such as qualified personnel in nuclear operations, qualified suppliers of nuclear equipment, and contractors with the necessary skills for nuclear design, engineering, and construction. Little has changed since that report was released. Nuclear plant construction in the United States remains constrained by time, access to critical construction resources, and the availability of qualified engineering and construction firms. Given the decline in U.S. nuclear infrastructure, there is ongoing debate among nuclear analysts about the prospect for rapid nuclear power expansion. A 2008 analysis by the Organisation for Economic Co-operation and Development (OECD) concluded that, based on historical experience from the 1970s and 1980s, and more recent growth in the world economy, "the capability could be rebuilt to construct 35-60 1000 GWe reactors per year" worldwide by 2030, and "[b]y 2050, capability could grow to 70-120 reactors per year." Roughly consistent with this assessment, a 2008 study by the DOE's Nuclear Energy Advisory Committee concluded that, with additional infrastructure, it would be "plausible," albeit "a major challenge," to build 30 new U.S. reactors by 2030. The latter rate of construction is substantially lower than that during the peak period of U.S. nuclear development, from 1963 to 1985, during which time 77 nuclear reactors were ordered, constructed, and began commercial operation. Others are more pessimistic about the potential for a rapid expansion of nuclear power in the United States. For example, one analyst concludes that "contrary to the public's perception and the industry's efforts, nuclear power will continue [a] long-term decline rather than move toward a flourishing future revival." The debate is complicated by the need to replace U.S. nuclear plant capacity retiring in the near future simply to maintain nuclear power's current electricity supply contribution. Referring specifically to such construction limitations, another expert concludes that "nuclear energy will remain an option among efforts to control climate change, but given the maximum rate at which new reactors can be built, much new construction will simply offset the retirement of nuclear reactors built decades ago." Observing that "the nuclear capability of the U.S. has atrophied in the 30 years since the last nuclear plant was ordered," Secretary of Energy Samuel Bodman has remarked more bluntly: "let's not kid ourselves about the challenges here." In its 2008 report, the National Intelligence Council likewise states– expansion of nuclear power generation by 2025 to cover anywhere near the increasing demand would be virtually impossible. The infrastructure (human and physical), legal (permitting), and construction hurdles are just too big. Only at the end of our 15-20 year period are we likely to see a serious ramp up of nuclear technologies Faced with these divergent assessments, experts disagree on the ability of nuclear power to help meet CO 2 mitigation goals. Members of the Nuclear Power Joint Fact Finding (NJFF) reached no consensus about the likely rate of expansion for nuclear power in the world or in the United States over the next 50 years. Some group members thought it was unlikely that overall nuclear capacity would expand appreciably above its current levels and could decline; others thought that the nuclear industry could expand rapidly enough to fill a substantial portion of a carbon-stabilization "wedge" during the next 50 years. Consequently, congressional policy makers face a key uncertainty as to the achievable pace of nuclear power industry expansion, and therefore, the potential contribution nuclear generation may make to near-term CO 2 reduction. Advanced Coal-Fired Power Generation One set of technologies that may help to reduce CO 2 emissions from coal power plants is advanced coal-fired power generation. Advanced coal technologies include ultra-supercritical pulverized coal plants and integrated gasification combined cycle (IGCC) units, the latter of which convert coal into a synthetic gas prior to combustion. Compared to conventional coal-fired power plants, which typically operate at around 33% efficiency, advanced technologies under development or demonstration could improve coal plant efficiency to 46% or more. Because they use coal more efficiently, advanced coal plants could yield proportionate reductions in CO 2 emissions per unit of electricity output compared to conventional coal plants. If carbon capture and sequestration technology (discussed in the next section) could be added to these plants their CO 2 emissions could be further reduced. Some analysts and policy makers anticipate that advanced coal generation, either in the form of new coal-fired plants or upgrades to certain existing plants, will make a significant contribution to U.S. carbon reduction goals. They argue that, until carbon capture and storage technology is commercialized, advanced coal plants will be a cost-effective option for meeting future electricity demand growth while limiting CO 2 emissions growth compared to its current rate of growth. EPRI, for example, proposes CO 2 reductions from advanced coal plants on par with those from customer energy-efficiency programs through 2030. Uncertainty in Coal Plant Financing and Approval While power plants employing advanced coal-fired generation technology face important questions about technological readiness and cost-effectiveness, the key uncertainty is whether they can be built—that is, whether the capital markets will finance them and whether regulators will permit them. Although they are more efficient than traditional coal plants, advanced technology coal plants still burn coal and—absent carbon capture technology—still release large volumes of CO 2 to the atmosphere. Once constructed, they may remain in service for 40 years or more. Hence they may not satisfy regulatory objectives for carbon control and may face financial risks stemming from future policies imposing costs on CO 2 emissions. Furthermore, industry arguments that these plants will be retrofitted with carbon capture technology when it becomes available are assuming the availability of that technology, which faces uncertainties as discussed in the following section. Due to the potential carbon-related risks faced by new coal generation projects, major financial institutions are imposing greater requirements on developers seeking capital for new coal plant investments. Regulatory agencies also have begun withholding regulatory approval from advanced coal project proposals. For example, in August 2007, the Minnesota Public Utilities Commission rejected a developer's proposal to construct a new IGCC power plant in the state as "not in the public interest." The Sierra Club reports that at least 30 other proposed IGCC or supercritical coal generation projects have been cancelled across the country over the last several years due to financial and carbon emissions concerns. In November, 2008, the Environmental Protection Agency's (EPA) Environmental Appeals Board ruled that an EPA region could not issue a permit for proposed coal-fired power plant without considering whether the "best available" CO 2 controls should be required for such a plant. According to industry analysts, the EPA ruling would place a "freeze on the construction of as many as 100 new coal-fired power plants around the U.S." The EPA Administrator has subsequently overruled the board's decision, apparently clearing the way for numerous coal plant permit applications to proceed, but raising new questions about future regulatory treatment of coal plant emissions under the next administration. Carbon Capture and Sequestration Another approach to mitigating atmospheric carbon emissions is direct sequestration of carbon dioxide: capturing CO 2 at its source and storing it indefinitely to avoid its release to the atmosphere. Carbon capture and sequestration (CCS) is of great interest because potentially large amounts of CO 2 emitted from the industrial burning of fossil fuels in the United States could be suitable for sequestration. In theory, carbon capture technologies are seen as potentially removing 80%-95% of CO 2 emitted from an electric power plant or other industrial facility. Power plants are the most likely initial candidates for CCS because they are predominantly large, single-point sources, and they contribute approximately one-third of U.S. CO 2 emissions from fossil fuels. Many analysts and policy makers have high hopes for CCS technology to help meet future CO 2 reduction goals in the U.S. electricity sector and worldwide. For example, one expert has testified before Congress that "[c]apturing and sequestering CO 2 emissions from coal-fired power plants and eventually all fossil combustion is a foundational technology component of any emissions reduction plan" seeking to stabilize atmospheric CO 2 . In the International Energy Agency's 2007 forecast CCS is "widely-deployed" under global CO 2 stabilization assumptions and accounts for 21% of avoided CO 2 emissions by 2030. In EPRI's analysis, CCS makes the single greatest contribution to reduced CO 2 emissions among all measures by 2030. CCS Technology Uncertainty Developing technology to capture CO 2 in an environmentally, economically, and operationally acceptable manner—especially from coal-fired power plants—has been an ongoing interest of the federal government for a decade. Nonetheless, the technology on the whole is still under development: no commercial device is currently available to capture carbon from coal plants. (Technology is currently available for capturing CO 2 from certain industrial processes, such as ammonia production, or natural gas processing, but the volumes of CO 2 emitted from coal-fired power plants dwarf any current industrial process in use today.) Various new CCS technologies have been tested successfully in laboratories, and some are being demonstrated in limited capacity field trials, but they are costly and face technical challenges to reaching commercial scale. Consequently, analysts disagree as to whether, when, and how CCS technology might be widely available in the United States at a cost competitive with commercially available technologies for generating electricity—particularly natural gas turbines. Policies that impose costs on generators for CO 2 emissions, such as carbon taxes or cap-and-trade programs, presumably, would benefit CCS competitiveness, but they, too, are highly uncertain and constrained by other economic factors. As one study notes, "[t]he success of a cap-and-trade program in spurring widespread CCS deployment depends on a wide range of factors that cannot be controlled or even predicted in advance." A review of recent studies reveals a broad range of opinion as to how quickly CCS could be commercially deployed on large scale. An analysis from Imperial College, London, sees initial commercial deployment of CCS technology in the 2015-2020 period. DOE officials reportedly have stated that the agency hopes to have carbon capture technology "in a deployable position within a decade." A 2008 study by McKinsey & Company projected that early commercial CCS projects would be built "around 2020." The World Business Council for Sustainable Development believes CCS technology will enter commercial deployment by 2025. The Intergovernmental Panel on Climate Change 2005 report on CCS technology states that "many integrated assessment analyses ... foresee the large-scale deployment of CCS systems within a few decades from the start of any significant regime for mitigating global warming." A coalition including Greenpeace, Friends of the Earth, and other public interest groups asserts that "the best-case scenario is that [CCS] technology would be ready by 2030." Referring to IEA's long term projections for carbon control, the OECD states that "there must be significant doubt as to whether or not it is feasible to achieve the assumed contribution from CCS by 2030." Given the range of expectations for CCS technology readiness, policy makers may not be able to establish to their satisfaction the contribution this technology may make to CO 2 emissions abatement. As one former DOE official reportedly has cautioned, "[p]eople's conception of how much [CCS] can deliver is probably wildly overrated. So I'm hopeful that carbon capture and storage could be part of the solution, but ... one just has to put a big question mark on it." Echoing this view, Nobel laureate Steven Chu, Director of the Lawrence Berkeley National Laboratory and nominee for Secretary of Energy, reportedly has remarked, "it's not guaranteed we have a solution for coal." Accordingly, the key uncertainty for policy makers regarding CCS is if and when the technology might be available for widespread deployment. Plug-in Electric Hybrid Vehicles A recent development in advanced vehicle technologies is the potential introduction in the next few years of plug-in hybrid electric vehicles (PHEVs). PHEVs, like commercially available hybrid electric vehicles (HEVs), would combine an electric motor and battery pack with an internal combustion engine to improve overall fuel efficiency. PHEVs would use a much higher-capacity battery pack than a typical HEV, however, and would be able charge the vehicle on grid power rather than solely by the combustion engine during operation. With their larger batteries, PHEVs could achieve an all-electric range of 20 to 40 miles (the average commuting distance). By using grid electricity rather than gasoline in this way, PHEVs could lower overall fuel-cycle pollutant emissions—including CO 2 emissions—from vehicles. Accordingly, many analysts and policy makers believe PHEV's offer substantial opportunities to reduce the nation's overall CO 2 emissions. A 2007 joint EPRI-Natural Resources Defense Council (NRDC) study, for example, concluded that, through the widespread adoption of PHEV technology, "cumulative [CO 2 ] savings from 2010 to 2050 can be large." The Obama-Biden presidential campaign pledged to "[p]ut 1 million plug-in hybrid cars ... on the road by 2015." While PHEVs are an innovative technology, there are important questions about the impact PHEVs may have on CO 2 emissions over the next 20 ot 30 years. One key uncertainty is whether such vehicles would be purchased in sufficient numbers (approximately 50% of new car sales by 2025, according to the EPRI/NRDC study) to have a significant carbon impact despite their high cost. PHEVs are projected to retail for over $40,000 per vehicle in the near-term compared to approximately $28,000 for an HEV and $23,000 for a conventional vehicle. As a point of reference, conventional HEVs accounted for 2.4% of new vehicle sales in the United States through November 2008. Of greater uncertainty, perhaps, are the projected carbon emissions of power plants operating to supply PHEV electricity. As a general rule, PHEVs only reduce net carbon emissions if the power plants supplying them produce relatively little carbon per kWh. But some studies show that, if the U.S. generation portfolio does not significantly reduce its overall carbon intensity, widespread adoption of PHEVs through 2030 may have only a small effect on, and might actually increase, net CO 2 emissions. Thus, the carbon abatement potential of PHEVs is largely dependent upon the concurrent implementation of renewables, nuclear power, and CCS—each of which face great uncertainties of their own as discussed above. Distributed Energy Resources Distributed energy resources are small-scale power generation technologies located near homes or businesses to provide an alternative to, or an enhancement of, conventional grid power. Distributed resources include technologies such as rooftop photovoltaics, natural gas-fired microturbines, wind turbines, and fuel cells. The category also includes combined heat and power (CHP) systems, which make productive use of "waste" heat from electricity generation, thereby increasing the total useful energy extracted from electric generation fuels. Distributed energy resources (DER) offer potential benefits to customers in terms of energy costs, power reliability, and power quality. DER technologies also can help mitigate CO 2 emissions because some use renewable energy sources, or, as in the case of CHP systems, they make more efficient use of fossil fuels than the utility power generation they displace. Among DER technologies, CHP is the most widespread, accounting for nearly nine percent of U.S. electric generating capacity in 2007. CHP is also viewed as having the greatest near-term potential to reduce CO 2 emissions. A 2008 report from Oak Ridge National Laboratory concludes that, by achieving 20 percent generation capacity from CHP by 2030 (an "aggressive target"), the United States could avoid 60 percent of the projected increases in CO 2 emissions during that time. A 2007 study by McKinsey & Company further concludes that much of this added capacity could be installed at negative marginal cost. Nonetheless, CHP, along with other DER technologies, has not been implemented to its potential due to technical and utility infrastructure barriers. CHP, or cogeneration, has been around in one form or another for more than 100 years; it is proven, not speculative. Despite this proven track record, CHP remains underutilized and is one of the most compelling sources of energy efficiency that could, with even modest investments, move the Nation strongly toward ... a cleaner environment. Other DER technologies, such as photovoltaics and fuel cells, likewise face barriers limiting their implementation. As a United Kingdom government study stated, The complexity and novelty of some of the technologies, together with their need to be integrated into the built environment, often by players new to the energy business, means there is a significant gap between potential and delivery. Moreover, many of the technologies are not yet cost-competitive at their current state of development and with current fuel and carbon prices. Analysts also question whether policies imposing costs on CO 2 emissions would substantially increase DER adoption due to the existing alignment of carbon reduction and cost reduction objectives, even without carbon costs, and the fundamental economics of renewables. Thus, DER faces a key uncertainty similar to that faced by energy efficiency. The key question is whether new programs and the imposition of carbon costs would enable the electricity sector to capture substantially more DER potential than it does today. Policy Issues for Congress Policy research and technical studies show that substantially reducing CO 2 emissions in the U.S. electricity sector over the next few decades likely requires successful deployment of every major carbon mitigation measure at the nation's disposal. However, it is also clear that significant uncertainties cast doubt on the potential of individual measures to achieve their hoped-for carbon impact. For the measures discussed in this report, the key uncertainties can be summarized as follows: Energy efficiency —Can the United States overcome socioeconomic barriers to achieve four times more potential savings than ever before? Renewable energy —Will there be enough transmission for wind power? Is there enough land to grow the needed biomass? Nuclear power —Could the United States build new plants fast enough to matter? Advanced coal power —Will banks fund them and regulators approve them? Carbon capture and sequestration —Will the technology be commercially deployable in 10 years, 25 years, or never? Plug-in hybrid electric vehicles —How much "low carbon" electricity would be available to charge their batteries? Distributed energy resources —Would carbon costs change distributed energy economics enough to spur deployment? Policy makers and interest groups recognize these uncertainties, and have put forth numerous proposals to address them. It is beyond the scope of this report to examine each of these proposals, but they include the broadest range of policy instruments at government's disposal: higher efficiency standards, new regulatory authorities, tax incentives, direct subsidies, research and development (R&D) grants, environmental rules, public information campaigns, and a host of other policy instruments. Specific examples include calls for more federally-funded CCS demonstration projects and proposals for federal preemption of state siting authority to promote new transmission development. While they run the gamut, it remains to be seen which proposals may be pursued by Congress and what effects they would have. Consequently, the overall success of a multi-measure CO 2 mitigation scheme such as that proposed by EPRI in Figure 1 , and its economic underpinnings, is inherently unpredictable. The cost of building and operating coal plants with and without CCS systems, the cost of natural gas, nuclear power and renewable sources of power, the cost of emissions offsets from outside the utility sector, and ultimately the market price of CO 2 itself are all variables that will dictate the decisions of future power plant developers. These variables are all highly uncertain from today's perspective and may create a set of economic drivers dramatically different from those anticipated by policymakers. Possible Outcomes for Carbon Control Identifying key uncertainties for carbon abatement measures is not the same as predicting their ultimate success or failure. This report does not independently assess the likelihood of particular measures meeting any specific CO 2 reduction target. The whole point of this report's focus on uncertainty is that CO 2 outcomes are not known, and expert opinions vary as to what the future will be. It is, therefore, entirely possible that a portfolio of CO 2 measures such as those in Figure 1 , implemented under the optimum subset of policies currently under debate, could achieve the types of carbon reductions projected. Indeed, EPRI has characterized its CO 2 scenario as "very aggressive, but potentially feasible." Other CO 2 abatement analyses have also been developed in good faith with a similar belief in their practicality. Successfully reducing U.S. carbon emissions to 1990 levels, say, by 2030 would validate the overall policy approach as well as the specific measures comprising it. Such an outcome would not be conclusive, as deeper CO 2 cuts would arguably need to follow, but the intervening years would probably provide greater clarity on the best policy options to 2050 and beyond. Underperformance of Individual CO2 Measures Although successful implementation of all carbon abatement measures is the goal, it is also entirely possible that, under a multi-measure strategy like EPRI's, one or more measures would fall short of meeting expectations for CO2 reduction. Nuclear industry expansion, for instance, could easily fail to materialize, or the transmission grid could expand too slowly for sustained wind power development. In such a case legislators might need to revisit both the enabling policies for the underperforming measures and for the carbon strategy as a whole. One obvious solution could be to rely on more successful measures to compensate for the underperforming ones. As the OECD study posits, "if CCS and/or end-use efficiency fail to achieve the required targets, it follows that other technologies, including nuclear power, will need to make bigger contributions to fill the gap." But based on a review of the relevant research cited in this report, such an approach may simply not be realistic. Since the CO 2 targets of the individual measures are already viewed by some analysts as "ambitious," "aggressive," or " a major challenge," and there are questions as to whether the initial targets can be achieved, increasing those targets may stretch credibility and sharply increase the uncertainty of the overall CO 2 mitigation effort. Alternatively, legislators could revisit measure-specific policies to see if more intervention could improve their particular prospects. Larger tax credits for renewable energy, for example, could potentially improve the competitiveness of biomass generation, thereby encouraging biomass investment. Such an approach might still encounter difficulty making up for early underperformance of a measure in the out years, as CO 2 emissions are cumulative, but any improvement would arguably be helpful. A third option would be to increase the level of any future carbon costs with the expectation that an increase would benefit carbon-mitigating technologies across the board. Such an action, however, could have broad implications for energy prices, reliability, and availability. Failure of the CO2 Mitigation Portfolio Notwithstanding the best efforts of federal policy makers, it is possible that, given the uncertainties they face, that few if any of the major measures proposed to moderate U.S. carbon emissions would achieve their anticipated impacts in a 20-year time frame. In its 2008 report, the National Intelligence Council suggests just such an outcome: [A]ll current technologies are inadequate for replacing the traditional energy architecture on the scale needed, and new energy technologies probably will not be commercially viable and widespread by 2025.... Even with a favorable policy and funding environment for biofuels, clean coal, or hydrogen, the transition to new fuels will be slow. Under such a scenario, legislators may face different policy alternatives, each with distinct but potentially significant implications. Congress might increase future carbon emissions costs even higher than under the previous scenario—to a level that virtually guarantees the targeted CO 2 reductions—although the effects of very high carbon prices on electricity costs might be detrimental to specific industries (e.g., coal) or to the economy as a whole. Alternatively, Congress might refocus its efforts on a single measure (e.g., CCS or nuclear power) restructuring its policies to expand the implementation of that specific measure far beyond its original targets. Congress could also reset its national CO 2 targets, deferring reduction goals until they are more in line with the maturation and implementation of the key CO 2 reduction technologies. In this case, legislators would signal acceptance that near-term targets could not be met and hope for greater success later in the century. This alternative risks unacceptable implications, however, and might violate future international emissions treaties. Finally, Congress could abandon its focus on CO 2 reduction altogether, instead directing resources at mitigating the effects of global warming and adapting to a hotter climate. Conclusion Reducing U.S. emissions of manmade CO 2 is a priority of both the President elect and leaders in Congress. Comprehensive policies have been proposed to achieve these reductions. Most envision aggressive implementation of a portfolio of major carbon reduction measures, with the goal of reducing U.S. CO 2 emissions to 1990 levels by 2020 or 2030. Numerous studies support the potential of specific measures to lower CO 2 emissions, but also identify key implementation uncertainties which may impact their overall viability. Congress is considering policies to address these uncertainties, but which policies may be implemented and how effective they may be cannot be known at this time. As the nation's CO 2 mitigation policies continue to develop, the inherent uncertainty associated with specific carbon measures may be a critical concern. Commitments, either domestic or international, to specific carbon emissions targets over time, or to a specific schedule of carbon costs (whatever form they may take) may be greatly affected by the success of the underlying measures relied upon to achieve them. The reverse is also true; a schedule of carbon costs may also influence the success of CO 2 abatement measures. Therefore, policy makers may benefit from a complete and integrated understanding of measure-specific uncertainties and the range of carbon outcomes they imply. As one study has concluded, "explicitly including uncertainty in both technical change and in climate damages is important for understanding the relationship between technical change, climate change, and policy.... [O]ptimal policy is different ... when uncertainty is taken into account. As Congress considers implementing CO 2 policies, keeping a close eye on the technology and market developments associated with every key measure may be an oversight priority. Success or failure of any particular measure may be apparent early on in its implementation, affording an opportunity through quick action to make policy adjustments to improve a measure's chances for success, or to abandon it in favor of more promising options. Perhaps more importantly, given the complexity and scale of the carbon control problem, Congress may also find it useful to expect the unexpected in the electricity sector. Apart from the measures discussed in this report, new technologies, consumer behavior, or infrastructure developments (e.g., a rush to natural gas) may emerge rapidly and unexpectedly to change fundamental aspects of the nation's carbon emissions trajectory. One way or another, electricity supply will balance with demand—but perhaps in unanticipated ways. The recent volatility in global oil prices is a relevant example of unexpected structural changes in energy markets. Balancing responses to energy market volatility and unexpected structural changes against the need for a predictability in R&D and private capital investment may be essential to maintaining the nation on course to meaningful atmospheric CO 2 reduction.

Congress has been debating a range of potential initiatives for reducing atmospheric CO2 from U.S. sources. Legislative proposals would seek to limit U.S. CO2 emissions to historical levels through emissions caps, carbon taxes, or other mechanisms. In the 110th Congress, the most prominent CO2 proposals sought reductions of nationwide CO2 emissions to 1990 levels or lower by 2030. President-elect Barack Obama has proposed cutting carbon CO2 emissions to 1990 levels by 2020, and by an additional 80% by 2050. A fundamental question arising from carbon control proposals is how the CO2 reduction targets can be achieved in the electricity industry, which is responsible for nearly 40% of U.S. CO2 emissions. It appears from the policy research and technical studies that substantially reducing CO2 emissions in the U.S. electricity sector over the next few decades would likely require every key carbon mitigation measure at the nation's disposal. However, it is also clear that significant uncertainty exists about the potential of individual measures to achieve their hoped-for carbon impact: Energy efficiency—Can the United States overcome socioeconomic barriers to achieve four times more potential savings than ever before? Renewable energy—Will there be enough transmission for wind power? Is there enough land to grow the needed biomass? Nuclear power—Could the United States build new plants fast enough to matter? Advanced coal power—Will banks fund them and regulators approve them? Carbon capture and sequestration—Will the technology be commercially deployable in 10 years, 25 years, or never? Plug-in hybrid electric vehicles—How much "low carbon" electricity would be available to charge their batteries? Distributed energy resources—Would carbon costs change distributed energy economics enough to spur deployment? As the nation's CO2 mitigation policies develop, the inherent uncertainty associated with specific carbon measures may be a critical concern. Commitments to specific carbon emissions targets over time, or to a specific schedule of carbon costs (whatever form they may take) may be greatly affected by the success of the underlying measures relied upon to achieve them. Notwithstanding the best efforts of federal policy makers, it is possible that, given the uncertainties each faces, few if any of the major measures proposed to moderate U.S. carbon emissions will achieve their anticipated impacts in a 20-year time frame. As Congress considers implementing CO2 policies, keeping a close eye on the technology and market developments associated with every key measure could be a priority. Balancing responses to energy market volatility and unexpected structural changes against the need for a predictability in R&D and private capital investment may be essential to maintaining the nation on course to meaningful atmospheric CO2 reduction.

Introduction Pursuant to the Clayton Act and the Federal Trade Commission Act (FTC Act), Congress charged the Department of Justice (DOJ) and the Federal Trade Commission (FTC) with reviewing whether proposed mergers comport with federal antitrust laws and preventing anticompetitive mergers. This report discusses statutes governing federal pre-merger review, along with DOJ and FTC guidelines for assessing whether a proposed merger complies with statutory requirements. This report also discusses the DOJ's and FTC's processes for challenging a merger prior to its consummation. Pre-Merger Review: Application of the Clayton Act and FTC Act While other federal laws, including the Sherman Act, seek to deter anticompetitive harms caused by monopolization and agreements to restrain trade, two federal statutes, the Clayton and the FTC Acts, relate particularly to proposed mergers. Section 7 of the Clayton Act applies to mergers "in any line of commerce" when their effect "may be substantially to lessen competition, or to tend to create a monopoly" unless the merger is statutorily exempt. Section 5 of the FTC Act prohibits unfair methods of competition and includes any activity that violates Section 7 of the Clayton Act. The FTC generally applies standards similar to DOJ's when assessing transactions under Section 7 of the Clayton Act pursuant to Section 5 of the FTC Act. By prohibiting mergers that negatively affect competition, the Clayton and FTC Acts aim to preserv e rather than enhance competition and to protect overall market competition rather than individual competitors. Accordingly, mergers may injure market competitors but not violate antitrust laws. Moreover, because Section 7 of the Clayton Act and Section 5 of the FTC Act aim to prevent anticompetitive harms from occurring, they look to the likelihood of future harm. To violate these statutes, therefore, the transaction must be likely, rather than certain, to have an anticompetitive effect. The Hart-Scott-Rodino Antitrust Improvements Act and the Pre-Merger Review Process The Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) requires businesses exceeding certain sizes to report proposed mergers and other transactions valued above specified thresholds to the DOJ and FTC so that the agencies may examine whether those transactions comply with federal antitrust laws. Businesses may only complete the proposed merger once the statutory waiting period has expired (typically 30 days after filing the report, but 15 days in the case of a cash tender offer, or such other time if the agency shortens or extends the waiting period). If the agency determines that the merger would be likely to lessen competition substantially, the agency may either negotiate with the transacting parties to address its concerns or act to block the merger. As part of the notice filed under the HSR Act, the transacting parties must provide certain non-public information to the agencies, including (1) information about themselves, including their balance sheets; (2) information related to the proposed transaction's planning and execution; and (3) information regarding the product, service, and geographic markets in which they operate. Information submitted during the process is exempt from the Freedom of Information Act and the agency cannot make it public except in the course of an administrative or judicial proceeding. Upon reviewing the pre-merger notification, the DOJ or FTC seeks clearance from the other agency to investigate the transaction. When both agencies request clearance, the agency with the most expertise in reviewing transactions in the relevant markets generally conducts the investigation subject to jurisdictional limitations. The agency selected to investigate the proposed merger reviews information provided by the transacting parties and other market participants. Prior to the expiration of the 30-day waiting period, the reviewing agency decides whether (1) to issue a second request for more information or (2) to allow the transaction to complete, either by terminating the waiting period early or by letting the waiting period expire without taking further action. If the parties voluntarily withdraw their filing and subsequently refile, the required waiting period restarts. If, during the initial waiting period, the reviewing agency needs additional information to assess whether the prospective merger complies with antitrust laws, the agency may require the transacting parties to provide further information and documents (commonly referred to as the "Second Request"). The reviewing agency may also gather evidence from entities that are not transacting parties. For example, the agency may interview, either informally or under oath, customers and other market participants or seek information from industry observers and academics. Once the parties have substantially complied with the Second Request, the reviewing agency has 30 days (or 10 days, in the case of a cash tender offer) to review the information and decide how to proceed. If parties fail to comply substantially with the Second Request, the reviewing agency may request a federal district court to order compliance and to extend the waiting period during the time it takes to reach substantial compliance. If the waiting period expires, the parties may complete the transaction. Depending upon the merger's complexity, a significant amount of time might pass between the reviewing agency's issuance of a Second Request and a final decision. A summary of the clearance process is depicted in Figure 1 . Substantive Review of Proposed Mergers by the FTC and the DOJ The FTC and DOJ employ shared guidelines to assess whether a proposed merger is permissible under the FTC and Clayton Acts. These standards apply to various types of transactions, including mergers between competing entities or potentially competing entities in a relevant market (horizontal mergers) and mergers between non-competing entities that operate within related industries (vertical mergers). Because horizontal and vertical mergers raise somewhat different competitive concerns, they are discussed separately below. Mergers Within the Same Industry (Horizontal Mergers) The FTC and DOJ use the Horizontal Merger Guidelines ("Guidelines") when reviewing whether a proposed merger between competitors raises anticompetitive concerns under the Clayton and FTC Acts. The Guidelines adopt "a fact-specific process through which the [FTC or DOJ], guided by their extensive experience, apply a range of analytical tools to the reasonably available and reliable evidence to evaluate competitive concerns in a limited period of time." The Guidelines primarily examine whether a proposed merger would unduly enhance the transacting parties' "market power," which is a firm's ability, without causing economic harm to itself, to raise prices, reduce output, reduce innovation, or otherwise harm consumers. The agencies view a proposed merger's probable enhancement of market power as increasing the likelihood that the merger will substantially lessen competition. To identify lines of commerce and geographic areas that the merger may affect and gauge its impact on the transacting parties' market power, a reviewing agency, assessing a horizontal merger under the Clayton or FTC Act, first defines the relevant product and geographic markets. Product Markets A "product market" consists of "all products 'reasonably interchangeable by consumers for the same purposes.'" To identify product markets that the merger would affect, the reviewing agency generally employs the "Hypothetical Monopolist Test," which examines whether consumers in the market would be able to switch from one product to a close substitute in response to a small but significant price increase or benefit reduction. If consumers could switch products, the agency next considers whether they could do so in sufficient numbers to render any price increase or benefit reduction unprofitable to the responsible party. If a sufficient number of consumers would likely switch from one product to another, the agency might find those products to belong to the same product market. The DOJ's 2016 suit to block Deere and Company's ("John Deere") acquisition of Monsanto, Co.'s Precision Planting ("Precision Planting") subsidiary illustrates how a reviewing agency defines a product market. In this suit, the DOJ defined the relevant product market as high-speed precision planting systems that were factory-installed on new planters or retrofitted on existing planters. The DOJ argued that other types of planting systems were not "effective substitutes" for high-speed systems, making it unlikely that high-speed planting systems users would switch to those alternatives, even if prices for high-speed systems rose significantly. In another recent case, the DOJ sued to block the proposed merger of Aetna, Inc. and Humana, Inc.—two large health insurance companies that offer Medicare Advantage plans, which provide benefits akin to traditional Medicare benefits along with other benefits. The DOJ concluded that the proposed Aetna-Humana merger would affect the market for Medicare Advantage policies. The DOJ found, however, that traditional Medicare was not part of the relevant market because the DOJ believed that, given a small but significant Medicare Advantage plan price increase or benefit reduction, seniors enrolled in those plans would be unlikely to switch to traditional Medicare in sufficient numbers. The district court agreed, finding that Medicare Advantage policies, but not traditional Medicare, constituted the relevant market. Geographic Markets With respect to the relevant geographic markets, the Supreme Court has stated: "Congress prescribed a pragmatic, factual approach to the definition of the relevant market and not a formal legalistic one. The geographic area selected must, therefore, both correspond to the commercial realities of the industry and be economically significant." Depending on the products and services at issue, a reviewing agency could identify the geographic market as the entire United States or a smaller region. For instance, when DOJ reviewed John Deere's proposed acquisition of Precision Planting, the agency found the sale of high-speed precision planting systems to be a national market. For the Aetna-Humana merger, DOJ defined the relevant geographic markets as "hundreds of counties across the United States" where Aetna and Humana compete to enroll seniors in Medicare Advantage plans. Measuring Market Power After defining the relevant market, the reviewing agency identifies the market participants, their market shares, and the level of market concentration. A reviewing agency typically begins a market-power assessment by comparing existing market concentration with the likely concentration following the merger. To measure market concentration, reviewing agencies typically employ the Herfindahl–Hirschman Index (HHI), which is calculated by "summing the squares of individual firms' market shares." Some U.S. courts also rely on HHI calculations to assess whether a transaction would create market power. Under the Merger Guidelines, the DOJ and FTC presumptively deem transactions that increase a market's HHI by 200 or more points and result in the HHI being above 2500 (a highly concentrated market) to lessen competition substantially. However, "[t]he presumption may be rebutted by persuasive evidence" that the transaction likely would not have anticompetitive consequences. Evaluation of Potential Harms In addition to considering market concentration impacts, the FTC and DOJ might consider the market impacts of other factors in the transaction as discussed below. Potential Effects on Pricing Because mergers reduce the number of market participants, a merged entity, facing less competition, might be more likely to engage in behavior harmful to consumers, such as raising prices. If consumers treat the transacting parties' products as substitutes, a reviewing agency might be concerned that the merged entity could behave anti-competitively. To illustrate, when the DOJ sued to block Anthem, Inc., from acquiring competing health insurance provider, Cigna, Corp, the DOJ argued that the companies competed head-to-head to sell insurance to employers with more than 5,000 employees in the national market and in fourteen state markets, and were often finalists in competitive bidding. The DOJ further contended that the merger, by eliminating competition between the two companies, would encourage the merged entity to raise prices unilaterally above otherwise competitive levels. Potential Effects on Product Output The reviewing agency might also consider whether, in markets with largely homogenous products, a merged entity would have incentives either to suppress its output by slowing production or to reduce its production capacity in order to elevate prices. For example, a merged entity might reduce the excess capacity of one of its components, which pre-merger had been constraining a rise in market prices. The merger might also provide the merged entity with a larger sales base, increasing the benefits of a price hike caused by reducing output. The Merger Guidelines provide an illustrative example of how a merged entity might reduce product output and thereby increase prices for consumers: Firms A and B both produce an industrial commodity and propose to merge. The demand for this commodity is insensitive to price. Firm A is the market leader. Firm B produces substantial output, but its operating margins are low because it operates high-cost plants. The other suppliers are operating very near capacity. The merged firm has an incentive to reduce output at the high-cost plants, perhaps shutting down some of that capacity, thus driving up the price it receives on the remainder of its output. The merger harms customers, notwithstanding that the merged firm shifts some output from high-cost plants to low-cost plants. Potential Effects on Innovation A reviewing agency may also consider a merger's potential effects on innovation. It may find that "combining two of a very small number of firms with the strongest capabilities to successfully innovate in a specific direction" hinders innovation in the market. For example, when the DOJ reviewed Dow Chemical's ("Dow") proposed merger with E. I. du Pont de Nemours and Company ("DuPont"), it observed that Dow and DuPont competed head-to-head in producing and selling certain herbicides and that DuPont had recently introduced a new herbicide that competed directly with one marketed by Dow. The agency found that competition between the two companies had "spurred research, development and marketing of new and improved" products and that the merger would eliminate such competition. Ultimately, DuPont agreed to divest its market-leading herbicide to address the DOJ's competition concerns. In another example, the DOJ cited potential negative impacts on innovation when it opposed AT&T, Inc.'s ("AT&T") proposed acquisition of T-Mobile US ("T-Mobile"). Because T-Mobile competed with AT&T in innovation, the DOJ cited T-Mobile's potential loss as a primary reason for seeking an injunction. Coordination Among Firms A reviewing agency may also examine whether a merger would unacceptably magnify market participants' opportunities for coordinated interaction, which is "conduct by multiple firms that is profitable for each of them only as a result of the accommodating reactions of others." One example of coordinated interaction is parallel action, which is when one market participant raises prices (or makes some other change), and other market participants take the same action in lockstep. In considering the risk of coordinated interaction, the FTC and DOJ generally take the view that the fewer participants in a given market, the more likely they are to engage in parallel action following a merger. For example, when the DOJ challenged AT&T's proposed acquisition of T-Mobile, the agency identified the potential for coordinated interaction as a reason to block the transaction. The DOJ claimed that, if AT&T acquired T-Mobile, the number of nationally competitive wireless service providers would decrease from four to three. The DOJ contended that T-Mobile's strategy of positioning its service as a lower-priced alternative to services offered by AT&T and other major service providers constrained AT&T and the other providers from increasing their prices. The DOJ asserted that eliminating T-Mobile as a competitor might lead the remaining competitors to coordinate, resulting in higher prices nationwide for wireless services. Similarly, the FTC was concerned that H.J. Heinz, Co.'s proposed merger with Beech-Nut Nutrition Corp. might lead the remaining major baby food producers to coordinate their behavior and raise prices above competitive levels. Market Entry, Efficiencies, and Other Considerations In assessing a proposed merger's anticompetitive effect, the reviewing agency may also consider factors that support the transaction. The ability of other competitors to enter the market indicates the degree to which the merged entity could constrain behavior and pricing within that market. Easy market entry suggests that a proposed merger is less likely to reduce market competition, while significant barriers to entry, such as the need to engage in lengthy research and development or obtain regulatory approvals, suggests that a proposed merger would be more likely to reduce market competition. Additionally, the DOJ and FTC recognize that "a primary benefit of mergers to the economy is their potential to generate significant efficiencies and thus enhance the merged firm's ability and incentive to compete[.]" Greater efficiency could provide benefits such as cost-reduction or increased services, potentially offsetting anticompetitive concerns raised by the merger provided, however, that "[t]he greater the potential adverse competitive effect of a merger, the greater must be the cognizable efficiencies, and the more they must be passed through to customers[.]" To support a proposed merger, the potential market efficiencies must be unlikely to be accomplished by a means other than the merger. They must also be reasonably verifiable and cannot "arise from anticompetitive reductions in output or service." The reviewing agency might also consider, among other things, whether one of the parties to a proposed merger has failed or is failing (i.e., whether it would soon exit the relevant markets as a competitor even if it did not merge with a competitor). Mergers in Related Industries (Vertical Mergers) The DOJ and FTC also may examine a proposed merger's impact on product and geographic markets in which the transacting parties do not compete, if the transaction may nonetheless have a negative effect on competition in those markets. This situation generally arises when a merger would lead to one business entity controlling two or more stages of production and distribution normally done by separate entities—a situation known as vertical integration or a "vertical merger." In part because these transactions do not affect competition between actual or potential competitors and they can create competition-enhancing efficiencies, the agencies tend to view vertical transactions as less likely to be anticompetitive than horizontal transactions. The Horizontal Merger Guidelines, most recently amended in 2010, do not provide guidance on vertical mergers. The 1984 Guidelines were the last version to address vertical mergers directly. Those guidelines took the view that vertical mergers generally posed a less immediate threat to competition than horizontal mergers, in part because vertical integration involved entities that did not compete at the same level in the market and therefore had no impact on market concentration. However, the DOJ and FTC have taken enforcement action against some vertical mergers that the agencies viewed as substantially lessening competition, generally through consent agreements. In such cases, the agencies have considered whether the merged entity would have incentives to foreclose competition in part of the market (e.g., by cutting off an important avenue for distribution of a product or service or by eliminating customer access to a product or service) and whether the transaction would increase incentives for coordinated anticompetitive conduct in affected markets, among other factors. For instance, Comcast Corp.'s ("Comcast") joint venture involving NBC Universal, Inc. ("NBC") and General Electric Co. ("GE") was a high-profile example of vertical integration. In that transaction, Comcast, a powerful distributor of programming content, proposed to engage in a joint venture with GE that would enable Comcast to obtain effective control over NBC, an important programming content provider. The DOJ ultimately permitted the transaction, subject to conditions contained in a consent agreement. For example, because DOJ was concerned that Comcast could restrict competing online video program distributors from providing their customers access to NBC-owned programming, thereby driving consumers to Comcast's cable services, the consent agreement required the joint venture to make its programming available to online video distributers on equivalent terms offered to traditional programming distributors (e.g., other cable providers, satellite providers). Potential Actions Following Completion of the Pre-Merger Review Process Upon completing its review of a proposed merger, the reviewing agency decides whether (1) to permit the merger to consummate; (2) to take any action to block the merger; or (3) to negotiate with the transacting parties to place conditions on the merger's completion that alleviate the agency's anticompetitive concerns. The agencies permit most proposed transactions to complete without conditions. If the reviewing agency seeks to block a merger, the agency may bring an action against the transaction in a judicial and/or administrative proceeding (depending upon whether the DOJ or the FTC is the reviewing agency). In these circumstances, the transacting parties may abandon the deal or contest the government's case before a federal or administrative law judge. Merger Challenges by the DOJ The DOJ pursues potential violations of the Clayton Act in federal court. Section 15 of the Clayton Act vests power to prevent and restrain violations of Section 7 in the federal district courts, and grants the DOJ authority to institute such proceedings. The DOJ may initially seek a preliminary injunction to block a merger from proceeding while litigation is ongoing. To shorten the potential duration of litigation, the DOJ and transacting parties often agree to consolidate the motion for a preliminary injunction with a motion for a permanent injunction. To obtain a permanent injunction against a merger, the DOJ must show by a preponderance of the evidence that the proposed transaction would violate the applicable antitrust law —a higher standard than required to obtain a preliminary injunction. In assessing whether a merger violates antitrust laws, the reviewing court is not bound by the DOJ's administrative review determination. If the district court denies the DOJ's request for a permanent injunction, the transacting parties may complete the proposed transaction. If the DOJ obtains a permanent injunction, which the transacting parties do not challenge or which a court upholds on appeal, the merger may not go forward. The DOJ and the transacting parties may also enter into a consent agreement to resolve the dispute. Such agreements might require one or both of the merging parties to divest particular assets or engage in other actions to alleviate potential anticompetitive effects of the transaction. When the DOJ has reached a consent agreement with the transacting parties, it will typically file both (1) a motion for an injunction in federal district court; and (2) a proposed consent agreement for approval by the court, along with other documents, such as a Hold Separate Order. The Hold Separate Order usually outlines the assets that the transacting parties must keep separate from the merged entity, and the parties must typically sell or spin off these assets into independent companies to alleviate the anticompetitive concerns raised by the merger. Once the reviewing court has approved the Hold Separate Order, the transacting parties may generally consummate the merger in accordance with the order's terms. Under the Tunney Act (also known as the Antitrust Procedures and Penalties Act), the DOJ must file consent agreements to resolve antitrust concerns with a federal court and, at the same time, publish the proposed agreement in the Federal Register for public comment prior to the court entering a judgment. The DOJ also must file any written comments related to the proposal with the court and publish them in the Federal Register. At the close of the comment period (typically 60 days), the DOJ must file with the court and publish in the Federal Register a response to the comments. After the agency has addressed the public comments, the reviewing court may enter a final judgment approving the consent order with the agreed-upon conditions, provided that the court finds the consent agreement to be in the public interest. Merger Challenges By the FTC The FTC's process for challenging proposed transactions is different from the DOJ's. Unlike the DOJ, the FTC may use enforcement tools available under the FTC Act in addition to those available under the Clayton Act to challenge proposed mergers. And whereas the DOJ process for blocking mergers under the Clayton Act involves seeking injunctive relief in federal district court, the FTC has several administrative and judicial avenues to prevent mergers that violate antitrust laws. Under Section 11 of the Clayton Act, the FTC can challenge proposed mergers in most areas of commerce, with some exceptions, via an administrative adjudication that can be appealed to a federal court of appeals. The FTC also has administrative processes available to review proposed mergers that may be unfair methods of competition under Section 5(b) of the FTC Act. Section 13(b) of the FTC Act further provides the FTC authority to request a court to enjoin, preliminarily and permanently, activities that would violate the statutes the FTC administers. When the FTC decides to challenge a proposed merger and has not reached a consent agreement with the transacting parties, the agency typically files a motion for a preliminary injunction under Section 13(b) of the FTC Act in federal court alleging that the transaction would violate both Section 7 of the Clayton Act and Section 5 of the FTC Act. Section 13(b) of the FTC Act requires courts to issue preliminary injunctions "[upon] a proper showing that weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest[.]" Around the same time that it files a motion for a preliminary injunction, the FTC will often commence administrative proceedings under the FTC and Clayton Acts by issuing a complaint and beginning proceedings before an FTC administrative law judge (ALJ) to determine whether the proposed transaction would violate federal law and any remedies. If the federal district court grants the preliminary injunction, the transacting parties may not complete the transaction during the administrative proceedings. The FTC has the option to continue administrative review of a merger even if the court denies its motion for a preliminary injunction and the transaction closes. However, if the court denies the FTC's request for a preliminary injunction, FTC rules require the administrative proceedings to be automatically stayed while the FTC determines whether to continue. The Federal Trade Commissioners review all ALJ initial decisions when the agency has also filed a motion for a preliminary injunction in federal court. When reviewing an ALJ's initial decision, the FTC staff and the parties provide briefs to the Commission and the Commission may hear oral arguments before issuing a final decision. If the Commission decides that a transaction would substantially lessen competition, the parties have the option to appeal to a federal appellate court "within whose jurisdiction the respondent resides or carries on business or where the challenged practice was employed." If the parties decide not to appeal, the litigation ends and the parties cannot complete the transaction. In practice, the FTC may use both judicial and administrative processes to challenge proposed transactions, but it typically uses only administrative processes when it enters consent agreements with transacting parties because Congress has granted the Federal Trade Commissioners authority to approve consent agreements. If a consent agreement is reached, the FTC publishes the proposed complaint, the proposed consent agreement, and an analysis of the proposed consent agreement for public comment for a period of 30 days. The Federal Trade Commissioners rule on the consent agreement. Because consent agreements involving mergers may require divestitures, such agreements may involve Hold Separate Orders, requiring the parties to keep certain assets separate after completing their transaction. If the consent agreement involves a Hold Separate Order, the Commission may issue (i.e., vote to approve as opposed to merely publish) the complaint and the Hold Separate Order when it publishes the proposed consent agreement for comment. Following the public comment period and any resulting adjustments to the consent agreement, the final decision and consent agreement may be submitted to the Commission for approval. If the Commission approves, the FTC generally issues a complaint , if it has not already done so, and a Final Decision and Order, which incorporates the consent agreement and ends the proceedings. Conclusion Federal antitrust law prohibits mergers and acquisitions that may substantially lessen competition. As the primary federal agencies charged with enforcing federal antitrust laws, the DOJ and FTC follow a congressionally mandated process that requires parties exceeding certain sizes to notify the agencies of sizable transactions so that one of the agencies may determine whether the planned transaction would violate antitrust laws. Highly fact-specific, the DOJ and FTC apply Section 7of the Clayton Act and Section 5 of the FTC Act, respectively, by assessing the proposed transaction's likely impact on competition within relevant markets identified by the agencies. After examining any evidence, the agencies may permit the transaction to proceed, negotiate with the parties to reach an agreement that alleviates antitrust concerns, or block the transaction.

Preserving competition is an overarching purpose of federal laws governing business mergers. Though other federal laws, including the Sherman Act, seek to address anticompetitive behavior relating to monopolization, two federal statutes, in particular, address harms that may result from proposed mergers. Section 7 of the Clayton Act prohibits mergers "in any line of commerce or in any activity affecting commerce" that may substantially lessen competition or tend to create a monopoly. Section 5 of the Federal Trade Commission Act (FTC Act) prohibits unfair methods of competition, which includes any activity that violates Section 7 of the Clayton Act. Pursuant to the Clayton and FTC Acts, Congress authorized the Department of Justice (DOJ) and the Federal Trade Commission (FTC) to determine whether a proposed merger would substantially lessen competition or tend to create a monopoly. Title II of the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) requires transacting parties, which exceed certain sizes, to report significant planned mergers and acquisitions to the FTC and DOJ so that the agencies may determine whether the proposed transactions raise anticompetitive concerns. If the FTC or DOJ determines that such concerns exist, the agencies may commence administrative or judicial proceedings to block the proposed transaction. Reviewing courts and administrative law judges consider a variety of factors when determining whether a proposed merged complies with federal antitrust laws. This report examines the primary statutes and processes that govern federal pre-merger review and merger challenges.

Background and History of the Violence Against Women Act (VAWA) The Violence Against Women Act (VAWA) was originally passed by Congress as Title IV of the Violent Crime Control and Law Enforcement Act of 1994 ( P.L. 103-322 ). This act addressed congressional concerns about violent crime, and violence against women in particular, in several ways. Among other things, it enhanced investigations and prosecutions of sex offenses by allowing for enhanced sentencing of repeat federal sex offenders; mandating restitution to victims of specified federal sex offenses; and authorizing grants to state, local, and tribal law enforcement entities to investigate and prosecute violent crimes against women. Congressional passage of VAWA was ultimately spurred on by decades of growing unease over the rising violent crime rate and a focus on women as crime victims. Beginning in the 1960s, the violent crime rate rose steadily, igniting concern from both the public and the federal government. Supplementing the concern for the nation's rising violent crime rate was the concern for violence against women. In the 1970s, grassroots organizations began to stress the need for attitudinal change regarding violence against women. These organizations sought a change in attitude among both the public as well as the law enforcement community. In the 1980s, researchers began to address the violence against women issue as well. For instance, Straus and Gelles collected data on family violence and attributed declines in spousal assault to heightened awareness of the issue by both men and the criminal justice system. The criminal justice system and the public were beginning to view family violence as a crime rather than a private family matter. In 1984, Congress enacted the Family Violence Prevention and Services Act (FVPSA, P.L. 98-457 ) to assist states in preventing incidents of family violence and to provide shelter and related assistance to victims of family violence and their dependents. While FVPSA authorized programs similar to those discussed in this report and has reauthorized programs that were originally created by VAWA, such as the National Domestic Violence Hotline, it is a separate piece of legislation and beyond the scope of this report. In 1994, Congress passed a major crime bill, the Violent Crime Control and Law Enforcement Act of 1994 ( P.L. 103-322 ). Among other things, the bill created an unprecedented number of programs geared toward helping local law enforcement fight violent crime and providing services to victims of violent crime. In their introduction to the Violence Against Women Act, then-Senator Joseph Biden and Senator Barbara Boxer highlighted the weak response to violence against women by police and prosecutors. The shortfalls of legal response and the need for a change in attitudes toward violence against women were primary reasons cited for the passage of VAWA. Since it was enacted in 1994, Congress has reauthorized VAWA three times. Most recently, Congress passed and President Obama signed the Violence Against Women Reauthorization Act of 2013 ( P.L. 113-4 ) that reauthorized most of the programs under VAWA, among other things. The VAWA reauthorization also amended and authorized appropriations for the Trafficking Victims Protection Act of 2000, enhanced measures to combat trafficking in persons, and amended VAWA grant purpose areas to include sex trafficking. Moreover, P.L. 113-4 gave Indian tribes authority to enforce domestic violence laws and related crimes against non-Indian individuals, and established a nondiscrimination provision for VAWA grant programs. The reauthorization also included new provisions to address the rape kit backlog in states. This reauthorization and others are discussed in this report. This report provides a brief legislative history of VAWA and an overview of the crimes addressed through VAWA. The report concludes with a brief description of the most recent reauthorization of VAWA. The Appendix provides brief VAWA program descriptions and outlines funding information for VAWA authorized programs from FY2011 through FY2015. Violence Against Women Act of 1994 VAWA was originally passed by Congress as part of the broader Violent Crime Control and Law Enforcement Act of 1994. The Violence Against Women Act of 1994 (1) enhanced investigations and prosecutions of sex offenses and (2) provided for a number of grant programs to address the issue of violence against women from a variety of angles, including law enforcement, public and private entities and service providers, and victims of crime. The sections below highlight examples of these VAWA provisions. Investigations and Prosecutions As passed in 1994, VAWA impacted federal investigations and prosecutions of cases involving violence against women in a number of ways. For instance, it established new offenses and penalties for the violation of a protection order as well as stalking in which an abuser crossed a state line to injure or harass another, or forced a victim to cross a state line under duress and then physically harmed the victim in the course of a violent crime. It added new provisions to require states and territories to enforce protection orders issued by other states, tribes, and territories. VAWA also allowed for enhanced sentencing of repeat federal sex offenders. It also authorized funding for the Attorney General to develop training programs to assist probation and parole officers in working with released sex offenders. In addition, VAWA established a new requirement for pretrial detention in federal sex offense or child pornography felony cases. It also modified the Federal Rules of Evidence to include new procedures specifying that, with few exceptions, a victim's past sexual behavior was not admissible in federal criminal and civil cases of sexual misconduct. In addition, VAWA asked the Attorney General to study measures in place to ensure confidentiality between sexual assault or domestic violence victims and their counselors. VAWA mandated restitution to victims of specified federal sex offenses, specifically sexual abuse as well as sexual exploitation and other abuse of children. It also established new provisions, including a civil remedy that allows victims of sexual assault to seek civil penalties from their alleged assailants, and a provision that allows rape victims to demand that their alleged assailants be tested for the HIV virus. Grant Programs VAWA created a number of grant programs for a range of activities, including programs aimed at (1) preventing domestic violence and related crimes; (2) encouraging collaboration among law enforcement, judicial personnel, and public/private sector providers with respect to services for victims of domestic violence and related crimes; (3) investigating and prosecuting domestic violence and related crimes; and (4) addressing the needs of individuals in a special population group (e.g., elderly, disabled, children and youth, individuals of ethnic and racial communities, and nonimmigrant women). VAWA grants are administered by the Department of Justice, Office on Violence Against Women and Office of Justice Programs as well as by the Department of Health and Human Services, Centers for Disease Control and Prevention. Under VAWA, grants were authorized for capital improvements to prevent crime in public transportation systems as well as in public and national parks. It also expanded the Family Violence Prevention and Services Act (FVPSA) to include grants for youth education on domestic violence and intimate partner violence as well as to include grants for community intervention and prevention programs. As mentioned, VAWA provided for federal grants to state, local, and tribal law enforcement entities to investigate and prosecute violent crimes against women. It established an additional grant to bolster investigations and prosecutions in rural areas. It also established a grant program to encourage state, local, and tribal arrest policies in domestic violence cases. VAWA authorized grants for education and training for judges and court personnel in state and federal courts on the laws of rape, sexual assault, domestic violence, and other crimes of violence motivated by the victim's gender. It also authorized grants to assist state and local governments in entering data on stalking and domestic violence into national databases. VAWA authorized the expansion of grants under the Public Health Service Act to include rape prevention education. Additionally, it expanded the purposes of the Runaway and Homeless Youth Act to allow for grant funding to assist youth at risk of (or who have been subjected to) sexual abuse. VAWA reauthorized the Court-Appointed Special Advocate Program and the Child Abuse Training Programs for Judicial Personnel and Practitioners. It also authorized funding for Grants for Televised Testimony by Victims of Child Abuse. VAWA established the National Domestic Violence Hotline and authorized funding for its operation. It also authorized funding for battered women's shelters, in addition to including special protections for battered nonimmigrant women and children. Other VAWA Requirements Beyond the criminal justice improvements and grant programs, VAWA included provisions for several other activities, including requiring that the U.S. Postal Service take measures to ensure confidentiality of domestic violence shelters and abused persons' addresses; mandating federal research by the Attorney General, National Academy of Sciences, and Secretary of Health and Human Services to increase the government's understanding of violence against women; and requesting special studies on campus sexual assault and battered women's syndrome. Office on Violence Against Women In 1995, the Office on Violence Against Women (OVW) was administratively created within the Department of Justice (DOJ) to administer the grants authorized under VAWA. Since its creation through FY2014, the OVW has awarded more than $6 billion in grants and cooperative agreements to state, tribal, and local governments, nonprofit organizations, and universities. While the OVW administers the majority of VAWA authorized grants, other federal agencies, including the Centers for Disease Control and Prevention (CDC) and the Office of Justice Programs (OJP), also manage VAWA funds. See Table A-1 for an outline of current VAWA authorized grant programs. Categories of Crime Addressed Through VAWA VAWA grant programs address the needs of victims of domestic violence, sexual assault, dating violence, and stalking. VAWA treats these as distinct crimes which involve a wide range of victim demographics. For domestic violence, sexual assault, dating violence, and stalking, the risk of victimization is highest for women. Victimization data on these crimes are available from two national surveys, the National Crime Victimization Survey (NCVS) and the Youth Risk Behavior Surveillance System, and the Federal Bureau of Investigation's (FBI's) Uniform Crime Reporting (UCR) Program. UCR data vary from survey data because the UCR describes crimes that were reported to law enforcement while survey data describe self-reported crimes that were not necessarily reported to law enforcement. Due to differences in methodology, survey data are not comparable to UCR data. Domestic Violence Public concern over violence against women prompted the original passage of VAWA. As such, VAWA legislation and programs have historically emphasized women as victims. More recently, however, there has been a focus on ensuring the needs of all victims are met through provisions of VAWA programs. Domestic violence is a complex crime and is often labeled as family violence or intimate partner violence. Under VAWA, domestic violence is generally interpreted as intimate partner violence. Intimate partner violence includes felony or misdemeanor crimes committed by spouses or ex-spouses, boyfriends or girlfriends, and ex-boyfriends or ex-girlfriends. Crimes may include sexual assault, simple or aggravated assault, and homicide. As defined in statute for the purposes of VAWA grant programs, domestic violence includes felony or misdemeanor crimes of violence committed by a current or former spouse or intimate partner of the victim, by a person with whom the victim shares a child in common, by a person who is cohabitating with or has cohabitated with the victim as a spouse or intimate partner, by a person similarly situated to a spouse of the victim under the domestic or family violence laws of the jurisdiction receiving grant monies, or by any other person against an adult or youth victim who is protected from that person's acts under the domestic or family violence laws of the jurisdiction. From 1993 to 2013, the rate of serious intimate partner violence declined by 63% for females, from 5.7 victimizations per 1,000 females aged 12 and older in 1993 to 2.1 per 1,000 in 2013, and 60% for males, from 1.5 victimizations per 1,000 males aged 12 and older in 1993 to 0.6 per 1,000 in 2013. According to NCVS data, intimate partner victimization rates also vary by age and race. Females aged 18 or older generally experience higher rates of intimate partner violence than females aged 12 to 17. Rates of intimate partner violence have also been historically higher for black females than white females. In 2011, a survey conducted by the Centers for Disease Control and Prevention included questions about lifetime victimization. The CDC estimates that 22.3% of women and 14.0% of men have experienced severe physical violence by an intimate partner in their lifetime. Intimate Partner Homicide Since peaking in the early 1990s, violent and property crime rates have declined through 2013. Overall homicide rates and intimate partner homicide rates have also declined. Researchers have studied the range of social factors that may influence homicide rates and have suggested possible reasons for the decline in intimate partner homicide rates. For instance, most intimate partner homicides involve married couples; as such, some researchers have suggested the decline in marriage rates among young adults as a contributing factor in the decline in intimate partner homicide rates. Additionally, divorce and separation rates have increased. Fewer marriages may result in less exposure to abusive partners and fewer marriages may suggest that those who do marry are more selective in choosing a partner. Overall, homicide is committed largely by males, mostly victimizing other males. From 1980 through 2008, males made up 90% of all offenders and 77% of all homicide victims; however, females were more likely than males to be victims of intimate partner homicide. From 1980 through 2008, female homicide victims were six times more likely than male victims to have been a victim of intimate partner homicide, and 63% of all intimate partner homicide victims were female. Sexual Assault While intimate partner violence can, and often does, include sexual assault, it is viewed as a separate category of crime under VAWA. Sexual assault may include the crimes of forcible rape, attempted forcible rape, assault with intent to rape, statutory rape, and other sexual offenses. Under VAWA, sexual assault is defined as "any nonconsensual sexual act proscribed by Federal, tribal, or State law, including when the victim lacks capacity to consent." Sexual assault is termed as "sexual abuse" and "aggravated sexual abuse" under federal criminal law, Title 18. According to statistics from the National Crime Victimization Survey (NCVS), there were 300,170 sexual assaults (1.1 per 1,000 aged 12 and older) in 2013. These data are not comparable to Uniform Crime Reporting (UCR) Program data because these data are self-reported during interviews and are not necessarily reported to law enforcement. According to the FBI's UCR Program, 79,770 forcible rapes were reported to law enforcement in 2013. Since 1990, when 102,555 forcible rapes were reported to law enforcement, this figure has fluctuated but has declined overall, as illustrated in Figure 1 . Under the revised FBI definition of rape, which is broader in its definition of rape and includes male victims, there were 108,672 forcible rapes reported in 2013. Until 2012, the FBI defined forcible rape as, "the carnal knowledge of a female forcibly and against her will." Forcible rape statistics include attempted forcible rape and assault with intent to rape, but exclude statutory rape without force and other sex offenses. In January 2012, the FBI revised its definition of forcible rape to include male victims. Current UCR reports (from 2013 on) include rape statistics for both male and female victims. Dating Violence Under VAWA, dating violence refers to "violence committed by a person who is or has been in a social relationship of a romantic or intimate nature with the victim." The relationship between the offender and victim is determined based on the following factors: (1) the length of the relationship; (2) the type of relationship; and (3) the frequency of interaction between the persons involved in the relationship. Reports on dating violence usually refer to teenagers as the relevant age demographic. According to the 2013 Youth Risk Behavior Survey , approximately 10.3% of high school students had been "hit, slammed into something, or injured with an object or weapon on purpose by someone they were dating or going out with" one or more times in the past year. The prevalence of physical dating violence was higher among female students (13.0%) than male students (7.4%). Stalking Stalking is defined as "a course of conduct directed at a specific person that would cause a reasonable person to feel fear." All 50 states, the District of Columbia, and U.S. Territories have enacted anti-stalking laws, and these laws vary in their definition. Federal law makes it unlawful to (1) travel across state lines or use the mail or computer; (2) with the intent to injure or harass another; and (3) as a result, places that person in reasonable fear of death or serious bodily injury or causes substantial emotional distress to that person or a member of that person's family. According to the NCVS, 3.3 million individuals aged 18 and older were victims of stalking in 2006. Females were at greater risk than males for stalking victimization, and individuals aged 18-24 were at greater risk than those individuals aged 25 or older. According to the CDC, 15.2% of women and 5.7% of men have been stalked by an intimate partner in their lifetime. Reauthorizations of VAWA Since it was enacted in 1994, Congress has reauthorized VAWA three times. Of note, the reauthorizations in 2000 and 2005 had broad bipartisan support while the most recent reauthorization in 2013 faced some adversity. In 2000, Congress reauthorized VAWA through the Victims of Trafficking and Violence Protection Act ( P.L. 106-386 ). Modifications included additional protections for battered nonimmigrants, a new program for victims in need of transitional housing, a requirement for grant recipients to submit reports on the effectiveness of programs, new programs designed to protect elderly and disabled women, mandatory funds to be used exclusively for rape prevention and education programs, and inclusion of victims of dating violence. VAWA 2000 amended interstate stalking and domestic violence law to include (1) a person who travels in interstate or foreign commerce with the intent to kill, injure, harass, or intimidate a spouse or intimate partner, and who in the course of such travel commits or attempts to commit a crime of violence against the spouse or intimate partner; (2) a person who causes a spouse or intimate partner to travel in interstate or foreign commerce by force or coercion and in the course of such travel commits or attempts to commit a crime of violence against the spouse or intimate partner; (3) a person who travels in interstate or foreign commerce with the intent of violating a protection order or causes a person to travel in interstate or foreign commerce by force or coercion and violates a protection order; and (4) a person who uses the mail or any facility of interstate or foreign commerce to engage in a course of conduct that would place a person in reasonable fear of harm to themselves or their immediate family or intimate partner. Also, the act added the intimate partners of victims as people covered under the interstate stalking statute. In 2005, Congress reauthorized VAWA through the Violence Against Women and Department of Justice Reauthorization Act ( P.L. 109-162 ). The legislation added protections for battered and/or trafficked nonimmigrants; enhanced penalties for repeat stalking offenders; and added programs for American Indian victims and sexual assault victims and programs designed to improve the public health response to domestic violence. The act emphasized collaboration among law enforcement; health and housing professionals; and women, men, and youth alliances, and encourages community initiatives to address these issues. The act also created the Office of Audit, Assessment and Management (OAAM). Reauthorization of VAWA and the 113th Congress Authorization for appropriations for the programs under VAWA expired in 2011; however, programs continued to receive appropriations in FY2012 and FY2013. In the 112 th Congress, a bill was passed in each chamber ( S. 1925 and H.R. 4970 ) that would have reauthorized most of the programs under VAWA, among other things. Neither bill was enacted into law. In 2013, the 113 th Congress reauthorized VAWA through the Violence Against Women Reauthorization Act of 2013 (VAWA 2013; P.L. 113-4 ). Many VAWA grants are now reauthorized from FY2014 through FY2018. This section briefly describes provisions of VAWA 2013. Consolidation of Grant Programs VAWA 2013 reauthorized most VAWA grant programs and authorized appropriations at a lower level, in general. It consolidated several VAWA grant programs and in doing so authorized new grant programs. These actions are summarized below. The (1) Safe Havens for Children (also referred to as Supervised Visitation) and (2) Court Training and Improvements programs were consolidated to form a new program, Grants to Support Families in the Justice System. The purpose of this program is to improve the civil and criminal justice system response to families with a history of domestic violence, dating violence, sexual assault, or stalking, or in cases involving allegations of child sexual abuse. The (1) Services to Advocate for and Respond to Youth (also referred to as Youth Services) and (2) Grants to Combat Domestic Violence, Dating Violence, Sexual Assault, and Stalking in Middle and High Schools (also referred to as Supporting Teens through Education and Protection or STEP) were consolidated to create Creating Hope Through Outreach, Options, Services, and Education for Children and Youth (CHOOSE Children & Youth). The purpose of this program is to enhance the safety of youth and children who are victims of or exposed to domestic violence, dating violence, sexual assault, stalking, or sex trafficking. This program also aims to prevent future violence. The (1) Engaging Men and Youth in Prevention and Grants to Assist Children and (2) Youth Exposed to Violence programs were consolidated to create Saving Money and Reducing Tragedies Through Prevention (SMART Prevention). The SMART Prevention program aims to prevent domestic violence, sexual assault, dating violence, and stalking through awareness and education programs and also through assisting children who have been exposed to violence and abuse. In addition, this program aims to prevent violence by engaging men as leaders and role models. Three previously unfunded programs, (1) Interdisciplinary Training and Education on Domestic Violence and Other Types of Violence and Abuse, (2) Research on Effective Interventions in the Health Care Setting, and (3) Grants to Foster Public Health Responses to Domestic Violence, Dating Violence, Sexual Assault, and Stalking, were eliminated and their purpose areas were included in the authorization of a new program called Grants to Strengthen the Healthcare System's Response to Domestic Violence, Dating Violence, Sexual Assault, and Stalking. The purpose of this program is to improve training and education for health professionals in their prevention of and response to domestic violence, dating violence, sexual assault, and stalking. VAWA Grant Provisions VAWA 2013 established new provisions for all VAWA grant programs. It established a nondiscrimination provision to ensure that victims are not denied services and are not subjected to discrimination based on actual or perceived race, color, religion, national origin, sex, gender identity, sexual orientation, or disability. It also enhanced protection of personally identifiable information of victims and specified the type of information that may be shared by grantees and subgrantees. It also required that any grantee or subgrantee that provides legal assistance must comply with certifications required under the Legal Assistance for Victims Grant Program. The 2013 reauthorization also added, modified, or expanded several definitions of terms in VAWA. These are a few examples: It revised the definition of "domestic violence" to specifically include "intimate partners" in addition to "current and former spouses." It removed the term "linguistically" from the Culturally Specific Services Grant and amended the definition of "culturally specific services" to address the needs of culturally specific communities. With respect to providing VAWA-related services, it added the terms "population specific services" and "population specific organizations," which focus on "members of a specific underserved population." It redefined "underserved populations" to include those who may be discriminated against based on religion , sexual orientation, or gender identity. It expanded the definition of cyberstalking to include use of any "electronic communication device or electronic communication service or electronic communication system of interstate commerce." It added a definition of "rape crisis center," which means "a nonprofit, nongovernmental, or tribal organization, or governmental entity in a State other than a Territory that provides intervention and related assistance ... to victims of sexual assault without regard to their age. In the case of a governmental entity, the entity may not be part of the criminal justice system ... and must be able to offer a comparable level of confidentiality as a nonprofit entity that provides similar victim services." It defined "individual in later life" to mean a person who is 50 years of age or older. It defined "youth" to mean a person who is 11 to 24 years of age. Accountability of Grantees VAWA 2013 imposed new accountability provisions including an audit requirement and mandatory exclusion if a grantee is found to have an unresolved audit finding. Additionally, it required the Office on Violence Against Women to establish a biennial conferral process with grantees and key stakeholders. Sexual Assault and Rape Kit Backlog VAWA 2013 amended the DNA Analysis Backlog Elimination Act of 2000 ( P.L. 106-546 ) to strengthen audit requirements for sexual assault evidence backlogs and require that for each fiscal year through 2018, not less than 75% of the total Debbie Smith grant amounts be awarded to carry out DNA analyses of samples from crime scenes for inclusion in the Combined DNA Index System and to increase the capacity of state or local government laboratories to carry out DNA analyses. Additionally, VAWA 2013 expanded the purpose areas of several VAWA grants to address the needs of sexual assault survivors to include strengthening law enforcement and forensic response and urging jurisdictions to evaluate and reduce rape kit backlogs. It also established a new requirement that at least 20% of funds within the STOP (Services, Training, Officers, Prosecutors) program and 25% of funds within the Grants to Encourage Arrest Policies and Enforce Protection Orders program be directed to programs that meaningfully address sexual assault. Trafficking in Persons VAWA 2013 amended and authorized appropriations for the Trafficking Victims Protection Act of 2000 (Division A of P.L. 106-386 ). It also enhanced measures to combat trafficking in persons, and amended VAWA grant purpose areas to address sex trafficking. For example, it expanded the purpose areas for the Creating Hope through Outreach, Options, Services, and Education for Children and Youth grant program to include victims of sex trafficking. VAWA 2013 also clarified that victim services and legal assistance include services and assistance to victims of domestic violence, dating violence, sexual assault, or stalking who are also victims of severe forms of trafficking in persons. American Indian Tribes VAWA 2013 included new provisions for American Indian tribes. It granted authority to Indian tribes to exercise special domestic violence criminal jurisdiction and civil jurisdiction to issue and enforce protection orders over any person, and created a new grant program to assist Indian tribes in exercising special criminal jurisdiction over cases involving domestic violence. It created a voluntary two-year pilot program for Indian tribes that make a request to the Attorney General to be designated as a participating tribe to have special domestic violence criminal jurisdiction over such cases ( Note: The Attorney General may grant a request after concluding that the criminal justice system of the requesting tribe has adequate safeguards in place to protect defendants' rights ). VAWA 2013 also expanded the purpose areas of grants to tribal governments and coalitions to include sex trafficking. Additionally, it expanded the purpose areas of grants for American Indian tribal governments and coalitions to develop and promote legislation and policies that enhance best practices for responding to violent crimes against Indian women. It also expanded the purpose areas of grants for American Indian tribal coalitions to raise awareness of and response to domestic violence to include identifying and providing technical assistance to enhance access to services for Indian women victims of domestic and sexual violence, including sex trafficking. Battered Nonimmigrants The most recent reauthorization of VAWA extended VAWA coverage to derivative children whose self-petitioning parent died during the petition process, a benefit currently afforded to foreign nationals under the family-based provisions of the Immigration and Naturalization Act (INA). It also exempted VAWA self-petitioners, U visa petitioners, and battered foreign nationals from being classified as inadmissible for legal permanent resident status if their financial circumstances raised concerns about them becoming potential public charges. Additionally, it amended the INA to expand the definition of the nonimmigrant U visa to include victims of stalking. VAWA 2013 added several new purpose areas of the Grants to Encourage Arrest Policies and Enforcement of Protection Orders program (Arrest Program), one of which was to improve the criminal justice system response to immigrant victims of domestic violence, sexual assault, dating violence, and stalking. Underserved Populations In addition to expanding the definition of "underserved populations," VAWA 2013 established several new grant provisions to address the needs of underserved populations. It required STOP implementation plans to include demographic data on the distribution of underserved populations within states and how states will meet the needs of their underserved populations. It also expanded the purpose areas of the Grants to Combat Violent Crimes on Campuses program to address the needs of underserved populations on college campuses. It amended a previously unfunded VAWA program, Grants for Outreach to Underserved Populations, to ensure that it would receive funding by allotting 2% of annual appropriated funding for the Arrest and STOP programs to the Grants for Outreach to Underserved Populations program. Housing VAWA 2013 added housing rights for victims of domestic violence, dating violence, sexual assault, and stalking, including a provision that states that an applicant may not be denied public housing assistance on the basis that the person has been a victim of domestic violence, dating violence, sexual assault, or stalking. Under the Transitional Housing Assistance Grant program, it ensured that victims receiving transitional housing assistance are not subject to prohibited activities, including background checks or clinical evaluations, to determine eligibility for services. It removed the requirement that victims must be "fleeing" from a violence situation in order to receive transitional housing assistance. VAWA 2013 also specified that transitional housing services may include assisting victims in seeking employment. VAWA 2013 required each executive department carrying out a covered housing program to adopt a model emergency transfer plan to use in allowing tenants who are victims of domestic violence, dating violence, sexual assault, or stalking to transfer to another available and safe dwelling unit of assisted housing. It also required the Secretary of Housing and Urban Development to establish policies and procedures under which a victim requesting such a transfer may receive Section 8 assistance under the U.S. Housing Act of 1937. Higher Education VAWA 2013 amended the Higher Education Act of 1965 (HEA) and established new mandatory grant guidelines for institutions of higher education in their incident response procedures and development of programs to prevent domestic violence, sexual assault, stalking, and dating violence. VAWA 2013 also addressed mandatory crime reporting and safety procedures on college campuses. For example, it amended the HEA to ensure that crime statistics on individuals who were "intentionally selected" because of their national origin or gender identity are recorded and reported according to category of prejudice. Other Changes VAWA 2013 amended rules for sexual acts in federal custodial facilities by adding "the commission of a sexual act" as grounds for civil action by a federal prisoner and mandating that detention facilities operated by the Department of Homeland Security and custodial facilities operated by the Department of Health and Human Services adopt national standards set forth through the Prison Rape Elimination Act of 2003 ( P.L. 108-79 ). VAWA 2013 also enhanced criminal penalties for assaulting a spouse, intimate partner, or dating partner. Appendix. Federal Programs Authorized by VAWA The fundamental goals of VAWA are to prevent violent crime, respond to the needs of crime victims, learn more about violence against women, and change public attitudes about domestic violence. This comprehensive strategy involves a collaborative effort by the criminal justice system, social service agencies, research organizations, public health organizations, and various private organizations. VAWA has supported these efforts primarily through federal grant programs that provide funding to state, tribal, and local governments, nonprofit organizations, and universities. Table A-1 provides descriptions of VAWA programs. Table A-2 provides a five-year funding history for these programs. VAWA 2013 authorized appropriations for most VAWA programs for FY2014-FY2018. Currently, Table A-2 includes FY2011-FY2015 appropriations for VAWA programs. FY2015 appropriations are provided by the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ).

The Violence Against Women Act (VAWA) has been of ongoing interest to Congress since its enactment in 1994 (P.L. 103-322). The original act was intended to change attitudes toward domestic violence, foster awareness of domestic violence, improve services and provisions for victims, and revise the manner in which the criminal justice system responds to domestic violence and sex crimes. The legislation created new programs within the Departments of Justice (DOJ) and Health and Human Services (HHS) that aimed to reduce domestic violence and improve response to and recovery from domestic violence incidents. VAWA primarily addresses certain types of violent crime through grant programs to state, tribal, and local governments; nonprofit organizations; and universities. VAWA programs target the crimes of intimate partner violence, dating violence, sexual assault, and stalking. In 1995, the Office on Violence Against Women (OVW) was created administratively within DOJ to administer federal grants authorized under VAWA. In 2002, Congress codified the OVW as a separate office within DOJ. Since its creation, the OVW has awarded more than $6 billion in grants. While the OVW administers the majority of VAWA authorized grants, other federal agencies, including the Centers for Disease Control and Prevention (in HHS) and the Office of Justice Programs (in DOJ), also manage VAWA grants. Since its passage in 1994, VAWA has been modified and reauthorized several times. In 2000, Congress reauthorized the programs under VAWA, enhanced federal domestic violence and stalking penalties, added protections for abused foreign nationals, and created programs for elderly and disabled women. In 2005, Congress again reauthorized VAWA. In addition to reauthorizing the programs under VAWA, the legislation enhanced penalties for repeat stalking offenders; added additional protections for battered and/or trafficked foreign nationals; created programs for sexual assault victims and American Indian victims of domestic violence and related crimes; and created programs designed to improve the public health response to domestic violence. In February 2013, Congress passed legislation (Violence Against Women Reauthorization Act of 2013; P.L. 113-4) that reauthorized most of the programs under VAWA, among other things. The VAWA reauthorization also amended and authorized appropriations for the Trafficking Victims Protection Act of 2000, enhanced measures to combat trafficking in persons, and amended some VAWA grant purpose areas to include sex trafficking. Moreover, VAWA 2013 gave Indian tribes authority to enforce domestic violence laws and related crimes against non-Indian individuals, and established a nondiscrimination provision for VAWA grant programs. The reauthorization also included new provisions to address the rape kit backlog in states. A description of the reauthorization is provided in this report.

Introduction Congress has played a key role in fostering the development of civilian capacity and capabilities to deal with conflicts overseas. "First generation" efforts were the establishment in 2004 of the former Office of the Coordinator for Reconstruction and Stabilization (S/CRS). This office was the result of widespread concern that the U.S. government lacked appropriate civilian "tools" to help stem, stabilize, and otherwise address conflicts that were perceived as a threat to the United States after the terrorist attacks of September 11, 2001 (9/11). Senator Richard G. Lugar and former Senator Joseph R. Biden Jr. provided the impetus to establish it in permanent law. The 113 th Congress may wish to play a continuing role regarding civilian capacity and capabilities by examining "second generation" efforts, which include the State Department Bureau of Conflict and Stabilization Operations (CSO). In November 2011, the Obama Administration announced its establishment of this bureau, which integrated S/CRS. CSO is intended to provide the institutional focus for policy and "operational solutions" to prevent, respond to, and stabilize crises. The evolution from S/CRS to CSO appears to have responded to changing perceptions of the security environment, S/CRS's perceived utility, and budget constraints. This report provides background on the origins and development of S/CRS and related capabilities. It also discusses four issues raised during the S/CRS years that may still be relevant for the CSO Bureau: perceptions of S/CRS's effectiveness, the appropriate size for Civilian Response Corps (CRC), flexible funding for stabilization operations, and funding for a reserve component. It does not cover events or perceptions since the formation of the CSO Bureau and will not be updated. For current information on CSO, see CRS Report R42775, In Brief: State Department Bureau of Conflict and Stabilization Operations (CSO) , by [author name scrubbed]. Overview of the Development of "First Generation" Civilian Capabilities Concerns about the need for the development of appropriate civilian capabilities to address conflict situations, particularly state-building tasks in post-conflict situations, began well over a decade before the creation of S/CRS. This concern grew from U.S. military operations in Haiti, Somalia, Bosnia, and elsewhere, where military forces were tasked with a variety of state-building tasks, such as creating justice systems, assisting police, and promoting governance. With the wars in Afghanistan and Iraq, consensus increased that the United States must develop adequate civilian organizational structures, procedures, and personnel to respond effectively to post-conflict and other "stabilization and reconstruction" (S&R) situations. The George W. Bush Administration launched several initiatives to do just that. The centerpiece of its efforts was the establishment of the S/CRS in the Office of the Secretary of State. Created in mid-2004, S/CRS was tasked with designing, and in some cases establishing, the new structures within the State Department and elsewhere that would allow civilian agencies to develop effective policies, processes, and personnel to build stable and democratic states. Among other tasks, S/CRS developed plans for the creation of a civilian "surge" capability that could respond rapidly to S&R emergencies. In the early months of the Obama Administration, Administration officials signaled their support for civilian S&R capabilities. In her January 2009 confirmation hearings before the Senate Foreign Relations Committee, Secretary of State Hillary R. Clinton mentioned the State Department's new S&R responsibilities, citing a department need to demonstrate competence and secure funding to carry them out. Secretary of Defense Robert Gates, while serving in that position under former President George W. Bush, urged the development of civilian capabilities in major speeches. As Senator, Vice President Joseph Biden was the co-sponsor, with Senator Lugar, of legislation, first introduced in 2004, to create an office within the State Department that would coordinate U.S. government S&R operations and deploy civilian government employees and private citizens to carry out state-building activities in crises abroad. In its second session, the 110 th Congress enacted legislation that "operationalized" certain groups of personnel within the Department of State and other federal agencies for S&R efforts by authorizing the creation of federal civilian "response" units, as well as the creation of a volunteer S&R civilian reserve force, akin to the military reserve force. This legislation advanced the work of previous Congresses regarding Bush Administration initiatives to improve the conduct of (S&R) efforts. With the passage in September 2008 of Title XVI of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 ( S. 3001 / P.L. 110-417 , known as the Lugar-Biden bill after its sponsors), signed into law October 14, 2008, Congress established S/CRS as part of permanent law. This law formally "operationalized" certain units in civilian federal agencies, most particularly the State Department; it expanded the State Department's functions to include effecting change through the deployment of "on-the-ground" personnel and programs dedicated to promoting security and stability in transitions from conflict and post-conflict situations. This was accomplished by authorizing the creation of a two component "readiness response" corps consisting of a small active unit of federal employees drawn from several agencies and a federal standby unit, and a large civilian reserve corps, analogous to the military reserve. The State Department's December 2010 Quadrennial Diplomacy and Defense Review (QDDR), with its broad reform agenda for State Department and USAID structures and activities, addressed potential changes to S/CRS, the response corps, and the reserves. The QDDR proposed reorganizing the structures to enhance the State Department's ability to develop and implement policy to address crises, conflict, and stability, including endowing an expanded version of S/CRS's mandate and capabilities in a new Bureau for Conflict and Stabilization Operations. The Obama Administration put some of the QDDR proposals into action when it established the CSO Bureau. Background to the Development of Civilian Capabilities Former President George W. Bush's pledge, articulated in his February 2, 2005, State of the Union address, "to build and preserve a community of free and independent nations, with governments that answer to their citizens, and reflect their own cultures" cast the once-discredited concept of building or rebuilding government institutions, economies, and civic cultures in a new light. During the 1990s, many policymakers considered the establishment of new institutions in troubled countries to be an overly expensive, if not futile exercise. The use of U.S. military forces for such activities, particularly in the first half of the decade, was troubling to many Members. The Bush Administration, in response to concerns about the threats posed by weak and fragile states, reframed both U.S. security and international development policy and initiated dramatic corresponding changes in U.S. governmental structures and practices. These changes, the Bush Administration argued, would enable the United States to perform such tasks more efficiently and at a lesser cost, particularly in transitions from conflict and in post-conflict situations. A key component of these changes was the establishment and reinforcement of new civilian structures and forces, in particular S/CRS and the civilian response/reserve corps. The Bush Administration made these new civilian entities a prominent feature in two initiatives: the National Security Presidential Directive 44 (NSPD-44) of December 2005 on the management of interagency reconstruction and stabilization operations and the "transformational diplomacy" reorganization of State Department personnel and practices announced in January 2006. These initiatives were intended to enhance the United States' ability to function effectively on the world scene in the environment created by the terrorist attacks of 9/11. Soon after 9/11, many analysts began to predict that the greatest threats to U.S. security often would emerge within states that are either too weak to police their territory or lack the political will or capacity to do so. To respond to those threats with a new "whole-of-government" approach, in 2006 former Secretary of State Condoleezza Rice outlined a new U.S. foreign policy strategy focusing on the "intersections of diplomacy, democracy promotion, economic reconstruction and military security" and involving extensive changes in government to carry that strategy out. State-building (or nation-building as it is often called) was at the center of this strategy. Both initiatives reinforced the important role that the Bush Administration gave S/CRS in policymaking and implementation dealing with conflict transitions and weak and fragile states. Evolving Perceptions of Post-Conflict Needs5 The creation of S/CRS in July 2004 responded to increasing calls for the improvement of U.S. civilian capabilities to plan and carry out post-conflict state-building operations. Several factors combined after 9/11 to lead many analysts to conclude that such operations were vital to U.S. security and that the United States must reorganize itself to conduct them effectively, in particular by creating new and improving existing civilian institutions to carry them out. Foremost among these factors, for many analysts, was the widespread perception after 9/11 that global instability directly threatened U.S. security and that U.S. interests would be served by transforming weak and failing states into stable, democratic ones. Related to this was the expectation that responding to the threat of instability will require the United States and the international community to intervene periodically in foreign conflicts with "peacekeeping" and "stabilization" forces at about the same intensive pace as it had done since the early 1990s. Because that pace stressed the U.S. military, many policymakers believed that the United States should create and enhance civilian capabilities to carry out the peacebuilding tasks that are widely viewed as necessary for stability and reconstruction in fragile, conflict-prone, and post-conflict states. Finally, numerous analyses distilling years of experience with multifaceted peacekeeeping and peacebuilding operations (subsequently also referred to as post-conflict operations or stabilization and reconstruction, or S&R missions), raised hopes that rapid, comprehensive, and improved peacebuilding efforts could significantly raise the possibilities of achieving sustainable peace. The perception that international terrorism could exploit weak, unstable states convinced many policymakers and analysts of the need to strengthen U.S. and international capabilities to foster security, good governance and economic development, especially in post-conflict situations. The 9/11 Commission and the Commission on Weak States and U.S. National Security found that weak states, as well as unsuccessful post-conflict transitions, pose a threat to U.S. security. These groups argued that such states often experience economic strife and political instability that make them vulnerable to drug trafficking, human trafficking, and other criminal enterprises, and to linkage with non-state terrorist groups (such as the links between the previous Taliban government in Afghanistan and the Al Qaeda terrorist network). Weak states also are unprepared to handle major public health issues, such as HIV/AIDS, that can generate political and economic instability. These commissions, and other analysts, argued for assistance to the governments of weak states and of post-conflict transitions regimes to help them control their territories, meet their citizens' basic needs, and create legitimate governments based on effective, transparent institutions. These and other studies perceived a need to enhance U.S. government structures and capabilities for conducting post-conflict operations. Although differing in several respects, the studies largely agreed on five points: (1) the ad hoc system needed to be replaced with a permanent mechanism for developing contingency plans and procedures for joint civil-military operations led by civilians; (2) mechanisms to rapidly deploy U.S. civilian government and government-contracted personnel needed to be put in place; (3) preventive action needed to be considered; (4) the U.S. government needed to enhance multinational capabilities to carry out post-conflict security tasks and to better coordinate international aid; and (5) flexible funding arrangements were needed to deal with such situations. In addition, some urged substantial amounts of funding for flexible U.S. and international accounts. Proposals for New Civilian Forces A prominent feature of several of the reports on stabilization and reconstruction operations was a recommendation to develop rapidly deployable civilian forces to undertake state-building functions, particularly those related to rule of law, even before hostilities had ceased. Many analysts view the early deployment of rule of law personnel as essential to providing security from the outset of an operation, which they argue will enhance the possibilities for long-term stability and democracy in an intervened or post-conflict country. Many view the development of civilian groups to do so as permitting the earlier withdrawal of military personnel than would otherwise be possible. The concept of a cohesive, rapidly deployable unit of civilian experts for stabilization and reconstruction operations dates back at least to the Clinton Administration. In PDD-71, which dealt with strengthening criminal justice systems in peace operations, the Clinton Administration identified such an initiative as a high priority, according to the PDD-71 White Paper. Six studies between 2003 and 2005 endorsed the creation of cohesive, rapidly deployable units of civilian experts for stabilization and reconstruction operations. These include a 2003 report of the National Defense University (NDU); a March 2004 report of the Center for Strategic and International Studies (CSIS); an April 2004 report of the U.S. Institute of Peace (USIP); a book by a USIP analyst; and the Defense Science Board 2004 Summer Study on transitions from hostilities. Critics Responded Some analysts questioned the utility of S/CRS and of the underlying rationale for its creation and the adoption of the transformational diplomacy strategy more broadly. Two think-tank studies published in January 2006 disputed the concept that weak and failed states are per se among the most significant threats to the United States. They pointed out that weak states are not the only locations where terrorists have found recruits or sought safe-haven, as they have exploited discontent and operated in developed countries as well. A report of the Center for Global Development stated that many factors beyond the weakness or lack of government institutions—demographic, political, religious, cultural, and geographic—contribute to the development of terrorism. As a result, they argued, an emphasis on weak and failed states could lead the United States to give short shrift to more tangible threats and to areas of greater U.S. interest. The CATO Institute study worried that former Secretary Rice's focus on promoting "responsible sovereignty" as an underpinning of transformational diplomacy could provide potential justification for eroding the current international norm of respect for national sovereignty, leading the United States into fruitless interventions. In addition, some analysts were skeptical that the problems of weak and failed states could be dealt with through military and political interventions aimed at creating viable government institutions. The effectiveness of past efforts continues to be a subject of debate, with differing views on the criteria for and the number of successes, draws, and failures, as is the best means to achieve success. There has been skepticism that state-building efforts will result in success in most instances. In the words of one scholar, "barring exceptional circumstances (the war against the Taliban after 9/11), we had best steer clear of missions that deploy forces (of whatever kind) into countries to remake them anew.... The success stories (Germany, Japan) are the exceptions and were possible because of several helpful conditions that will not be replicated elsewhere." Others, however, point to cases such as Mozambique and El Salvador as examples that state-building efforts can promote peace after civil strife. Creating Civilian Reconstruction and Stabilization Capabilities: Congressional and Executive Actions, 2004-2007 The "Lugar-Biden" Legislation On February 25, 2004, Senators Lugar and Biden introduced the Stabilization and Reconstruction Civilian Management Act of 2004 "to build operational readiness in civilian agencies." (At the time, these Senators were respectively the chairman and ranking Member of the Senate Foreign Relations Committee [SFRC].) The bill provided concrete proposals for establishing and funding the two new "operational" entities that had been recommended in think tank reports. This legislation contained three main proposals: (1) establish in law and fund a State Department Office for Stabilization and Reconstruction, (2) create an Emergency Response Readiness Force, and (3) create and fund an annually replenishable emergency response fund similar to that used for refugee and migration funds. The SFRC reported S. 2127 on March 18, 2004, but it was not considered by the full Senate; its companion bill ( H.R. 3996 , 108 th Congress, introduced by Representative Schiff) was not considered by the House International Relations Committee. In subsequent years, similar legislation was introduced, but until 2008 the only bill to pass either chamber was a subsequent Lugar-Biden measure, the Reconstruction and Stabilization Civilian Management Act of 2006 ( S. 3322 /109 th Congress). S. 3322 was introduced in the Senate May 26, 2006, and approved without amendment by unanimous consent the same day. It was received by the House on June 6, 2006, and referred to the House International Relations Committee. No further action occurred until the 110 th Congress with House passage on March 5, 2008, of a House bill with almost the same title, the Reconstruction and Stabilization Civilian Management Act of 2008 ( H.R. 1084 ), and the incorporation of a version of that bill into the conference version of the FY2009 NDAA, ( S. 3001 , P.L. 110-417 , see below). S/CRS Start-Up and Early Congressional Mandate S/CRS began operations in July 2004 on a somewhat more tentative status than that envisioned by the Lugar-Biden bill. The office was created by then-Secretary of State Colin Powell without statutory authority, and the coordinator, appointed by the Secretary, was not given the rank of "Ambassador-at-Large." By the beginning of 2005, S/CRS had a staff of 37 individuals from the State Department, USAID, and several other U.S. government agencies, including the Departments of Defense, Commerce, and the Treasury. The U.S. military supported S/CRS's creation and its mission. In prepared statement for testimony before the Armed Services Committees in February 2005, General Richard B. Myers, Chairman of the Joint Chiefs of Staff, cited the creation of S/CRS as "an important step" in helping "post-conflict nations achieve peace, democracy, and a sustainable market economy." "In the future, provided this office is given appropriate resources, it will synchronize military and civilian efforts and ensure an integrated national approach is applied to post-combat peacekeeping, reconstruction and stability operations," according to General Myers. S/CRS also received an endorsement from a task force headed by two former Members. The June 2005 report of the congressionally mandated Task Force on the United Nations, chaired by former Speaker of the House of Representatives Newt Gingrich and former Senate Majority Leader George Mitchell, recommended that the United States strengthen S/CRS and that Congress provide it with the necessary resources to coordinate with the United Nations. 2004 Congressional Mandate Congress first endorsed the creation of S/CRS in 2004 as part of the Consolidated Appropriations Act for FY2005 ( H.R. 4818 , P.L. 108-447 ), signed into law December 8, 2004. Section 408, Division D, defined six responsibilities for the office, the first five of which respond to the first need—to create a readily deployable crisis response mechanism—stated above. As legislated by P.L. 108-447 , S/CRS's functions were (1) to catalogue and monitor the non-military resources and capabilities of executive branch agencies, state and local governments, and private and non-profit organizations "that are available to address crises in countries or regions that are in, or are in transition from, conflict or civil strife"; (2) to determine the appropriate non-military U.S. response to those crises, "including but not limited to demobilization, policy, human rights monitoring, and public information efforts"; (3) to plan that response; (4) to coordinate the development of interagency contingency plans for that response; (5) to coordinate the training of civilian personnel to perform stabilization and reconstruction activities in response to crises in such countries or regions"; and (6) to monitor political and economic instability worldwide to anticipate the need for U.S. and international assistance. In subsequent legislation ( S. 3001 , P.L. 110-417 , the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009), Congress expanded this list of functions. (See below.) Congress funded S/CRS under the State Department's Diplomatic and Consular Affairs budget. S/CRS received funding through annual appropriations and supplemental appropriations. S/CRS Role in Interagency Coordination The S/CRS role in interagency coordination was formalized under NSPD-44, issued by former President Bush on December 7, 2005, to improve conflict-response coordination among executive branch agencies. NSPD-44 formally remains in effect as of the date of this report, although it may not be observed in practice. This directive assigns the Secretary of State the lead responsibility for developing the civilian response for conflict situations and related S&R activities; the Secretary may direct the Coordinator for Reconstruction and Stabilization to assist with those tasks. Under NSPD-44, the Secretary of State is also responsible for, and may delegate to the Coordinator, coordination of the interagency processes to identify states at risk, the leadership of interagency planning to prevent or mitigate conflict, and the development of detailed contingency plans for stabilization and reconstruction operations, as well as for identifying appropriate issues for resolution or action through the National Security Council (NSC) interagency process as outlined in President Bush's first National Security Policy Directive (NSPD-1, "Organization of the National Security Council System," signed February 1, 2001 ). NSPD-44, entitled "Management of Interagency Efforts Concerning Reconstruction and Stabilization," expanded S/CRS activities beyond those conferred by the congressional mandate (see above). (NSPD-44 supersedes PDD-56, referred to above.) S/CRS developed the mechanism for interagency cooperation in actual operations, drafting the January 22, 2007, Interagency Management System (IMS) for Reconstruction and Stabilization, which was approved by a National Security Council (NSC) deputies meeting. This document lays out a plan for interagency coordination in responding to highly complex reconstruction and stabilization crises. Under the IMS, the Coordinator for Reconstruction and Stabilization is one of three co-chairs of the central coordinating body for the U.S. government response to a crisis. (The others are the appropriate regional Assistant Secretary of State and the relevant NSC Director.) Under the plan, S/CRS is charged with providing support to a civilian planning cell integrated with relevant military entities (a geographic combatant command or an equivalent multinational headquarters). Codifying Civilian Reconstruction and Stabilization Assistance and State Department Capabilities: Title XVI, P.L. 110-417, October 14, 2008 The effort to expand civilian capabilities to perform stabilization and reconstruction tasks reached an important benchmark in October 2008. Through Title XVI of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 ( P.L. 110-417 ), Congress amended the basic foreign assistance and State Department statutes to (1) authorize the President to provide assistance for a reconstruction and stabilization crisis, (2) formally establish S/CRS and assign it specific functions, and (3) authorize a Response Readiness Corps (RRC) and a Civilian Reserve Corps (CRC). The authority to provide assistance for a reconstruction and stabilization crisis was created by amending chapter 1 of part III of the Foreign Assistance Act of 1961, as amended (FAA, 22 U.S.C. 2734 et seq.) by inserting a new section. This authority is, however, subject to a time limitation: it may be exercised only during FY2009-FY2011. The new authority for S/CRS, the RRC, and the CRC was created by amending Title I of the State Department Basic Authorities Act of 1956 (22 U.S.C. 2651a et seq.). These authorities are permanent. Authorizes Assistance for Reconstruction and Stabilization Crises Under the heading "Authority to Provide Assistance for Reconstruction and Stabilization Crises," Section 1604 of P.L. 110-417 adds a new section to the FAA. Section 681 provides authority for the President to use U.S. civilian agencies or non-federal employees to furnish assistance for reconstruction and stabilization in order to prevent conflict and to secure peace. The specific authority permits the President to "to assist in reconstructing and stabilizing a country or region that is at risk of, in, or is in transition from, conflict or civil strife." As passed in P.L. 110-417 , this authority may be exercised for three fiscal years (FY2009-FY2011). To provide such assistance, the President must determine that U.S. national security interests are served by using such personnel. The President may use funds made available under any other provision of the FAA that are transferred or reprogrammed for the purposes of this section, subject to the 15-day prior notification to congress required by Section 634A, FAA. The President must also consult with and provide a written policy justification to Congress's foreign affairs and appropriations committees (under Section 614(a)(3), FAA) prior to its use. The assistance may be provided notwithstanding any other provision of law, and on such terms and conditions as the President may determine. The section does not provided authority "to transfer funds between accounts or between Federal departments or agencies." Makes S/CRS a Permanent State Department Office and Assigns Specific Functions A major objective of proponents of improving the civilian capacity to perform stabilization and reconstruction operations was to provide S/CRS with a permanent authorization and specified functions mandated by law. Such an authorization was a key feature of the initial and subsequent versions of the Lugar-Biden legislation. P.L. 110-417 , Section 1605, codifies the existence of S/CRS by amending Title 1 of the State Department Basic Authorities Act of 1956 (22 U.S.C. 2651 et seq.), which, among other functions, provides for the establishment of the higher level positions within the Department of State. This codification prevents the dismantling of the office without the legislative consent of Congress. It also assigns nine specific functions to S/CRS, largely mirroring the functions assigned by Congress in its original legislation on S/CRS, as cited above. In general, these functions convey on the Coordinator for Reconstruction and Stabilization an overall responsibility for monitoring and assessing political and economic instability, and planning an appropriate U.S. response. Some of these functions are to be undertaken in coordination or conjunction with USAID and other relevant executive branch agencies. Authorizes a Civilian Response Readiness Corps and a Civilian Reserve Corps Civilian personnel available through the U.S. government to perform S&R activities are scarce, decentralized in organization, and difficult to call up. Many analysts have viewed the remedy to this situation as the creation of a corps of "on-the-ground" civilian personnel which could develop and implement state-building activities and interact with U.S. military personnel at all levels in order to foster security and stability in troubled situations. From the beginning, Luger\Biden legislation sought to authorize the establishment of such a corps. The Bush Administration began creating a small response cadre of government employees in its FY2006 and FY2007 budget submissions, and proposed a full-scale corps in its February 2008 Civilian Stabilization Initiative. P.L. 110-417 established the Response Readiness Corps and the Civilian Reserve Corps "to provide assistance in support of stabilization and reconstruction activities in foreign countries or regions that are at risk of, in, or are in transition from, conflict or civil strife." [ Note that the terminology for this "surge" capability differs in the legislation from that used by the Bush and Obama Administration in naming its components. The Obama Administration combines the Civilian Response Readiness Corps and the Civilian Reserve Corps into one "Civilian Response Corps" (CRC) with three components. The Obama Administration's CRC active and standby units (CRC-A and CRC-S) correspond to this legislation's Civilian Response Readiness Corps, and the reserve component (CRC-R) corresponds to this legislation's Civilian Reserve Corps.] This civilian capability consists of two components: The Response Readiness Corps (RRC) of federal employees composed of active and standby components consisting of U.S. government personnel, including employees of the Department of State, USAID, and other agencies who are recruited and trained to provide reconstruction and stabilization assistance when deployed to do so by the Secretary of State. No specific number is provided for members of these components. The legislation notes that members of the active component would be specifically employed to serve in the Corps. The Secretary of State is authorized to establish and maintain the SRC, in consultation with the Administrator of USAID and the heads of other appropriate U.S. government agencies. The Secretary of State alone is authorized to deploy its members. The Civilian Reserve Corps (CRC) of individuals with "the skills necessary for carrying out reconstruction and stabilization activities, and who have volunteered for that purpose." The Secretary is authorized to establish the Corps in consultation with the Administrator of USAID, and is authorized to employ and train its members, as well as to deploy them subject to a presidential determination under the proposed Section 618 of the Foreign Assistance Act of 1961, as amended. No size was specified for the Civilian Reserve Corp. For the Corps to deploy, the President must issue a determination that U.S. national security interests would be served by providing assistance for a reconstruction and stabilization crisis (see above). Development of the S/CRS Office, Responsibilities, and Capabilities S/CRS worked to develop the knowledge, capacity, and procedures to ably respond to the needs of countries at risk of conflict, in transitions from conflict, and in the early stages of recovery from conflict. S/CRS grew slowly from a few dozen to somewhat under 200. The numbers varied from time to time. Staff was largely drawn from the State Department (Foreign Service officers and State Department permanent civil service employees) and several contributed by other executive branch agencies, including Justice, the Office of the Director of National Intelligence, USAID, DOD, the Army Corps of Engineers, the Department of Agriculture, and the Department of Health and Human Services. It also included a good number of contract employees working for S/CRS, as well as fellows and interns. S/CRS carried out a wide range of activities: monitoring potential conflict, planning for U.S. responses to conflict, and evaluating and initiating programs to prevent conflict or the spread of conflict, among others. Monitoring and Planning for Potential Conflicts To monitor potential crises, S/CRS asked the National Intelligence Council (NIC) to provide it twice a year with a list of weak states most susceptible to crisis, from which S/CRS could choose one or more as test cases to prepare contingency plans for possible interventions. S/CRS also worked with the USAID Office of Conflict Management and Mitigation, which develops techniques for preparing highly detailed assessments of current and impending conflicts. In addition, S/CRS worked with the U.S. military's Joint Forces Command (JFCOM) to develop a common civilian-military planning model for stabilization and reconstruction operations. S/CRS also assisted U.S. embassies abroad in assessing the potential for conflict in individual countries. Developing and Carrying Out Conflict Response Activities S/CRS took a lead in planning, developing, and implementing many small conflict response programs. From FY2006 through FY2009, S/CRS used funds provided under DOD's "Section 1207" to carry out conflict prevention and response efforts in 14 individual countries and other countries in Southeast Asia and the Trans-Sahara region. In the wake of the January 2010 earthquake in Haiti, S/CRS played a supporting role to USAID's humanitarian relief effort. Well before Congress authorized the creation of a Civilian Response Corps (see below), S/CRS took the first steps in the lengthy process of creating integrated and coherent groups of crisis-response personnel from executive branch agencies. In 2006, S/CRS created, as a pilot project, a small nucleus of active and retired government employees to deploy to operations. S/CRS began deploying members of the active response component during the last half of 2006. In 2006, ARC members were deployed to Darfur, Lebanon, Chad, and Nepal. About 10 other deployments followed, some with standby component members and other members of the S/CRS staff. Subsequent deployments to many other countries followed. In 2010, S/CRS and the CRC carried out three primary missions, conducted in Afghanistan, Kyrgyzstan, and Sudan. As of August 2010, there were 26 S/CRS and CRC staff in Afghanistan providing support to the government of Afghanistan in implementing the Afghan National Development Strategy, to coalition military regional commands, and to communications and elections efforts. Personnel deployed in Afghanistan are supported by a 15-person Afghan Engagement Team at S/CRS in Washington, DC, which also supports other agencies' efforts in Afghanistan, including the Office of the Special Representative for Afghanistan and Pakistan, regional bureaus, regional combatant commands, and partner nations. In February 2010, S/CRS staff deployed to Kyrgyzstan at the request of the State Department's South and Central Asia Bureau to provide assessment and planning support for the development of a five-year strategic plan for the country. After the April overthrow of the government, S/CRS supported efforts that led to a six-month interagency stabilization strategy, and then deployed 18 of its personnel and 17 CRC members to help implement the strategy. S/CRS and the CRC also provide support to a wide variety of other U.S. activities involving elections, strategic communications, stabilization and conflict-mitigation assistance, and economic and trade assessments and advice, as well as to the Organization for Security and Cooperation in Europe (OSCE) efforts. Beginning in April 2010, six S/CRS planners, accompanied at times by USAID staff, supported the election preparation work of the U.S. Special Envoy to Sudan as that office prepared for the January 2011 referendum on self-determination in Southern Sudan, as well as other support to the special envoy and to U.S. government interagency groups working on Sudan. As of January 11, 2011, there were 15 Washington, DC-based personnel (6 S/CRS and 9 CRC) engaged in Sudan work. As of January 6, 2012, S/CRS and the CRC had 51 people deployed to 10 countries. This was down 17 personnel and 1 country, Nepal, from mid-December 2011. Most of them were in Afghanistan (30) and Sudan (11). Of those in Afghanistan, 22 were CRC-A, 2 were CRC-S, and 6 were from S/CRS. In Sudan, 7 were CRC-A, 3 were CRC-S, and 1 was from S/CRS. There were two people each in Cote D'Ivoire (both from S/CRS) and Pakistan (one CRC-A and one CRC-S). One CRC-A member was present in each of the Democratic Republic of the Congo, Haiti, Iraq, Libya, Tunisia, and Uganda. Contributing agencies were State, USAID, and the Departments of Agriculture, Commerce, and Justice. Other Activities To address the need for greater interagency, particularly civil-military, planning and coordination, S/CRS worked with the military entities to develop civilian-military training exercises for stabilization and reconstruction operations. It has entered into an agreement with the U.S. Army to train civilian planners. And, among other activities, it has developed ties with other international participants to coordinate and enhance civilian capabilities for stabilization and reconstruction activities. Development of the Civilian Response Corps (CRC) On July 16, 2008, then Secretary of State Rice formally launched the Civilian Response Corps active and standby components with a speech thanking Congress for the passage of funding in the Supplemental Appropriations Act, 2008, to establish the CRC. Under plans developed by the Bush Administration (and continued by the Obama Administration) the three-component corps would consist of a 250-member active component (CRC-A) of U.S. government employees who could deploy within 48 hours, a 2,000-member standby component (CRC-S) of U.S. government employees who could deploy within 30 days, and a 2,000-member reserve component (CRC-R) of experts from other public institutions and the private sectors who would be available for deployment in 45-60 days. Under the leadership of S/CRS, two other State Department offices and eight other contributing departments and agencies are now recruiting the first 100 members of the CRC-A, and 500 members of the standby component. Besides the State Department, contributors are USAID and the Departments of Agriculture (USDA), Commerce, Justice, Health and Human Services (HHS), Homeland Security (DHS), Treasury, and Transportation. Initial CRC Funding: FY2008 and FY2009 As of May 7, 2009, the date the Obama Administration presented its detailed FY2010 budget request, Congress had appropriated $140 million for the establishment and deployment of the active and standby civilian response components. These FY2008 and FY2009 funds together provided for the establishment of a 250-member active component and a 500-member standby component. In June 2008, Congress specifically provided $65 million for S/CRS and USAID S&R activities in supplemental appropriations through the Supplemental Appropriations Act, 2008, P.L. 110-252 , signed into law June 30, 2008. Of that amount, up to $30 million was appropriated as FY2008 funds (under the State Department Diplomatic and Consular Programs account) for the State Department "to establish and implement a coordinated civilian response capacity" and up to $25 million was appropriated to USAID as FY2008 supplemental funds for that agency to do the same (122 Stat.2328-2329). The remaining $10 million was part of FY2009 supplemental bridge fund appropriations for the State Department. (This appropriation was less than the $248.6 million that the Bush Administration requested in February 2008, for its CSI, which rolled into one its request for funds for continued operations of S/CRS, funds for a 250-member interagency CRC Active Response component and a 2,000-member Standby Response component, and a 2,000-member Civilian Reserve component, and money for deployment of experts.) In March 2009, Congress provided $75 million in FY2009 appropriations to the newly created Civilian Stabilization Initiative account in order to establish and support the CRC active and standby components (Omnibus Appropriations Act, 2009, P.L. 111-8 , signed into law March 11, 2009). This included $45 million in State Department funds and $30 million in USAID funds. Establishing the Civilian Response Corps Active Response Component (CRC-A) As originally planned by the Bush Administration, and contemplated by early plans of the Obama Administration, the total number of personnel for the CRC-A was 250. By early 2010, the Obama Administration contemplated a CRC-A of 247 members onboard, trained, and ready for deployment as of the end of FY2010. This is nearly all the originally planned goal of 250 CRC-A members. The planned distribution among the agencies participating at that time, to be achieved by September 30, 2010, was as follows: In mid-2010, however, S/CRS halted formation of the active unit to rethink the appropriate distribution of specialties and, consequently, the necessary contribution from each agency. It is still in the process of formulating a new division of labor for the CRC-A. Meanwhile, the Treasury Department withdrew, and two new agencies—the Department of Energy (DOE) and the Department of Transportation (DOT)—were added. As of early 2012, CRC-A members totaled 131, a bit over half the originally planned goal. They were contributed by the following agencies: Establishing the Civilian Response Corps Standby Component (CRC-S) The Obama Administration's original goal for the response corps' standby component was 2,268. As of January 21, 2011, the CRC-S had 1,062 members contributed by seven agencies ready and trained for deployment. They were distributed as follows: Revised plans called for an intermediate CRC-S goal of 2,000 members, of which 1,374 members were to be onboard from these seven agencies as of the end of FY2011. By January 6, 2012, the CRC-S was reduced by almost half. Its 590 members were contributed by agencies as follows: Establishing a Civilian Reserve Capability In line with former President Bush's 2008 State of the Union speech, mentioned above, S/CRS had developed by early 2009 a general concept for a reserve component of retired government personnel, personnel from state and local governments, private for-profit companies, and non-profit NGOs to carry out rule of law, civil administration, and reconstruction activities. Nevertheless, Congress turned down the sole budget request for the reserve corps: $63.3 million for FY2010 for a 2,000-member CRC reserve component (CRC-R), whose members would be deployable within 45-60 days. The Obama Administration did not request FY2011 funds for a civilian reserve. In briefings to Congress, Administration officials stated that the Administration would complete work establishing the CRC active and standby components before requesting funds for a reserve component. With the State Department's December 2010 QDDR, the Obama Administration announced a change of course regarding a civilian reserve. The QDDR proposed replacing the reserve with "a more cost-effective 'Expert Corps' consisting of an active roster of technical experts, willing but not obligated to deploy to critical conflict zones." (See the section on " Establishing a Reserve Capability? " below for more information.) Civilian Stabilization Initiative FY2010 Funding The Obama Administration's May 7, 2009, FY2010 budget request of $323.272 million for the Civilian Stabilization Initiative (CSI) was designed to continue Bush Administration plans for the establishment of a 4,250 member, three-component civilian response corps. According to the State Department request for these funds, this CSI would provide "trained, equipped, and mission-ready civilian experts and institutionalized systems to meet national security imperatives, including in partnership with the U.S. Armed Forces." This corps will enable the President and Secretary of State "to react to unanticipated conflict in foreign countries" while reducing or eliminating "the need for large military deployments in such crises," according to the State Department request. The requested FY2010 CSI funding also was intended to support the continued development of the CRC, including the establishment of a reserve component, which has yet to receive funds, and provide for the institutional structure to coordinate interagency conflict response efforts. CRC development requires not only recruitment and hiring, but the training and pre-positioning of equipment for U.S. government response personnel. The State Department broke down the uses of the requested $323 million as follows: $136.9 million to build and support an active component of 250 members and a standby component of 2,000 members, to fund up to 1,000 members of the active and standby component to deploy to S&R missions in FY2010; $63.6 million to establish a trained and equipped 2,000 member reserve component that will draw other public and private sector experts into U.S. S&R responses; $12.5 million to fund the deployment of other experts during the first three months of an operation, "ensuring that critical staff such as police trainers and advisors can be deployed when ... most needed"; $51.3 million to sustain deployed personnel and provide logistics for up to 130 responders for three months, including $7.1 million to operate and maintain a civilian deployment center; $34.3 million to provide security for up to 130 civilian responders (in up to three deployed field teams) in a semi-permissive environment for three months; and $24.7 million to augment Washington-area leadership, including 10 new positions for S/CRS operations and staff. The Obama Administration requested an additional $40 million in the Economic Support Fund (ESF) account for Stabilization Bridge Funds (SBF) to provide for urgent on-the-ground needs during the initial stages of a crisis. These funds could be used while other funds are reprogrammed, transferred, or appropriated for the crisis. Under its "General Provisions" request, the Obama Administration asks authority to transfer SBF funds into the CSI account. In response, Congress provided a $50 million "Complex Crisis Fund" under USAID. (See the section on " Flexible Funding for S&R Operations ," below.) Congress's FY2010 Appropriations and Rescission For FY2010, Congress provided $150 million for the CSI Active and Standby components in the Department of State, Foreign Operations, and Related programs Appropriations Act, 2010, Division F of the Consolidated Appropriations Act, 2010, ( H.R. 3288 , P.L. 111-117 , signed into law December 16, 2009). Of this, Congress provided $120 million to the State Department and $30 million to USAID. It did not provide funding for the proposed reserve component. The P.L. 111-117 appropriations language requires USAID and the State Department to coordinate their activities. Congress specified that the CSI funds were provided to enable the State Department and USAID to "support, maintain, mobilize, and deploy a Civilian Response Corps ... and for related reconstruction and stabilization assistance to prevent or respond to conflict or civil strife in foreign countries or regions, or to enable transitions from such strife" under Section 667 of the FAA. These funds are available until expended. The bill's conference report ( H.Rept. 111-366 ) mandated the allocations detailed below, in bold, from the State Department's funding. The State Department's actual allocations, made after $70 million in rescissions, are indicated in italics. $21.0 million for active response component salaries, benefits, and other personnel costs ( $22.3 million ). $15.2 million for Active and Standby Response Component training ( $8.6 million ). $25.0 million for equipment acquisition ( $1.1 million ). $26.7 million for deployments ( $12.3 million ). $8.0 million for operations support ( $8.4 million ). $21.1 million for S/CRS policy and planning functions ( $27.2 million ). In addition, Congress established a new USAID Complex Crisis Fund with $50 million to "support programs and activities to respond to emerging or unforeseen complex crises overseas." These funds are also available until expended. Civilian Stabilization Initiative FY2011 Funding In its FY2011 budget request submitted February 1, 2010, the Obama Administration requested $184 million for the CSI, to be available until expended. This was $34 million over the total CSI funding provided by Congress for FY2010. Although Congress divided FY2010 CSI funding between the State Department and USAID, the Administration requested the entire FY2011 CSI budget under the State Department. Under the continuing resolutions for FY2011 in effect through March 4, 2011 ( P.L. 111-322 ), and through March 18, 2011 ( P.L. 112-4 ), total CSI funding remained at the FY2010 level before rescissions. H.R. 1 , Full-Year Continuing Appropriations, 2011, as passed by the House February 19, 2011, would set the CSI funding level at $40 million for State and $7 million for USAID. The FY2011 funding request broke down planned CSI allocations as follows, in bold. The State Department's planned allocations for FY2011, based on P.L. 111-322 appropriations calculated at an annual rate, are indicated in italics. CRC active component salaries, benefits and other personnel expenses: $45.1 million ( $ 16.0 million ). Training for CRC active and standby components: $12.2 million ( $5.2 million ). Equipment acquisition: $12.3 million ( $25.0 million ). Deployments: $69.6 million ( $34.7 million ). Deployment center: $4.1 million ( 0 ). CRC operations support: $11.0 million ( $13.0 million ). S/CRS policy and planning: $29.8 million ( $26.1 million ). For FY2011, the Administration also asked for $100 million for the Complex Crises Fund, which it stated "will replace funding formerly provided through the Department of Defense Section 1207 authority." According an accompanying document, the requested funds will support activities to prevent or respond to emerging or unforeseen crises that address reconstruction, security, or stabilization needs. Funding will target countries or regions that demonstrate a high or escalating risk of conflict or instability, or an unanticipated opportunity for progress in a newly-emerging or fragile democracy. Projects will aim to address and prevent root causes of conflict and instability through a whole-of-government approach and will include host government participation, as well as other partner resources where possible and appropriate. As noted above, Congress established this account in 2009 with initial funding from the FY2010 budget of $50 million, the level at which was continued under the FY2011 continuing resolutions through March 4 ( P.L. 111-322 ) and through March 18, 2011 ( P.L. 112-4 ). H.R. 1 provided no funding for the CCF. Civilian Stabilization Operations FY2012 Funding For FY2012, the Obama Administration requested $92.2 million for Conflict Stabilization Operations (CSO), the new name for the CSI, and $75 million for the USAID Complex Crises Fund. The request was broken down as follows: CRC active component salaries, benefits, and other personnel expenses: $31.9 million. Training for CRC active and standby components: $9.6 million. Equipment acquisition: $1.0 million. Deployments: $15.5 million. Deployment center: $0.6 million. CRC operations support: $7.7 million. Headquarters policy and planning: $25.9 million. The Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), provided $8.5 million for Conflict Stabilization Operations in the Overseas Contingency Operations (OCO) funding. During FY2012, $21.8 million in funds for S/CRS and then for CSO were drawn from the State Department Diplomatic and Consular Programs account. P.L. 112-74 provided $40 million for the CCF, $10 million in the core budget, and $30 million in OCO funds. Issues for Congress S/CRS in Retrospect The establishment of the new State Department Conflict and Stabilization Operations (CSO) Bureau appeared to respond to the perception that S/CRS was not performing as intended. During its seven years, S/CRS encountered substantial difficulties in building its capabilities and carrying out its functions, and many analysts expressed doubts about the office's ability and capacity to carry out its mission. Some analysts blamed a perceived lack of initiative by the State Department to provide S/CRS with necessary personnel and responsibility on an "anti-operational" social culture of the State Department, at least at first. (For several years, it was also blamed on a perceived lack of sufficient funding from Congress.) Some analysts have pointed to resistance from the regional bureaus, which traditionally have the lead on conflict response abroad, to S/CRS involvement in specific crises. Some cited the lack of necessary support from top State Department leadership to overcome this bureaucratic resistance and ensure that S/CRS played a larger and constructive role. Many analysts have agreed that the U.S. government needs a civilian entity or entities that can effectively perform the planning and lessons learned functions assigned to S/CRS by Congress, as well as the coordination function for specific operations that the Secretary of State may assign to the Coordinator under NSPD-44. The question has been whether to resolve the problem by upgrading or improving S/CRS, assigning operational functions to USAID, or replacing S/CRS with a new organization. Some observers argued that the magnitude of the S/CRS mission required improved capabilities within the office and enhanced status, if it is to provide adequate direction and personnel for an interagency response to stabilization and reconstruction crises. "It is not clear that S/CRS is large enough, well enough funded, or sufficiently high in rank to pull an interagency effort together," according to a 2008 MIT Security Studies Program report. To provide the head of S/CRS with greater clout within the State Department and in dealing with other departments and agencies, some suggested that rank of that official or the status of the Office itself, be upgraded. Some suggest that the Coordinator's functions be assigned to an Under Secretary, or that S/CRS become a State Department bureau headed by an Assistant Secretary. (The "Coordinator" position is the equivalent of an Assistant Secretary, according to an S/CRS official.) Nevertheless, others have questioned whether all of the functions assigned S/CRS are appropriate for that office. For instance, some contend that an office with the mission of mobilizing civilian personnel for stabilization and reconstruction missions would be better placed in USAID, which fields disaster response units (the Disaster Assistance Response Teams) and has an Office of Transition Initiatives that has worked in post-conflict settings. A study by a former U.S. Ambassador to Senegal and to Guinea, Dane F. Smith, Jr., now a senior associate at CSIS, argued that leadership for reconstruction and stabilization missions should be exercised through a State Department office "like that of" S/CRS, but one that incorporates a much greater number of personnel from other civilian agencies (as well as some from DOD) and would be "a fully integrated State-USAID operation." Ambassador Smith also cited a need to establish a new balance between the regional bureaus and the S/CRS-like office that would draw on their respective strengths for planning and conducting operations, and for the Secretary of State to ensure effective cooperation. Another study would reassign S/CRS functions to a new, independent entity, the U.S. Office for Contingency Operations (USOCO), responsible to the NSC. As proposed in a February 2010 report by the Office of the Special Inspector General for Iraq Reconstruction, the USOCO "would become the locus for planning, funding, staffing, and managing" stabilization and reconstruction operations, "replacing the fragmented process that now exists. Importantly, it would provide a single office whose sole mission is ensuring that the United States is ready to go when the next contingency occurs; and it would provide someone to hold accountable for failures in planning and executions." Another proposal would have divided S/CRS's functions among the NSC, the State Department Policy Planning Office, and USAID. As proposed by an April 2010 joint study of the Brookings Institution and CSIS, the NSC would take on "the design and management of whole-of-government coordination systems," a "more robust policy planning office at the State Department," would provide the "helpful planning support that S/CRS has provided to regional bureaus on a case-by-case basis," and USAID would assume the "operational responsibilities of building and maintaining the Civilian Response Corps." (USAID might also take on the planning support if a policy and strategic planning entity were to be established there, according to the proposal.) QDDR Proposal to Reorganize State Department for Conflict and Stabilization Operations The Obama Administration first announced the creation of the CSO Bureau in the December 2010 QDDR. In line with proposals to elevate the status of S/CRS functions, the QDDR proposed restructuring the State Department in order for it to "exercise the leadership demanded in complex political and security contingencies." This is to be accomplished by integrating "conflict and stabilization operations into core functions of the State Department." Under the plan set out in the QDDR, S/CRS would be subsumed under the new Bureau for Conflict and Stabilization Operations (CSO), which would "build upon but go beyond the mandate and capabilities of S/CRS," serving "as the institutional locus for policy and operational solutions for crisis, conflict, and instability." Under this plan, the Assistant Secretary leading the CSO Bureau "will coordinate early efforts at conflict prevention and rapid deployment of civilian responders as crises unfold, working closely with the senior leadership of USAID's Bureau of Democracy, Conflict, and Humanitarian Assistance." In addition, this Bureau would be placed under a new Under Secretary for Civilian Security, Democracy, and Human Rights. The QDDR set forth five other functions of the CSO Bureau. In respect to interagency work, the CSO Bureau would bear responsibility, in cooperation with other State Department bureaus and USAID, to (1) build the capabilities and systems of the CRC, other interagency surge teams, and other deployable assets; (2) provide expertise and operational guidance for the development of policies and strategies to prevent and respond to crises and conflicts; and (3) provide specialists in crisis, conflict, and state fragility to regional bureaus in order to serve as CSO liaisons and to integrate conflict prevention work across the State Department. In relation to other countries and international organizations, the CSO Bureau would be responsible for institutionalizing an international operational crisis response framework, and coordinating efforts among key allies and other partners to build civilian capacity, strengthening interoperability, and cooperation. As part of this restructuring, the State Department promised in the QDDR promises to ensure that the new CSO Bureau would be staffed with personnel with the requisite expertise and experience in conflict management and prevention, and draw others with needed expertise in other areas from elsewhere in State, as well as USAID and other U.S. government agencies. The CSO Bureau would also create a new cadre of senior diplomats trained and experienced in conflict resolution and mediation to deploy to conflict zones and at-risk weak states. The State Department would also develop a quick, flexible contracting mechanism to deploy people and resources to the field. In parallel with the creation of the CSO Bureau, the State Department would also revamp related USAID capabilities. The QDDR calls for expanding USAID's Office of Transition Initiatives (OTI), enhancing its field presence, and augmenting its staff abroad and in Washington. The QDDR promises that the State Department will work more closely with OTI, and signals OTI's risk-taking, problem solving, and innovative organizational culture as a model for State's crisis response and stabilization. It also states that the CSO Bureau will work with OTI leadership to ensure effective design and start-up of the new bureau. Other improvements are proposed, including an expansion of USAID's capacity for conflict programs and transitions from relief to development. Appropriate Size for the Civilian Response Corps Some policymakers and analysts have questioned whether the CRC active and standby components are large enough to perform effectively their intended functions. Others might wonder whether the United States should be supporting such a Corps even at its current size in the current constrained budget environment. One 2008 study, prepared by the National Defense University (NDU) Center for Technology and National Security Policy, argued that the CRC should be considerably larger, with 5,000 total in the active and standby components and 10,000 in the reserve component. An active/standby component of that size "would provide a fairly large pool of trained experts in each category" if personnel were "properly distributed," according to the study. "This sizable, diverse pool, in turn, would help provide the flexibility, adaptability, and modularity to tailor complex operations to the missions and tasks at hand in each case, without worrying that the act of responding effectively to one contingency would drain the force or expertise in key areas needed to handle additional contingencies." This study also stated that a combined active and standby force numbering 2,500 (compared to the 2,250 now planned) "should be backed by a reserve force of 4,500 personnel, not 2,000." Another study envisioned the possibility of a larger corps than currently contemplated by the Obama Administration, but somewhat smaller than that proposed in the NDU study. Co-sponsored by the American Academy of Diplomacy and the Stimson Center, this study found that the "magnitude of growth beyond FY2010 will depend largely on the experience gained based on deployments in that year. For the purposes of projection, we propose that the active response team would grow to 500 by FY2014, the standby response corps would remain at 2,000, and the civilian reserve would grow to 4,000." Some Members of Congress, however, questioned in authorization and appropriations reports whether the CRC active and standby units were being expanded too rapidly, at the cost of effectiveness. In the Senate Appropriations Committee (SAC) report accompanying its FY2011 Department of State, Foreign Operations, and Related Programs Appropriations Bill, 2011 ( S. 3676 , S.Rept. 111-237 , July 29, 1010), the SAC expressed its concerns: The Committee continues to believe that the success of CSI can best be achieved through a gradual stand up and implementation and is concerned that CSI has not been adequately integrated into the overall United States response to crises and disasters, including in Haiti and Kyrgyzstan. The Committee is also concerned that the timelines for hiring, training, and deployment of its civilian corps have been overly ambitious and unrealistic. The SAC also noted approval that the Administration did not request reserve component funding, stating that it would consider such funding "only after the CSI has established a record of effective operations and can demonstrate programmatic accomplishments." Flexible Funding for S&R Operations For many years, proponents of "operational" civilian capabilities for S&R operations have urged Congress to provide the State Department with a flexible conflict or crisis response fund that would allow U.S. government civilian agencies to respond rapidly to S&R emergencies. The Bush Administration repeatedly requested such a fund, and proposals for a flexible, replenishable fund were included in early versions of the Lugar-Biden legislation and subsequent related legislation. But Congress, which has long resisted the provision of "blank check" pots of money as an abdication of constitutional appropriation and oversight powers, turned down several Bush Administration requests for more flexible S&R funding mechanisms in the State Department budget. The first session of the 111 th Congress, on the other hand, took a first step in providing flexible funding by creating a USAID Complex Crises Fund with a $50 million appropriation in the Department of State, Foreign Operations, and Related Programs appropriations act (Division F of the Consolidated Appropriations Act, 2010, P.L. 111-117 ), although this is less money than many analysts would argue is necessary. This fund was Congress's response to the Obama Administration's FY2010 budget request for a total of $116 million in flexible funding for S&R purposes: $40 million for a Stabilization Bridge Fund under the Economic Support Fund account (mentioned above), and $76 million for a Rapid Response fund under the USAID Transition Initiatives (TI) account "to provide flexible funding to respond to emerging opportunities to divert conflict in new and fragile democracies." As stated by the conferees on the bill, this "new account provides greater flexibility to USAID to prevent or respond to emerging or unforeseen complex crises overseas, and … consolidates the budget request for a Rapid Response Fund and a Stabilization Bridge Fund to provide greater efficiency and oversight by the Administration and Congress of these activities." (The conferees defined "complex crisis" for the purposes of this account as "a disaster or emergency, usually of long-term duration, that includes a combination of humanitarian, political and security dimensions which hinders the provision of external assistance.") Proponents of flexible funding argue that it is needed because many crises that demand a U.S. rapid response cannot be foreseen and thus planned for in annual budget submissions. In addition, they argue, the existing mechanisms for transferring funds to an emergency situation are too time-consuming to provide an immediate response. Some proponents have argued for a mechanism like the automatically replenishable Emergency Refugee and Migration Assistance (ERMA) emergency relief account, funded through foreign operations appropriations. Many proponents suggest that ERMA provides a model for a response fund to be used for conflicts or related crisis situations. Several bills were introduced that would, among other provisions, permanently establish a conflict response fund, but none passed Congress. In December 2007, the HELP Commission recommended the establishment of two rapid-response crisis funds. One would be a permanent humanitarian crisis response fund to meet the needs of natural disasters. The other would be a foreign crisis fund to meet security challenges. No recommendation was made regarding the agency responsible for these funds. From 2006 to 2010, the funding for security and stabilization activities that Congress made available through the DOD budget served as a de facto response fund for small S&R projects carried out by personnel from the State Department and USAID. Section 1207 of the conference version of the National Defense Authorization Act (NDAA) for Fiscal Year 2006 ( P.L. 109-163 , H.R. 1815 / S. 1042 ; signed into law January 6, 2006, and subsequently amended) authorized the Secretary of Defense to provide the Secretary of State with up to $100 million in services, defense articles, and funding for reconstruction, security, or stabilization assistance to a foreign country per fiscal year. Although "Section 1207" authority was repeatedly extended, Congress allowed it to expire at the end of FY2010. Similarly, defense appropriators signaled their expectation that DOD's Section 1207 funding would not be provided for another year. In their report on the FY2010 Department of Defense Appropriations Act ( P.L. 111-118 , H.Rept. 111-380 ), conferees recommended an allocation of $97.09 million (from the overall Defense Security Cooperation Agency appropriation), but stated that the establishment of the Complex Crises Fund "will enable USAID and the Department of State to meet emergent requirements that fall under their purview without relying on the Department of Defense." Nevertheless, they argued for continued DOD participation in the planning process for small-scale security and stabilization projects, directing the Secretaries of Defense and State and the Director of USAID "to maintain and strengthen the interagency process created from the section 1207 program when formulating, reviewing, and approving future projects that would have been funded through section 1207." In creating the Complex Crises Fund, conferees on the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ) urged the State Department and USAID to develop additional capacity in order to replace Section 1207 DOD funding with additional Complex Crises funding. "USAID and the Department of State should continue to establish and bolster crisis prevention and response capabilities in order to assume most, if not all, of the functions currently funded" by DOD under Section 1207 authority, they wrote. Much like the defense appropriations conferees, the foreign operations conferees also specified that "USAID and the Departments of State and Defense shall continue to consult on the formulation and implementation of stabilization and security assistance, as appropriate, whether through the utilization of section 1207 or funds appropriated by this Act." As noted above, the Administration requested $100 million for the CCF from the FY2011 budget, stating that this will replace funding previously provided under Section 1207 authority. The FY2011 continuing resolutions through March 4 and March 18, 2011, provided FY2011 funding for the CCF at the $50 million FY2010 level, but the final FY2011 appropriations bill provided no CCF funding. FY2012 appropriations for the CCF totaled $40 million: $10 million in the core account in $30 million in OCO funds. Establishing a Reserve Capability? The Obama Administration initially planned to implement Bush Administration plans for a CRC civilian reserve component, but in the 2010 State Department/USAID QDDR announced plans to proceed instead with the development of a civilian expert roster, from which the U.S. government could select and hire non-federal personnel on a temporary basis to deploy as needed. A roster system would be quite different from the original proposal for a civilian reserve akin to the U.S. military reserve (which encompasses the National Guard). Plans for a reserve corps were part of the initial 2004 Lugar-Biden civilian stabilization capability legislation (Title XVI, P.L. 110-417 ), embraced by the Bush Administration. In his January 23, 2007, State of the Union address, former President Bush pointed to the need for a civilian reserve corps as a tool in the generational struggle against terrorism. "Such a corps would function much like our military reserve," he said. "It would ease the burden on the armed forces by allowing us to hire civilians with critical skills to serve on missions abroad when America needs them. It would give people across America who do not wear the uniform a chance to serve in the defining struggle of our time." In 2008, Congress provided authorization for the establishment of a Civilian Reserve Corps ( P.L. 110-417 , see above) that could substitute for military troops in a wide variety of state-building activities. The Bush Administration's 2008 CSI proposal called for the establishment of a CRC reserve component of 2,000; the Obama Administration's 2009 CSI proposal called for the same. Nevertheless, Congress did not provide funds to establish a civilian reserve. In considering the Department of State, Foreign Operations, and Related Programs Appropriations Bill, 2010 ( H.R. 3081 and S. 1434 ), House and Senate appropriators denied the Obama Administration's request for funding for the CSI reserve component. In their respective reports ( H.Rept. 111-187 and S.Rept. 111-44 ), both committees indicated their desire for a gradual build-up of the civilian response corps components, with the focus now on the active and standby components. Proponents of the creation of a civilian reserve corps have cited a variety of advantages from the creation of such a corps. DOD promoted the concept on the grounds that it would free military personnel from state-building tasks during military operations, thus increasing the personnel available for combat and other more strictly military tasks. Proponents also view such a corps as a means to enhance prospects for success in S&R operations, as the personnel who would be sent to perform such tasks would in general have a much higher level of expertise and depth of experience than soldiers and could, unlike many military personnel assigned to such tasks, perform at peak efficiency from the outset. Many view this as particularly true at the national level, where extensive experience with developing national-level structures is desirable over the long run. (Although military Civil Affairs officers are largely reservists whose civilian jobs are relevant to state-building tasks, many analysts state that there are too few civil affairs personnel to provide the depth needed to deploy the appropriate person in most circumstances.) Many argue that civilian personnel are also preferable for symbolic reasons, as they may signal a greater commitment to the construction of a democratic state. Skeptics look at the concept of a civilian reserve as untested and potentially unfeasible. Some wonder whether qualified experts would sign up in sufficient quantities to make the corps an effective replacement for military troops in S&R operations. Some question whether the existence of such a corps would provide an incentive to interventions of various types that the United States otherwise would not have undertaken. Cost may well have been a major factor in the decision to switch to a roster system. In 2008, the Congressional Budget Office (CBO) assembled a cost estimate for the Bush Administration's CSI. Its estimate for the recruiting, screening, enrolling, training, and equipping the 2,000 members contemplated by the CSI was $87 million in FY2009 and $47 million in 2010. (The CBO estimate of first-year costs is considerably higher than the Obama Administration's $63.6 million FY2010 request to establish the reserve.) Although some may view the potential cost of the civilian corps as high, some proponents argue that the costs of deploying civilian personnel would result in a net savings to the military. (It is likely, however, that any possible savings would depend on the circumstances in which such civilian personnel were deployed and the effect of their deployment on the number of military personnel needed.) Proponents also maintain that even if high, the monetary cost to maintain and deploy civilian reservists would still be relatively inexpensive when compared to the multiple costs, both tangible (such as money and lives) and intangible (such as domestic and international political support and loss of strategic leverage) of prolonged or failed military interventions. QDDR Proposal to Establish an Expert Corps Roster The QDDR proposed replacing the reserve with "a more cost-effective 'Expert Corps' consisting of an active roster of technical experts." According to the QDDR, this Expert Corps roster could be composed of current temporary hires who have served successfully in Iraq, Afghanistan, Pakistan, and elsewhere, as well as other civilians with critical skills who have not been previously deployed. Other countries, such as Canada and Germany, and international organizations, such as the United Nations and the Organization for Security and Cooperation in Europe, use roster systems for civilian deployments to nation-building and post-conflict missions. The roster concept is substantially different from the CSI concept of a reserve corps modeled after the military reserves and National Guard. Under that concept, a reserve component of more than 2,000 members, civilians from outside government with various types of expertise, would be in reserve status for four years with a required deployment of up to one year. Unlike the concept for a reserve corps, roster members would not be obligated to deploy to critical conflict zones. However, neither would roster members be provided with re-employment rights, as was contemplated for reserve corps members. The QDDR stated that the Administration would request funding and needed authorities for the Expert Corps. The Administration expected the roster to be less costly than the more elaborate reserve corps. According to the QDDR, the budget would support actual deployments, rather than support and maintenance for a large reserve. Still, some costs, such as equipment acquisition, might remain. And while some savings would most likely accrue from eliminating benefits such as pensions and from the costs of an intensive training regime, some analysts might argue that certain benefits, such as health coverage, should be offered to recruit quality personnel, and that a good training program is essential to effective performance.

In November 2011, the Obama Administration announced the creation of a new State Department Bureau of Conflict and Stabilization Operations (CSO) to provide the institutional focus for policy and "operational solutions" to prevent, respond to, and stabilize crises in priority states. This bureau represents a "second generation" effort to develop civilian capacity to deal with conflict, integrating the "first generation" Office of the Coordinator for Reconstruction and Stabilization (S/CRS). Congress established S/CRS by law in the Reconstruction and Stabilization Civilian Management Act, 2008, as Title XVI of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (S. 3001, P.L. 110-417, signed into law October 14, 2008). This "Lugar-Biden" legislation codified the existence and functions of S/CRS and authorized new operational capabilities within the State Department, a Civilian Response Corps (CRC) of government employees with an active and a standby component, and a reserve component. Earlier, in 2004, the George W. Bush Administration had stood up S/CRS to address long-standing concerns, both within Congress and the broader foreign policy community, over the perceived lack of the appropriate capabilities and processes to deal with transitions from conflict to stability. These capabilities and procedures include adequate planning mechanisms for stabilization and reconstruction operations, efficient interagency coordination structures and procedures in carrying out such tasks, and appropriate civilian personnel for many of the non-military tasks required. From July 2004, S/CRS worked to establish the basic concepts, mechanisms, and capabilities necessary to carry out such operations. With a staff that slowly grew from a few dozen to well over 100 individuals, S/CRS took steps to monitor and plan for potential conflicts, to develop a rapid-response crisis management "surge" capability, to improve interagency and international coordination, to develop interagency training exercises, and to help State Department regional bureaus develop concepts and proposals for preventive action. Not until four years later, in 2008, did Congress provide the first funding to establish civilian response capabilities, as well as the first line-item funding for S/CRS. The Bush Administration plans at that point contemplated a CRC force of 4,250, including a sizable reserve component of private citizens similar in concept to the U.S. military reserve. The Obama Administration proceeded with plans and funding requests to develop S/CRS and its operational arm, the CRC. The 111th Congress provided funding to expand the active and standby units, but not to establish the civilian reserve. The 111th Congress also established a new USAID Complex Crises Fund (CCF) to support programs and activities responding to emerging or unforeseen complex crises abroad. The 112th Congress continued to fund S/CRS and its successor, the CSO Bureau, as well as the CCF, although at reduced levels. As background for the 113th Congress's possible consideration of civilian capabilities, this report covers their development through the formation of the CSO Bureau. This report will not be updated. For information on the CSO Bureau, see CRS Report R42775, In Brief: State Department Bureau of Conflict and Stabilization Operations (CSO), by [author name scrubbed].

Introduction The primary source of federal aid to K-12 education is the Elementary and Secondary Education Act (ESEA), particularly its Title I, Part A program of Education for the Disadvantaged. The ESEA was initially enacted in 1965 (P.L. 89-10), and was most recently amended and reauthorized by the No Child Left Behind Act of 2001 (NCLB, P.L. 107-110 ). The NCLB authorized virtually all ESEA programs through FY2008. During the 112 th Congress, both the House and Senate considered legislation to reauthorize the ESEA. It is widely expected that the 113 th Congress will consider whether to amend and extend the ESEA. The NCLB initiated a major expansion of federal influence on several aspects of public K-12 education, primarily with the aim of increasing the accountability of public school systems and individual public schools for improving achievement outcomes of all students, especially the disadvantaged. Accountability requirements included in Title I-A of the ESEA require states to implement content and performance standards and assessments aligned with these standards for reading/language arts and mathematics for multiple grades. The results of these assessments are used to make complex annual adequate yearly progress (AYP) determinations for each public school and local educational agency (LEA). A series of increasingly substantial consequences must be applied to schools and LEAs that fail to meet the AYP standards for two consecutive years or more. Accountability requirements also extend to virtually all public school teachers and aides with respect to their qualifications. As discussed in a subsequent section of this report, the Administration has taken actions to alter many of these requirements. Beyond Title I-A, other major ESEA programs provide grants to support the education of migrant students; recruitment of and professional development for teachers; language instruction for limited English proficient (LEP) students; drug abuse prevention programs; after-school instruction and care; expansion of charter schools and other forms of public school choice; education services for Native American, Native Hawaiian, and Alaska Native students; Impact Aid to compensate local educational agencies for taxes forgone due to certain federal activities; and a wide variety of innovative educational approaches or instruction to meet particular student needs. Annual appropriations for ESEA programs are provided through the Departments of Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED) Appropriations Act. Table A -1 provides FY2010, FY2011, FY2012, and FY2013 appropriations for programs authorized by the ESEA based on line-item amounts included in appropriations tables. This list of "programs" does not take into account the number of programs, projects, or activities that may be funded under a single line-item appropriation, so the actual number of ESEA programs, projects, or activities being supported through appropriations is not shown. This report provides a brief overview of major provisions of the ESEA. It is organized by title and part of the act. Other CRS reports provide much more detailed discussions and analyses of major ESEA provisions. Appendix B provides a list of selected acronyms used in the report. Recent ESEA Flexibility Provided by the Administration While Congress has not enacted legislation to reauthorize the ESEA, on September 23, 2011, President Obama and the Secretary announced the availability of an ESEA flexibility package for states and described the principles that states must meet to obtain the included waivers. The waivers apply to school years 2011-2012, 2012-2013, and 2013-2014. States have the option to apply for a one-year waiver extension for the 2014-2015 school year. The waivers exempt states from various academic accountability requirements, teacher qualification-related requirements, and funding flexibility requirements that were enacted through NCLB. State educational agencies (SEAs) may also apply for an optional waiver related to the 21 st Century Community Learning Centers program. However, in order to receive the waivers, SEAs must agree to meet four principles established by the U.S. Department of Education (ED) for "improving student academic achievement and increasing the quality of instruction." The four principles, as stated by ED, are as follows: (1) college- and career-ready expectations for all students; (2) state-developed differentiated recognition, accountability, and support; (3) supporting effective instruction and leadership; and (4) reducing duplication and unnecessary burden. Taken collectively, the waivers and principles included in the ESEA flexibility package amount to a fundamental redesign by the Administration of many of the accountability and teacher-related requirements included in current law. As of May 2013, ED had approved ESEA flexibility package applications for 37 states and the District of Columbia and was reviewing applications from several other states. If Congress continues to work on ESEA reauthorization during the 113 th Congress, it is possible that provisions included in any final bill may be similar to or override the waivers and principles established by the Administration. The remainder of this report focuses only on current law and does not discuss the details of the ESEA flexibility package or how it modifies current law. For more information about the ESEA flexibility package, see CRS Report R42328, Educational Accountability and Secretarial Waiver Authority Under Section 9401 of the Elementary and Secondary Education Act . Title I: Improving the Academic Achievement of the Disadvantaged The introductory text for ESEA Title I includes the authorization of appropriations for FY2002-FY2007 for each Part of the Title, including school improvement grants (SIGs), and authority for states to reserve 1% of grants under parts A, C, and D, or $400,000 (whichever is greater), for state administration. School Improvement Grants Title I-A authorizes the appropriation of such sums as may be necessary for grants to states under Section 1003(g) for School Improvement Grants. States are eligible to apply for these grants, which are allocated in proportion to each state's share of funds received under ESEA Title I, Parts A, C (Migrant Education Program), and D (Neglected and Delinquent Children and Youth). States must use at least 95% of the funds received to make subgrants to LEAs. Subgrants made to LEAs must be between $50,000 and $500,000 for each school identified for improvement, corrective action, or restructuring that will be served through the grant, and must be renewable for up to two additional years if schools meet the goals of their school improvement plans. Subgrants must be used by LEAs to support school improvement. LEAs with the lowest-achieving schools and the greatest commitment to ensuring that such funds are used to provide "adequate resources" to enable the lowest-achieving schools to meet the goals under school and LEA improvement plans must be given priority in the awarding of subgrants. While the ESEA has not been reauthorized since the enactment of NCLB in 2002, several changes have been made to the SIG program through various appropriations acts. Through the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ), the SIG program was amended to provide a maximum grant of $2 million annually to each school served using funds appropriated under the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) or FY2010 appropriations. In addition, provisions in P.L. 111-117 altered school eligibility criteria to receive SIG to include any school eligible to receive assistance under Title I-A that has not made adequate yearly progress (AYP) for at least two years or is in the state's lowest quintile of performance based on proficiency rates or, for secondary schools, includes any school with a graduation rate below 60%. The FY2011 ( P.L. 112-10 ) and FY2012 ( P.L. 112-74 ) appropriations acts included the same provisions relevant to the identification of schools for SIG funds and changes to the maximum amount that can be awarded to a school. Schools that are eligible for SIG as a result of the new criteria included in the appropriations acts are referred to as "newly eligible schools." In addition to the aforementioned provisions, the FY2012 appropriations act also included a provision permitting the Secretary of Education to reserve up to 5% of the funds appropriated for SIG to carry out activities to build SEA and LEA capacity to implement the SIG program. Part A: Improving Basic Programs Operated by Local Educational Agencies Title I, Part A, of the ESEA authorizes federal aid to local educational agencies (LEAs) for the education of disadvantaged children. Title I-A grants provide supplementary educational and related services to low-achieving and other students attending pre-kindergarten through grade 12 schools with relatively high concentrations of students from low-income families. It has also become a "vehicle" to which a number of requirements affecting broad aspects of public K-12 education for all students have been attached as a condition for receiving Title I-A grants. Title I-A funds are allocated by the U.S. Department of Education (ED) to state educational agencies (SEAs), which then suballocate grants to LEAs. It is one of the few federal K-12 formula grant programs for which substate grants are, in most cases, calculated by ED. Portions of each annual appropriation for Title I-A are allocated under four different formulas—Basic, Concentration, Targeted, and Education Finance Incentive Grants—although funds allocated under all of these formulas are combined and used for the same purposes by recipient LEAs. Although the allocation formulas have several distinctive elements, the primary factors used in all four formulas are estimated numbers of children aged 5-17 in poor families plus a state expenditure factor based on average expenditures per pupil for public K-12 education. Other factors included in one or more formulas include weighting schemes designed to increase aid to LEAs with the highest concentrations of poverty, and a factor to increase grants to states with high levels of expenditure equity among their LEAs. Each formula also has a LEA hold harmless provision (no LEA may receive less than 85-95% of its previous year grant, depending on the LEA's poverty rate) and a state minimum grant provision (up to either 0.25% or 0.35% of state grants, depending on the formula). Within LEAs, Title I-A funds are used to provide supplementary educational services to students at public schools with the highest percentages or numbers of children from low-income families, as well as eligible students who live in the areas served by these public schools, but who attend private schools. While there are several program rules related to school selection, the participating schools must generally have a percentage or number of children from low-income families that is greater than the LEA's average. LEAs can generally choose to focus Title I-A services on selected grade levels (e.g., only in elementary schools), but they must usually provide services in all schools, without regard to their grade level, where the percentage of students from low-income families exceeds 75%. Once schools are selected, Title I-A funds are allocated among them on the basis of their number of students from low-income families. There are two basic types of Title I-A programs. Schoolwide programs are authorized if the percentage of low-income students served by a school is 40% or higher. In schoolwide programs, Title I-A funds may be used to improve the performance of all students in a school. For example, funds might be used to provide professional development services to all of a school's teachers, upgrade instructional technology, or implement new curricula. The other major type of Title I-A school service model is the targeted assistance program (TAP). This was the original type of Title I-A program, under which Title I-A-funded services are generally limited to the lowest achieving students in the school. For example, students may be "pulled out" of their regular classroom for several hours of more intensive instruction by a specialist teacher each week, or they may receive such instruction in an after-school program, or funds may be used to hire a teacher's aide who provides additional assistance to low achieving students in their regular classroom. A number of major accountability requirements apply to public schools in a state that participates in the Title I-A program. Participating states must administer annual, standards-based assessments in reading/language arts and mathematics to students in each of grades 3-8, plus at least once in grades 10-12. Beginning with the 2007-2008 school year, such assessments must also be administered to students in each of three grade levels (3-5, 6-9, and 10-12) in science. Student performance standards for all required assessments must include at least three performance levels: advanced, proficient, and basic. The state assessments must meet a variety of criteria regarding accommodations for students with disabilities and LEP students, and linkages between state content standards, student performance standards, and assessments. Participating states must also administer annual assessments of English language proficiency to all of their LEP students, and participate in National Assessment of Educational Progress (NAEP) tests of 4 th and 8 th grade students in reading and math every two years. 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. States participating in Title I-A must use results of the required reading and math assessments to make annual adequate yearly progress determinations. AYP standards must be applied to all public schools, LEAs, and to states overall. However, under the ESEA, consequences for failing to meet AYP standards need only be applied to schools and LEAs participating in Title I-A, and consequences for states as a whole are limited to potential identification and provision of technical assistance. AYP is defined primarily on the basis of the percentage of students scoring at a proficient or higher level of achievement. AYP standards must also include at least one additional academic indicator; in the case of high schools, this must be the graduation rate. AYP calculations must be disaggregated—that is, determined separately for several demographic groups, as well as for an "all students" group. The specified groups include economically disadvantaged students, LEP students, students with disabilities, and students in major racial and ethnic groups. However, student groups need not be considered if their number is so small that results would not be statistically significant or the identity of students might be divulged (minimum group size). In order to make AYP, at least 95% of students overall and 95% of each demographic group must participate in assessments. Schools or LEAs meet AYP standards only if they meet the required threshold levels of performance on assessments, other academic indicators, and test participation with respect to all of the designated student groups that meet the minimum group size criterion selected by the state. The primary structure for AYP determination under the ESEA applies the same required threshold level of achievement to all students and schools statewide (a "status" model). The ESEA also includes a "safe harbor" provision, under which AYP may be met by a student group if it experiences a 10% reduction, compared to the previous year, in the number of students below proficiency. In recent years, there has been increasing interest in using "growth" models to determine AYP, by which the achievement of individual students is tracked from year to year. Interested states may apply to receive a waiver from the Secretary of Education (hereinafter referred to as the Secretary) to implement a growth model. The ESEA requires states to identify LEAs and schools that fail to meet AYP standards for two consecutive years for improvement. Students attending these schools must be provided with options to attend other public schools that make AYP. If a Title I-A school fails to meet AYP standards for a third year, students from low-income families must be offered the opportunity to receive instruction from a supplemental educational services (SES) provider of their choice. One or more additional "corrective actions," such as implementing a new curriculum, must be taken with respect to Title I-A schools that fail to meet AYP for a fourth year. Those that fail to meet AYP standards for a sixth year must develop a "restructuring" plan, involving such actions as reopening as a charter school. If a school fails to make AYP for a subsequent year, the school must implement its restructuring plan. Procedures analogous to those for schools apply to LEAs that receive Title I-A grants and fail to meet AYP requirements. Finally, states participating in Title I-A are required to provide that all public school teachers in core subjects are "highly qualified." In order to be deemed a highly qualified teacher (HQT), all such public school teachers must hold at least a bachelor's degree, have obtained full state certification or passed the state teacher licensing examination, and must hold a license to teach. In addition, teachers who are new to the profession must demonstrate subject area knowledge, including (if teaching at a secondary level) passing a state academic test or completing an academic major, graduate degree, or advanced certification in each subject taught. A public school teacher who is not new to the profession may also be deemed to be "highly qualified" by demonstrating competence in all subjects taught "based on a high objective uniform State standard of evaluation" (HOUSSE). Further, paraprofessionals (aides) providing instruction in Title I-A programs must have either: (a) completed at least two years of higher education; or (b) earned an associate's (or higher) degree; or (c) met a "rigorous standard of quality." Part B: Student Reading Skills Improvement Grants Subpart 1 of Title I-B authorizes the Reading First program. Under Reading First, grants are allocated among participating states in proportion to their estimated number of children aged 5-17 in poor families, with each state receiving at least 0.25% of the total funds available for state grants. SEAs then make competitive subgrants to LEAs, with priority given to LEAs in which the estimated number of children aged 5-17 in poor families is at least 6,500 or the poverty rate for 5-17 year-olds is at least 15%. LEAs are to use these funds to improve reading programs for students in grades K-3 in schools that either have percentages of students from low-income families that are among the highest in the LEA or have been identified for improvement under Title I-A. The supported reading instruction must be grounded in scientifically based reading research. Subpart 1 also authorizes targeted assistance performance awards to states that have demonstrated improvements in student reading performance. This program is not currently funded. The Early Reading First program is authorized under Subpart 2 of Title I-B. Early Reading First provides competitive grants to LEAs and/or programs serving preschool children for activities, grounded in scientifically based reading research, that are intended to help preschool children acquire knowledge and skills necessary for learning to read. This program is not currently funded. Subpart 3 of Title I-B authorizes the William F. Goodling Even Start Family Literacy Programs. Under Even Start, funds are allocated to states in proportion to grants under Title I-A, with a minimum state grant amount of the greater of $250,000 or 0.5% of total funding for state grants. Within states, funds are competitively awarded to partnerships of LEAs and other entities to provide a combination of services to parents and children, from birth to age 7, including early childhood education, adult basic education, and parenting skills training to parents lacking a high school diploma. This program is not currently funded. Subpart 4 of Title I-B authorizes grants to LEAs to improve the services provided by school libraries. If annual appropriations are less than $100 million (as has been the case each year thus far), competitive grants to LEAs are made directly by ED; if appropriations were $100 million or above, grants would be made by formula to SEAs, in proportion to Title I-A grants, and SEAs would make competitive grants to LEAs. This program is not currently funded. Part C: Education of Migratory Children Title I-C authorizes grants to SEAs for the education of migratory children and youth. Funds are allocated by formula on the basis of each state's number of migratory children and youth aged 3-21 and the Title I-A state expenditure factor. ED may also make grants for the coordination of services and transfer of educational records for migratory students. Part D: Prevention and Intervention Programs for Children and Youth Who Are Neglected, Delinquent, or At-Risk Title I-D authorizes a pair of programs intended to improve education for students who are neglected, delinquent, or at risk of dropping out of school. Subpart 1 authorizes grants for the education of children and youth in state institutions for the neglected or delinquent, including community day programs and adult correctional institutions. Funds are allocated to states on the basis of the number of such children and youth plus the Title I-A state expenditure factor. A portion of each state's grant is to be used to provide transition services to children and youth transferring to regular public schools. Subpart 2 provides aid for programs operated by LEAs in collaboration with locally operated correctional facilities, and in coordination with the Title I-A program. Part E: National Assessment of Title I Title I-E requires ED to conduct a national assessment of Title I programs, including a national longitudinal study of schools participating in Title I-A and an evaluation of assessments used to meet the accountability requirements of Title I-A. Part E also authorizes grants for the demonstration of innovative practices in serving students assisted under Title I programs, and grants to the Close-Up Foundation for civic education programs. In addition, using authority available to the Secretary under section 1502, the Striving Readers program, a comprehensive literacy education program for children from birth through grade 12, was enacted through the L-HHS-ED Appropriations Act. Part F: Comprehensive School Reform Title I-F authorizes grants via SEAs to LEAs to implement comprehensive reform strategies in schools participating in Title I-A. This program is not currently funded. Part G: Advanced Placement Programs Title I-G authorizes grants to SEAs to pay advanced placement test fees on behalf of low-income individuals, as well as grants to SEAs, LEAs, or nonprofit educational entities with relevant expertise, to support activities intended to expand access to advanced placement programs for low-income individuals. Part H: School Dropout Prevention At annual appropriations levels of $75 million or less (as has been the case each year thus far), Title I-H authorizes competitive grants to SEAs or LEAs for dropout prevention and reentry programs in high schools with dropout rates above the state average plus middle schools whose graduates attend these high schools. At annual appropriations levels above $75 million but less than $250 million, competitive grants would be made to SEAs for dropout prevention and reentry services to be provided via competitive subgrants to LEAs. If annual appropriations were $250 million or above, grants would be made by formula (in proportion to Title I-A grants) to SEAs, with competitive subgrants to LEAs. At all funding levels, the Secretary of Education is authorized to carry out a variety of activities as part of a "coordinated national strategy" for dropout prevention and reentry. Part I: General Provisions Title I-I provides for the development of federal regulations for Title I programs, state administration of these programs, and a selected number of LEA Title I-A audits. Part I also prohibits federal control of the "specific instructional content, academic achievement standards and assessments, curriculum or program of instruction" of states, LEAs, or schools (Sec. 1905), and states that nothing in Title I is to be "construed to mandate equalized spending per pupil for a State, local educational agency, or school" (section 1906). Title II: Preparing, Training, and Recruiting High-Quality Teachers and Principals Part A: Teacher and Principal Training and Recruiting Fund Subpart 1 authorizes a program of state grants that may be used for a variety of purposes related to recruitment, retention, and professional development of K-12 teachers and principals. In the allocation of funds, each state first receives an amount equal to its FY2001 grant under two antecedent programs (the Eisenhower Professional Development and the Class Size Reduction programs), and remaining funds, if any, are allocated as follows: 35% on the basis of total population aged 5-17, and 65% on the basis of population aged 5-17 in poor families, with a state minimum grant amount of 0.5% of funds available for state grants. SEAs may reserve a share of funds for administration and statewide services, such as teacher or principal support programs or certification reform, and must suballocate at least 95% of grants to LEAs under Subpart 2 . In making grants to LEAs under Subpart 2, each LEA first receives an amount equal to its FY2001 grant under the two antecedent programs noted above, and remaining funds, if any, are allocated as follows: 20% on the basis of total population aged 5-17, and 80% on the basis of population aged 5-17 in poor families. LEAs may use these grants for purposes that include recruiting and retaining highly qualified teachers and professional development activities for teachers and principals, consistent with a locally developed needs assessment. Subpart 3 authorizes grants to partnerships for sustained, high quality professional development services for teachers, principals, and paraprofessionals. Eligible partnerships must include an institution of higher education (IHE) with a teacher or principal education department, a school of arts and sciences within an IHE, a high-need LEA (defined as an LEA with either a school-age child poverty rate of 20% or with 10,000 school-age children in poor families, and a high percentage of teachers who are not fully certified or who are not teaching in fields or grade levels for which they were trained), and possibly additional organizations. Additional provisions of Part A authorize national activities, such as support for principal recruitment, advanced certification, and early childhood educator professional development programs, plus a National Panel on Teacher Mobility. Part B: Mathematics and Science Partnerships Part B authorizes grants to eligible partnerships—that include an SEA (if annual appropriations are $100 million or above), an engineering, mathematics, or science department of an IHE, and a high-need LEA (as defined in Part A)—for activities that include professional development, summer workshops or institutes, and recruitment of mathematics and science teachers, as well as development of rigorous curricula in these fields. Title II-B funds are allocated to states by formula if appropriations are equal to or greater than $100 million, as has been the case in recent years. Part C: Innovation for Teacher Quality Subpart 1 authorizes a pair of programs designed to encourage former members of the armed services to become teachers (Troops to Teachers), and to support alternative certification programs for mid-career professionals and others to become teachers through nonstandard routes, especially in high-need LEAs (as defined in Part A) or schools (Transition to Teachers). Subpart 2 authorizes grants to a nonprofit organization, the National Writing Project, which, through a series of contracts with IHEs and other nonprofit entities, provides professional development training to teachers of writing. Subpart 3 authorizes a pair of grants to nonprofit organizations, the Center for Civic Education and the National Council on Economic Education, as well as other organizations experienced in the development of civic and economic educational materials for use in the schools of other nations. These grants are used to support civic education in U.S. schools, plus civic and economic educational exchange programs between the United States and Central or Eastern European nations, Ireland, or any developing country. Subpart 4 authorizes the Teaching of Traditional American History program, under which competitive grants are made for instructional improvement to partnerships that include an IHE, a nonprofit history or humanities organization, and a library or museum. Subpart 5 sets limits on the liability of teachers for actions taken to maintain classroom discipline; it applies to states that receive funds under any ESEA program. Many of these programs are not currently funded. Part D: Enhancing Education Through Technology Subpart 1 of Part D authorizes grants to SEAs and LEAs to increase access to educational technology, support the integration of technology into instruction, enhance technological literacy, and support technology-related professional development of teachers. Funds are allocated to states in proportion to Title I-A grants, with a state minimum grant amount of 0.5% of total funding for state grants. At least 95% of state grants must be allocated to LEAs (and consortia of LEAs and other entities)—50% by formula, in proportion to Title I-A grants, and 50% competitively. Subpart 2 authorizes support for national activities related to educational technology, including development of a national long range technology plan. Subpart 3 authorizes the Ready-to-Learn Television program, under which support is provided to one or more public telecommunications entities to support the production and distribution of educational programs for preschool and elementary school students and their parents to support school readiness and student academic achievement. Subpart 4 requires LEAs or schools receiving aid under Part D to establish and implement Internet safety policies designed to prevent minors from accessing material that is obscene, includes child pornography, or is harmful to minors, and prevent adults from accessing material that is obscene or includes child pornography. This program is not currently funded. Title III: Language Instruction for Limited English Proficient and Immigrant Students Title III of the ESEA authorizes funds to support the education of LEP and immigrant students. For fiscal years in which appropriations equal or exceed $650 million, Title III, Part A, the English Language Acquisition, Language Enhancement, and Academic Achievement Act, is in effect. If appropriations are less than $650 million, Title III, Part B, Improving Language Instruction Educational Programs, is in effect. Since FY2002, appropriations have exceeded $650 million, meaning only Title III, Part A has been in effect. Therefore, only Part A is discussed below. Part A: English Language Acquisition, Language Enhancement, and Academic Achievement Act Title III-A was designed to help ensure that LEP students, including immigrant students, attain English proficiency, develop high levels of academic attainment in English, and meet the same state academic content and student academic achievement standards that all students are expected to meet. Formula grant allocations are made to states based on the proportion of LEP students and immigrant students in each state relative to all states. These amounts are weighted by 80% and 20%, respectively, resulting in a formula allocation based primarily on the number of LEP students in each state. States make subgrants to eligible entities (often LEAs) based on the relative number of LEP students in schools served by the eligible entity. States are also required to reserve up to 15% of the state allocation to make grants to eligible entities that have experienced a significant increase in the number of immigrant students enrolled in schools in the geographic area served by the eligible entity. Eligible entities receiving subgrants are required to use funds for two activities. Funds must be used to increase the English language proficiency of LEP students by providing high-quality instructional programs that are grounded in scientifically based research that demonstrates the program is effective in increasing English language proficiency and student academic achievement in core academic subjects. Funds must also be used to provide high-quality professional development to school staff or community-based personnel that work with LEP students. Eligible entities receiving grants from the funds reserved specifically for immigrant students are required to use these funds to support activities that "provide enhanced instructional opportunities" for immigrant students. Each SEA is required to develop and hold eligible entities responsible for meeting annual measurable achievement objectives (AMAOs) for LEP students. AMAOs must include objectives for the following measures: Annual increases in the number or percentage of students making progress in attaining English proficiency; Annual increases in the number or percentage of students attaining English proficiency by the end of each school year; and AYP targets for LEP students on annual assessments (under Title I-A). While Title III-A focuses on the education of LEP students, Title I-A also contains provisions that specifically apply to this student population. For example, Title I-A requires that LEAs annually assess the English proficiency of all students with limited English proficiency (Section 1111(b)(7)). These assessments must measure students' speaking, listening, reading, and writing skills in English. National Programs (Sections 3131 and 3303) In the reservations of funds made under Title III-A, funds are provided to support two specific national programs: (1) the National Professional Development Project; and (2) the National Clearinghouse. Under the National Professional Development Project, grants are awarded on a competitive basis for a period of up to five years to IHEs working in consortia with SEAs or LEAs to provide for professional development activities that will improve classroom instruction for LEP students and to help personnel working with these students to meet professional standards (e.g., licensure, certification). The National Clearinghouse is responsible for collecting, analyzing, synthesizing, and disseminating information about language instruction educational programs for LEP students and related programs. Title IV: 21st Century Schools Title IV of the ESEA authorizes the Safe and Drug-Free Schools and Communities program (Part A) and the 21 st Century Community Learning Centers (Part B). It also includes requirements related to the provision of services for children in smoke-free environments (Part C). Part A: Safe and Drug-Free Schools and Communities Title IV-A is the federal government's major initiative to prevent drug abuse and violence in and around schools. One-half of state grant funds is allocated on the basis of total population aged 5-17, and one-half is allocated in proportion to Title I-A concentration grants, with a minimum grant amount of the greater of 0.5% of total funding for state grants or each state's grant for FY2001. SEAs subsequently make formula grants to LEAs based on each LEA's share of total Title I-A funding (60%) and share of enrollment in public and private nonprofit elementary and secondary schools (40%). Title IV-A also provides funds to state governors to create programs to deter youth from using drugs and committing violent acts in schools. Funds are not currently provided for state grants. National programs supporting a variety of national leadership projects designed to prevent drug abuse and violence in elementary and secondary schools (e.g., the Safe Schools/Healthy Students initiative) are also funded under Title IV-A. Part B: 21st Century Community Learning Centers Title IV-B supports activities provided during nonschool hours that offer learning opportunities for school-aged children. Formula grants are made to states based on the proportion of Title I-A funds received by each state relative to the total amount of funding provided through Title I-A. States subsequently award grants to local entities (e.g., LEAs, community-based organizations) on a competitive basis for a period of three to five years. SEAs are required, to the extent possible, to distribute funds equitably among the various geographic areas within the state, including urban and rural communities. Eligible entities are to serve primarily students who attend schools eligible for schoolwide programs under Title I-A and the families of these students. Eligible entities may use funds for before- and after-school activities that advance student academic achievement. The program's focus, however, is currently on providing after-school activities for children and youth, and literacy-related activities for their families. Part C: Environmental Tobacco Smoke Title IV-C prohibits smoking in facilities providing elementary or secondary education or library services to children, if the services are funded directly or indirectly by the federal government, or the facility is constructed, operated, or maintained using federal funds. Title V: Promoting Informed Parental Choice and Innovative Programs Part A: Innovative Programs Part A authorizes the Innovative Programs block grant program, under which aid is provided to SEAs and LEAs that can be used for an especially wide range of educational services and activities. Part A grants are allocated to states on the basis of total population aged 5-17, with a state minimum grant amount of 0.5% of total funding for state grants. At least 85% of Title V-A funds must be allocated by SEAs to LEAs on the basis of state-developed formulas that take into consideration each LEA's enrollment of students in public and private schools, with adjustments to provide increased grants per pupil to LEAs with the greatest numbers or percentages of "high cost" students, including those from economically disadvantaged families and those living in sparsely populated areas or areas of concentrated poverty. Of the Part A funds that may be retained by states, no more than 15% may be used for administrative costs; remaining funds reserved by states are to be used for one or more of seven specified types of programs and services, including the broad categories of statewide education reform, school improvement programs and technical assistance activities. LEAs may use their Part A funds for any of 27 different types of "innovative assistance programs." While several of these are relatively specific (e.g., programs to provide same gender schools and classrooms), others are more general (e.g., promising education reform projects). This program is not currently funded. Part B: Public Charter Schools Subpart 1 authorizes grants to SEAs or, if a state's SEA chooses not to participate, charter school developers, to support the development and initial implementation of public charter schools. Priority in awarding grants is to be given to states with charter school policies meeting such criteria as holding charter schools accountable for meeting clear and measurable objectives, or establishing one or more public chartering agencies that are not LEAs. Up to 5% of program funds may be reserved by ED for technical assistance to, as well as studies of, charter schools. Subpart 1 also includes general provisions for allocations to charter schools under ESEA and other federal formula grant programs. Subpart 2 authorizes ED to make grants to three or more entities to demonstrate innovative ways to help charter schools acquire appropriate facilities. Subpart 3 authorizes competitive grants to SEAs, LEAs, or partnerships of these entities with nonprofit organizations for programs to expand public school options for K-12 students. Subpart 3 is not currently funded. Part C: Magnet Schools Assistance Part C provides grants to plan and operate magnet schools—public schools of choice designed to encourage voluntary enrollment by students of different racial backgrounds. Part D: Fund for the Improvement of Education Part D authorizes a series of competitive grant programs intended to support a variety of innovative K-12 educational activities. Subpart 1 includes both a broad authority for innovative activities selected at the discretion of the Secretary of Education, and a series of required studies (on unhealthy public school buildings, exposure of children to violent entertainment, and sexual abuse in schools). This authority has been used to create the Teacher Incentive Fund (TIF) program and the Promise Neighborhoods program through L-HHS-Ed appropriations acts. The TIF program provides competitive grants to support the development and implementation of performance-based teacher and principal compensation systems in high-need schools. The Promise Neighborhood program provides competitive grants to support distressed communities in developing and implementing a plan for the provision of a continuum of effective family and community services, family supports, and comprehensive educational reforms designed to improve outcomes for children from birth through college. A number of specific activities are authorized in Subparts 2-21 . Authorized programs include Elementary and Secondary School Counseling Programs; Partnerships in Character Education; Smaller Learning Communities; Gifted and Talented Students; Star Schools Program; Ready to Teach; Foreign Language Assistance Program; Physical Education; Community Technology Centers; Educational, Cultural, Apprenticeship, and Exchange Programs for Alaska Natives, Native Hawaiians, and Their Historical Whaling and Trading Partners in Massachusetts; Excellence in Economic Education; Grants to Improve the Mental Health of Children; Arts in Education; Parental Assistance and Local Family Information Centers; Combating Domestic Violence; Healthy, High-Performance Schools; Grants for Capital Expenses of Providing Equitable Services for Private School Students; Additional Assistance for Certain Local Educational Agencies Impacted by Federal Property Acquisition; and the Women's Educational Equity Act. Many of these programs are not currently funded. The availability of funds for any of these subparts, and the level of actual discretion for the Secretary, within a single appropriations authorization for all of Part D, is determined through annual appropriations legislation. Title VI: Flexibility and Accountability Part A: Improving Academic Achievement Subpart 1 of Part A authorizes grants to states for the development and enhancement of assessments meeting the requirements of Title I-A. In the allocation of funds, each state first receives $3 million per year, and remaining funds, if any, are allocated in proportion to population aged 5-17. Through FY2008, if appropriations exceeded a "trigger" amount ($400 million in FY2008), funds in excess of the trigger amount were awarded competitively to states for assessment-related activities. If appropriations fell below the trigger amount, states could defer the commencement or suspend the administration of student assessments required under Title I-A. This "trigger" no longer applies. Funds continue to be appropriated for both formula and competitive grants. The majority of funds are awarded by formula. Subpart 2 of Part A allows most LEAs to transfer up to 50% of their formula grants among selected ESEA programs, and to transfer funds from these programs into , but no funds out of , Title I-A. States may transfer up to 50% of the funds under the selected ESEA programs over which they have authority, except for administrative funds, among a number of ESEA programs. States may also transfer these funds into, but not out of, Title I-A. Subpart 3 of Part A authorizes a pair of regulatory flexibility programs, State-Flex and Local-Flex. Under State-Flex, up to seven states may consolidate all of their state administration and state activity funds under a number of ESEA programs and use these funds for any purpose authorized under any ESEA program. Under a companion Local-Flex authority, a limited number of LEAs may consolidate all of their funds under a number of ESEA programs, and use these funds for any purpose authorized under any ESEA program. Under both the state and local flexibility demonstration programs, a limited number of specified types of requirements—including those regarding civil rights, fiscal accountability (particularly the requirement that funds be used only to supplement, and not supplant, nonfederal funds), and equitable participation by private school students and teachers—may not be waived. Subpart 4 of Part A requires the Secretary of Education to review whether participating states overall (i.e., not individual LEAs or schools) meet the adequate yearly progress requirements of Title I-A and the annual measurable achievement objectives of Title III-A. The Secretary is to provide technical assistance to states that fail to meet either of these requirements for two consecutive years, and to submit reports to Congress listing such states. Part B: Rural Education Initiative Part B includes Rural Education Achievement Program (REAP) initiatives that are designed to assist rural LEAs that may lack the resources to compete effectively for competitive grants and that may receive grants that are too small to be effective in meeting their specified purposes. Subpart 1 of Part B authorizes the Small, Rural School Achievement Program (SRSA), which provides flexibility in the use of funds under several ESEA programs to rural LEAs with fewer than 600 students (or meeting certain other criteria). Eligible LEAs may also receive additional grants, although these are offset by amounts received under certain ESEA programs. Subpart 2 authorizes the Rural and Low-Income School Program (RLIS), under which grants are made to rural LEAs that do not receive grants under the SRSA program and that have a school-age child poverty rate of 20% or more. The RLIS grants may be used for a variety of ESEA-related purposes. Part C: General Provisions Part C contains one of several prohibitions against federal control of educational curriculum, standards, and assessments (others may be found in Title I-I and Title IX-E of the ESEA, as well as other statutes). Title VI-C also contains a number of provisions regarding the National Assessment of Educational Progress that were primarily designed to support the NAEP participation requirements under Title I-A. Title VII: Indian, Native Hawaiian, and Alaska Native Education Part A: Indian Education Subpart 1 of Part A authorizes grants to LEAs and to schools operated or funded by the Bureau of Indian Affairs (BIA). Eligible LEAs must meet Indian student enrollment thresholds of at least 10 students or 25% of total enrollment (the thresholds do not apply if the LEA is located in Alaska, California, or Oklahoma, or on or near an Indian reservation). Formula grants are allocated on the basis of the number of Indian students and the greater of the average expenditure per pupil for the state or 80% of the national average. The formula grants may be consolidated with grants under other federal education programs serving Indian students (under a demonstration project authority); and may be used for comprehensive programs of educational services for Indian students, such as culturally related activities and curriculum content, substance abuse prevention, and family literacy programs. Subpart 2 of Part A authorizes competitive grants to SEAs, LEAs, Indian tribes and organizations, BIA operated or supported schools, Indian institutions (such as IHEs), or consortia of these entities for such activities as early childhood education and teacher professional development. Subpart 3 authorizes a variety of national activities intended to improve education for Indian students, such as research, postsecondary education fellowships, programs for gifted and talented Indian students, adult education programs, and education planning and administration grants to Indian tribes. Subpart 4 establishes the National Advisory Council on Indian Education, and authorizes a preference for Indian applicants under Part A grant programs. Part B: Native Hawaiian Education Part B authorizes a consolidated program of competitive grants to Native Hawaiian educational or community-based organizations, or other public or private nonprofit organizations with experience in operating Native Hawaiian programs, or consortia of these entities to provide a wide variety of services intended to improve education for Native Hawaiians. In the awarding of grants, priority is to be given to activities that are intended to: improve reading skills for Native Hawaiian students in grades K-3; meet the needs of at-risk children and youth; increase participation by Native Hawaiians in fields or disciplines in which they are underemployed; or increase the use of the Hawaiian language in instruction. Specifically authorized activities include early childhood education and care, postsecondary education scholarships, and services for Native Hawaiian students with disabilities. Title VII-B also establishes a Native Hawaiian Education Council, and supports the establishment of individual island councils. Part C: Alaska Native Education Part C authorizes competitive grants for a variety of activities and services intended to improve education for Alaska Natives. Eligible grantees include Alaska Native organizations, entities with experience operating Alaska Native programs or instruction in Alaska Native languages, or other organizations, including SEAs and LEAs, in consortia with Alaska Native organizations. Priority is to be given to applicants that include Alaska Native regional nonprofit organizations. Authorized uses of grants include the development of curriculum materials that address the special needs of Alaska Native students, family literacy services, support for Alaska Native students in teacher preparation programs, home instruction programs, and cultural education and exchange programs. Title VIII: Impact Aid Title VIII of the ESEA, Impact Aid, compensates LEAs for "substantial and continuing financial burden" resulting from federal activities. These activities include federal ownership of certain lands, as well as the enrollments in LEAs of children of parents who work and/or live on federal land (e.g., children of parents in the military and children living on Indian lands). The federal government provides compensation because these activities deprive LEAs of the ability to collect property or other taxes from these individuals (e.g., members of the Armed Forces living on military bases) even though the LEAs are obligated to provide free public education to their children. Thus, Impact Aid is intended to compensate LEAs for the resulting loss of tax revenue. Title VIII authorizes several types of Impact Aid payments. These include payments under Section 8002, Section 8003, Section 8007, and Section 8008. Each of these types of payments is discussed briefly below. Section 8002. Section 8002 compensates LEAs for the federal ownership of certain property. To qualify for compensation, the federal government must have acquired the property, in general, after 1938, and the assessed value of the land at the time it was acquired must have represented at least 10% of the assessed value of all real property within an LEA's area of service. Section 8003. Section 8003 compensates LEAs for enrolling "federally connected" children. These are children who reside with a parent who is a member of the Armed Forces living on or off federal property; reside with a parent who is an accredited foreign military officer living on or off federal property; reside on Indian lands; reside in low-rent public housing; or reside with a parent who is a civilian working and/or living on federal land. Two payments are made under Section 8003. Section 8003(b) authorizes "basic support payments" for federally connected children. Basic support payments are allocated directly to LEAs by ED based on a formula that uses weights assigned to different categories of federally connected children and cost factors to determine maximum payment amounts. Section 8003(d) authorizes additional payments to LEAs based on the number of certain children with disabilities who are eligible to receive services under the Individuals with Disabilities Education Act (IDEA). Payments are limited to certain IDEA-eligible children, most notably those whose parents are members of the Armed Forces (residing on or off military bases), and those residing on Indian lands. Section 8003 payments account for more than 90% of total Impact Aid appropriations. Section 8007. Section 8007 provides funds for construction and facilities upgrading to certain LEAs with high percentages of children living on Indian lands or children of military parents. These funds are used to make formula and competitive grants. Section 8008. Section 8008 provides funds for emergency repairs and comprehensive capital improvements to 24 schools that ED currently owns but LEAs use to serve federally connected children. Two of the schools are located on closed military bases and operated by ED, and the remaining facilities are operated by LEAs. Statutory language requires ED to transfer ownership of these facilities to LEAs or other entities. Title IX: General Provisions Part A: Definitions Part A provides definitions of a variety of terms used frequently throughout the ESEA, such as "local educational agency," "state educational agency," "highly qualified teacher," "limited English proficient," "professional development," "scientifically based research," and "state." Part B: Flexibility in the Use of Administrative and Other Funds Part B authorizes SEAs and LEAs to consolidate and jointly use funds available for administration under multiple ESEA programs. In order to qualify for this flexibility, SEAs must demonstrate that a majority of their resources are provided from nonfederal sources. Part C: Coordination of Programs; Consolidated State and Local Plans and Applications Part C authorizes SEAs and LEAs to prepare single, consolidated plans and reports for all "covered" ESEA programs (in general, these are the formula grant programs administered via SEAs). Part D: Waivers Under this provision, the Secretary of Education is authorized to waive most requirements associated with any program authorized by the ESEA, if specifically requested by SEAs, LEAs, Indian tribes or schools (via their LEAs). Part E: Uniform Provisions Subpart 1 of Part E contains provisions for the participation of private school students and staff in those ESEA programs where such participation is authorized. Under the relevant ESEA programs, services provided to private school students or staff are to be equitable in relation to the number of such students or staff eligible for each program; are to be secular, neutral and nonideological, with no funds to be used for religious worship or instruction; and are to be developed through consultation between public and private school officials. Provision is made for bypassing SEAs and LEAs that cannot or have not provided equitable services to private school students or staff, and serving private school students and staff in these areas through neutral, third-party organizations. Provision is also made for the submission of complaints regarding implementation of these requirements. Subpart 1 also prohibits federal control of private or home schools, or the application of any ESEA requirement to any private school that does not receive funds or services under any ESEA program. Subpart 2 of Part E contains a general definition of "maintenance of effort," as applied in several ESEA programs; requires ED to publish guidance on prayer in public schools, and requires LEAs receiving ESEA funds to certify to their SEAs that they do not limit the exercise of "constitutionally protected prayer" in public schools; requires recipient SEAs, LEAs, and public schools that have a "designated open forum" to provide equal access to the Boy Scouts; prohibits the use of ESEA funds to "promote or encourage sexual activity;" prohibits federal control of educational curriculum, content or achievement standards, building standards, or allocation of resources; prohibits federally sponsored testing of students or teachers; and requires LEAs receiving funds under any ED program to provide to the armed services access to directory information on secondary school students, unless students or their parents request that such information not be released (this provision does not apply to certain religiously affiliated private schools). Finally, under an "Unsafe School Choice Option," students in states receiving ESEA funds who attend a "persistently dangerous" public school, or who are victims of violent crime at school, are to be offered the opportunity to transfer to a safe public school. Part F: Evaluations Part F authorizes ED to reserve 0.5% of the funds appropriated for ESEA programs, other than Titles I and III, for program evaluations, if funds for this purpose are not separately authorized. Appendix A. Appropriations for Programs Authorized by the ESEA Appendix B. Selected Acronyms Used in This Report AMAO: Annual measurable achievement objectives AMO: Annual measureable objectives AYP: Adequate yearly progress BIA: Bureau of Indian Affairs BIE: Bureau of Indian Education ED: U.S. Department of Education ESEA: Elementary and Secondary Education Act HOUSSE: High objective uniform state standard of evaluation HQT: Highly qualified teacher IDEA: Individuals with Disabilities Education Act IHE: Institution of higher education LEA: Local educational agency LEP: Limited English proficient NAEP: National Assessment of Educational Progress NCLB: No Child Left Behind Act REAP: Rural Education Achievement Program RLIS: Rural and Low-Income School Program SEA: State educational agency SES: Supplemental educational services SRSA: Small, Rural School Achievement Program TAP: Targeted assistance program

The primary source of federal aid to K-12 education is the Elementary and Secondary Education Act (ESEA), particularly its Title I, Part A program of Education for the Disadvantaged. The ESEA was initially enacted in 1965 (P.L. 89-10), and was most recently amended and reauthorized by the No Child Left Behind Act of 2001 (NCLB, P.L. 107-110). The NCLB authorized virtually all ESEA programs through FY2008. It is widely expected that the 113th Congress will consider whether to amend and extend the ESEA. The NCLB initiated a major expansion of federal influence upon several aspects of public K-12 education, primarily with the aim of increasing the accountability of public school systems and individual public schools for improving achievement outcomes of all students, especially the disadvantaged. States must implement in all public schools and school districts a variety of standards-based assessments in reading, math and science; make complex annual adequate yearly progress (AYP) determinations for each public school and district; and require virtually all public school teachers and aides to meet a variety of qualification requirements. State AYP policies must incorporate an ultimate goal of all public school students reaching a proficient or higher level of achievement by the end of the 2013-2014 school year. Further, participating states must enforce a series of increasingly substantial consequences for most of their schools and almost all school districts that fail to meet the AYP standards for two consecutive years or more. All of these requirements are associated with state participation in the ESEA Title I-A program. Other major ESEA programs provide grants to support the education of migrant students; recruitment of and professional development for teachers; language instruction for limited English proficient students; drug abuse prevention programs; after-school instruction and care; expansion of charter schools and other forms of public school choice; education services for Native American, Native Hawaiian, and Alaska Native students; Impact Aid to compensate local educational agencies for taxes foregone due to certain federal activities; and a wide variety of innovative educational approaches or instruction to meet particular student needs. While Congress has not enacted legislation to reauthorize the ESEA, the Administration has made available an ESEA flexibility package that waives various academic accountability requirements, teacher qualification-related requirements, and funding flexibility requirements that were enacted through NCLB. In exchange for these waivers, states must agree to meet four principles established by the U.S. Department of Education (ED) for "improving student academic achievement and increasing the quality of instruction." The four principles, as stated by ED, are as follows: (1) college- and career-ready expectations for all students; (2) state-developed differentiated recognition, accountability, and support; (3) supporting effective instruction and leadership; and (4) reducing duplication and unnecessary burden. Taken collectively, the waivers and principles included in the ESEA flexibility package amount to a fundamental redesign by the Administration of many of the accountability and teacher-related requirements included in current law. As of May 2013, ED had approved ESEA flexibility package applications for 37 states and the District of Columbia and was reviewing applications from several other states. If Congress considers ESEA reauthorization during the 113th Congress, it is possible that provisions included in any final bill may be similar to or override the waivers and principles established by the Administration. This report focuses only on current law and does not discuss the details of the ESEA flexibility package or how it modifies current law. For more information about the ESEA flexibility package, see CRS Report R42328, Educational Accountability and Secretarial Waiver Authority Under Section 9401 of the Elementary and Secondary Education Act.

Introduction Tracking changes in energy activity is complicated by variations in different energy markets. These markets, for the most part, operate independently, although events in one may influence trends in another. For instance, oil price movement can affect the price of natural gas, which then plays a significant role in the price of electricity. Since aggregate indicators of total energy production and consumption do not adequately reflect these complexities, this compendium focuses on the details of individual energy sectors. Primary among these are oil, particularly gasoline for transportation, and electricity generation and consumption. Natural gas is also an important energy source, for home heating as well as in industry and electricity generation. Coal is used almost entirely for electricity generation, nuclear and hydropower completely so. Renewable sources (except hydropower) continue to offer more potential than actual energy production, although fuel ethanol has become a significant factor as a transportation fuel. Wind power also has recently grown rapidly, although it still contributes only a small share of total electricity generation. Conservation and energy efficiency have shown significant gains over the past three decades, and offer encouraging potential to relieve some of the dependence on imports that has caused economic difficulties in the past as well as the present. To give a general view of energy consumption trends, Table 1 shows consumption by economic sector—residential, commercial, transportation, and industry—from 1950 to the present. To supplement this overview, some of the trends are highlighted in Figure 1 and Figure 2 . In viewing these figures, a note on units of energy may be helpful. Each source has its own unit of energy. Oil consumption, for instance, is measured in million barrels per day (mbd), coal in million short tons per year, natural gas in trillion cubic feet (tcf) per year. To aggregate various types of energy in a single table, a common measure, British thermal unit (Btu), is often used. In Table 1 , energy consumption by sector is given in units of quadrillion Btus per year, or "quads," while per capita consumption is given in million Btus (MMBtu) per year. One quad corresponds roughly to one tcf of natural gas, or approximately 50 million tons of coal. One million barrels per day of oil is approximately 2 quads per year. One million Btus is equivalent to approximately 293 kilowatt-hours (Kwh) of electricity. Electric power generating capacity is expressed in terms of kilowatts (Kw), megawatts (Mw, equals 1,000 Kw) or gigawatts (Gw, equals 1,000 Mw). Gas-fired plants are typically about 250 Mw, coal-fired plants usually more than 500 Mw, and large nuclear powerplants are typically about 1.2 Gw in capacity. Table 1 shows that total U.S. energy consumption almost tripled since 1950, with the industrial sector, the heaviest energy user, growing at the slowest rate. The growth in energy consumption per capita (i.e., per person) over the same period was about 50%. As Table 1 illustrates, much of the growth in per capita energy consumption took place before 1970. Table 1 does not list the consumption of energy by the electricity sector separately because it is both a producer and a consumer of energy. For the residential, commercial, industrial, and transportation sectors, the consumption figures given are the sum of the resources (such as oil and gas) that are directly consumed plus the total energy used to produce the electricity each sector consumes—that is, both the energy value of the kilowatt-hours consumed and the energy lost in generating that electricity. As Figure 2 shows, a major trend during the period was the electrification of the residential and commercial sectors and, to a lesser extent, industry. By 2010, electricity (including the energy lost in generating it) represented about 70% of residential energy consumption, about 80% of commercial energy consumption, and about a third of industrial energy consumption. Consumption of major energy resources—petroleum, natural gas, and coal, as well as nuclear and renewable energy—is presented in Table 2 and Figure 3 . The historical trends show that petroleum has been and continues to be the major source of energy, rising from about 38% in 1950 to 45% in 1975, then declining to about 40% in response to the energy crisis of the 1970s. It remained in that range until the economic recession in 2008, when it declined to about 36%. Natural gas followed a similar pattern at a lower level, increasing its share of total energy from about 17% in 1950 to over 30% in 1970, then declining to about 25% in 1995. Since then, unlike petroleum, natural gas has taken on a larger share of total energy consumption, rising to about 27% in 2013. Much of that increased use of gas has taken place in the electric power sector, where most additions to generating capacity have been gas-fired. Consumption of coal in 1950 was 35% of the total, almost equal to oil, but it declined to about 20% a decade later. By that time almost all coal consumption was for electric power generation. Coal's share declined even further in the early 1970s as utilities converted coal-fired plants to burn oil and gas for environmental reasons. That era ended with the 1970s oil-embargoes, and coal remained at about 23% of total energy consumption until recent years, when natural gas began to replace it as a power-generating source. Oil About 40% of the energy consumed in the United States is supplied by petroleum, and that proportion remained approximately the same since 1950, although in recent years it has declined to about 36%. Also unchanged is the almost total dependence of the transportation sector on petroleum, mostly gasoline. The perception that the world is on the verge of running out of oil, widespread during the 1970s, has changed, however. The rapid price increases at that time, aided by improved exploration and production technology, stimulated a global search for oil and resulted in large amounts of new reserves. Indeed, as concerns about tightening supply and continually increasing prices were at a peak, and world production of petroleum grew, proven reserves actually increased by about 50% between 1973 and 1990. Some of the increase was in the Western Hemisphere, mostly in Mexico, but most was located in the region that already dominated the world oil market, the Middle East. With prices essentially steady during the 1990s, the search for oil slowed, but additions to reserves during the decade exceeded the amount of oil pumped out of the ground. By 2003, improved technology for retrieving petroleum from oil sands in Canada and, to a lesser extent, from heavy oil in Venezuela led to significant production from these resources, and by 2005, approximately 200 billion barrels of resources from oil sands and heavy oil were added to the total of proven world reserves, 20% of the total 1991 figure. In more recent years, successful extraction of tight oil (also called "shale oil") in the United States has added significantly to world resources estimates. These trends are illustrated in Figure 4 . Petroleum Consumption, Supply, and Imports Consumption of petroleum by sector reflects a variety of trends (see Table 3 ). In the residential and commercial sectors, petroleum consumption grew steadily from 1950 to 1970, while accounting for about 15% of total petroleum consumption. After the price surge in the 1970s, consumption in those sectors declined, falling to less than 7% of total petroleum consumption by 1995. When oil prices surged again after 2005, consumption declined further, to about 5%. Usage in the electric power sector followed a similar but more abrupt pattern. Until 1965 only about 3% of petroleum went to power generation. In the late 1960s, efforts to improve air quality by reducing emissions led utilities to convert a number of coal-fired power plants to burn oil, and many new plants were designed to burn oil or natural gas. Utilities found themselves committed to increasing dependence on oil just at the time of shortages and high prices; in 1975 almost 9% of oil consumption went for power production. Consumption then fell sharply as alternate sources became available, declining to about 2%-3% of total consumption and falling even lower after 2005 as oil prices increased sharply. Industrial consumption of petroleum, which includes such large consumers as refineries and petrochemical industries, has remained about 25% of total consumption since 1970. As other sectors' share fell, transportation's share, which was a little more than half of total consumption prior to 1975, climbed to two-thirds by 2000 and 70% in 2010, where it has remained. The slowing of the economy in the summer of 2008 led to a temporary drop in total oil consumption in 2009. While petroleum consumption increased throughout the period from 1950 to the present (except for a temporary decline following the price surge of the 1970s and another in 2009), U.S. domestic production peaked in 1970. However, in recent years expanded production of tight oil has reversed the decline in production. (See Table 4 .) The result, as shown in Figure 5 , was greater dependence on imported petroleum, which rose from less than 20% in 1960 to near 60% in 2005. With a decline in consumption following 2008, and increased production, import dependence declined to about 35% in 2013. Petroleum and Transportation Since the transportation sector is so heavily dependent on petroleum, and uses so much of it, Table 5 and Figure 6 present a more detailed breakdown of the various types of petroleum products used. Aviation fuel includes both aviation gasoline and kerosene jet fuel. In 1950 aviation was almost entirely gasoline powered; by 2000 it was 99% jet fueled. The growth in flying is illustrated by the fact that aviation fuel was only 3% of petroleum consumption for transportation in 1950, but had grown to 12% in 1965 and has maintained that share since then. Diesel fuel consumption showed a similar dramatic increase. About 6% of total petroleum consumption for transportation in 1950, it rose to 11% by 1975 and to 20% in recent years. Diesel fuel is used by a number of transportation sectors. Part of the increase involved the change of railroads from coal-fired steam to diesel and diesel-electric power. Diesel fuel is used also in the marine transportation sector, and some private automobiles are diesel-powered. The major part of diesel fuel consumption in transportation is by large commercial trucks. Total diesel fuel consumption increased from about 200,000 barrels per day in 1950 to 3.0 million barrels per day in 2007. The economic downturn in 2008 led to a decline in diesel consumption. Most of the petroleum consumed in the transportation sector is motor gasoline. In 1950 it was 71% of total sector petroleum consumption, and in recent years, despite the increase in aviation fuel and diesel, it has been about 65%. Since 1950, gasoline consumption has almost quadrupled. Like diesel fuel, gasoline consumption fell after the economic decline in the summer of 2008. Of the other petroleum products consumed in the transportation sector, the largest is residual fuel oil, most of which is used in large marine transport. Consumption of residual fuel oil in the transportation sector was about 500,000 barrels in 1950, and declined gradually to about 400,000 in 2000. Petroleum Prices: Historical Trends Oil is a commodity, and most commodity prices are volatile. Because oil is widely consumed, and is so important at all levels of the economy, its price is closely watched and analyzed. Especially since the 1970s, when a generally stable market dominated by a few large oil companies was broken by the Organization of the Petroleum Exporting Countries (OPEC) cartel and a relatively open world market came into being, the price of crude oil has been particularly volatile. Figure 7 and Figure 8 show the long-term trends of crude oil and gasoline prices, in both current dollars and inflation adjusted dollars. At the consumer level, prices of products such as motor gasoline and heating oil have reacted to price and supply disruptions in ways that have been modulated by various government and industry policies and international events. A significant and not often noted fact is that, for many commodities, the long-term trend in prices, adjusted for inflation and excluding temporary surges, has been down. As shown in Figure 8 , the real price of gasoline declined steadily until 1973, peaked in 1980, then fell precipitously in the mid-1980s and continued its downward trend. The surge in prices that peaked in 2008 brought the price above the peak of 1980 (in real dollars). It is not clear whether prices will remain at the present high level, or whether they will resume the more typical downward trend of commodity prices. Figure 9 illustrates the proportion of the gross domestic product (GDP) dedicated to consumer spending on oil. The price surges in the 1970s pushed this ratio from about 4.5% before the Arab oil embargo to about 8.5% following the crisis in Iran late in the decade. Following that, it declined to less than 4%. During the recent run-up of prices the trend started back up again, reaching 6% in 2008. Petroleum Prices: The 2004-2008 Bubble and Back Up Again Beginning in 2004 the world price of crude oil, and with it the price of gasoline, began to increase. Unlike the previous increases in the 1970s, there was no interruption or shortage in the supply of either petroleum or its products, except for a few months in the fall of 2005 when Hurricane Katrina shut down a major portion of U.S. refinery capacity as well as some crude oil production and delivery capacity in the Gulf of Mexico. Nevertheless, an unexpected surge in demand for oil imports by China, added to continuing increases in demand from Europe and the United States as economies continued to grow, tightened the production capacity of the major oil producing nations and signaled that demand in the near future might not be met. In addition, turmoil in the Middle East and elsewhere, as well as the possibility of further natural disasters like Katrina, threatened supply interruptions and put further upward pressure on prices. (See Figure 10 and Figure 11 .) As prices continued to climb, it became apparent that demand for gasoline was relatively insensitive to its cost to the consumer. Throughout the period, as illustrated in Figure 12 , consumption of gasoline varied seasonally but continued an upward trend on an annual basis. In the summer of 2008 crude oil prices soared far beyond the actual cost of production, and the market took on features of a classical commodities bubble, with expectations of indefinitely rising prices and participation in the market by many who would not normally enter it. The bubble burst in October 2008 with the onset of a financial crisis in the U.S. housing and banking sectors and the evidence that consumption of gasoline was finally faltering. As the economic crisis became more acute, crude prices fell in a few months from $135 per barrel to close to $40, where they had been at the start of the run-up five years earlier. At the end of 2010, with the economy beginning to recover, oil prices began to rise again. When unrest in Libya, a major oil producer, interrupted some supply to Europe, prices of both crude oil and gasoline surged again. As that crisis eased, prices fell, only to rise again with the prospect of a supply interruption involving Iran in the Persian Gulf. Why Are Oil Prices So High? Many diverse factors combine to determine prices in a world oil market that is globally integrated. About 60% of the world's oil supply is traded internationally, and particular sources of oil can be interchangeable within the limits set by the oil's quality. Consequently, the price of oil is global. No matter where it is produced or consumed, the price tends to move in the same direction at a similar rate. New supplies, or disruptions to existing supplies, will impact prices around the world, no matter where those events occur. Similarly, a change in demand in any particular country is likely to affect prices globally. The price of oil generally increased from 2003 until it peaked at $145 per barrel in mid-2008. This run-up of oil prices was unlike the two oil crises in the 1970s, in that there was no major interruption of supply. In 1973-1974, Arab members of the Organization of the Petroleum Exporting Countries (OPEC) embargoed shipments of oil to the United States and the Netherlands because of their support of Israel during the Yom Kippur War. The resulting shortages, coupled with domestic price controls in the United States, led to lines at gas stations and widespread concern about energy security. The legislation during that time is now being revisited because of the rise in U.S. production. During the later disruption in oil supply following the Iranian revolution in 1979, the shortages and gas station lines were so severe that Congress began considering a gasoline rationing plan. In contrast, there was no period during 2003 to 2008 when oil was in short supply, except for a brief period following Hurricane Katrina in 2005, and there were no lines at the gas pumps, except for a limited time in a few places. Nevertheless, the price of oil climbed steadily during that period. As it climbed, so did the price of gasoline. But despite the higher price, consumption of gasoline continued to increase, indicating that consumers were relatively insensitive to the increased cost. Only when the economy began to falter in the summer of 2008 did consumption significantly decline. Once the U.S. recession spread to the rest of the world in 2008, global oil consumption and prices collapsed, falling to a one-day low of less than $31 per barrel. Within a year of the 2008 collapse, the price of oil recovered to the range of $70-$85, far above the $20-$30 region it had been in during the 15 years previous to the price run-up. (See Figure 7 for long-term yearly average prices, and Figure 10 for more current weekly average price movements.) Significantly, the actual cost of producing most of the oil being supplied to the market had not risen to a degree comparable to the increase in price. The question then arises, why are oil prices so much higher than they were in the 1990s? Numerous factors in addition to the current cost of production contribute to the price of oil. First, a major feature of the oil market is that very large capital investments, and considerable time, are necessary to bring known resources into production. Investors in production facilities as a result are interested not only in current demand and supply, but in expectations as to how demand and supply will change in the future. Second, not only market factors but political decisions play a major role in determining the price of oil, especially since many of the world's primary producers are nationally owned. In many of those countries where oil is state-owned, oil revenue is often treated as part of the general revenue, and devoted to governmental purposes rather than enhancing the production capacity of the oil industry. These are only two of the many factors that influence oil prices. Specifically, the following factors may also be important: Geopolitical Factors, Including OPEC . The concentration of oil resources in the Persian Gulf countries means that the political events in the Middle East can have great influence on the oil market. Their influence is enhanced by the monopolistic policies of OPEC, which is dominated by Saudi Arabia and other Persian Gulf countries. Also contributing to the importance of this factor is the resource nationalism of government-owned oil companies, noted above, and the practice of many developing countries, where demand growth has become rapid, to subsidize gasoline consumption with regulated low prices. A Changing Market. To an increasing degree, investors in oil futures have been investors with little interest in oil as a commodity, such as investment banks and pension and endowment funds. A debatable question is the degree to which such investors lead to a market focused more on future prospects than present conditions. Inelastic Demand for Oil Products, Particularly Gasoline . During the 2003-2008 run-up of prices, U.S. consumption of gasoline continued to increase, indicating that consumers were relatively insensitive to what it cost to keep their automobiles running. Only when the economy faltered in the summer of 2008 did consumption decline. The insensitivity to price is exacerbated in some countries, particularly in the developing nations and the oil-exporting countries, by government subsidies noted above, which mask the actual cost of gasoline. Foreign Exchange Rates . Oil is traded in dollars, even in foreign markets. As a result, changes in the value of the dollar relative to other currencies can have an effect on the price of oil. Changing Views on Oil Resources. Because the oil market is forward-looking, future supply and demand conditions are important factors in determining price. During the crises of the 1970s, there was a widespread belief that natural resources in general, including oil, were running out. In the 1980s, after the price of oil collapsed in the face of reduced demand and excess production capacity, the limits to growth concept lost much of its support. However, during the recent price run-up, there was, and continues to be, widespread belief that future finds of large oil deposits will diminish, and even that world oil production will soon reach a peak and stabilize or decline. These predictions are controversial –– they appear to be contradicted by the doubling of world proven oil reserves, as shown in Figure 4 — but they have a powerful influence on the forward-looking oil market. Changing Demand Centers. There is greater and growing demand from the lesser industrialized countries than from the OECD nations. This has contributed to a change in trade flows and also less transparency in the market. Gasoline Taxes The federal tax on gasoline is currently 18.4 cents per gallon. An extensive list of the gasoline and diesel fuel tax rates imposed by each state per gallon of motor fuel is maintained and updated by the American Petroleum Institute (API), "Notes to State Motor Fuel Excise and Other Tax Rates," at http://www.api.org/Oil-and-Natural-Gas-Overview/Industry-Economics/~/media/Files/Statistics/State_Motor_Fuel_Excise_Tax_Update.ashx . API, State Gasoline Tax Reports (webpage), http://www.api.org/oil-and-natural-gas-overview/industry-economics/fuel-taxes . April 2014 Summary Reports, 4 p., PDF, http://www.api.org/oil-and-natural-gas-overview/industry-economics/~/media/Files/Statistics/state-motor-fuel-taxes-report-summary.pdf . State Gasoline Tax Reports, April 2014 Notes to State Motor Fuel Excise Tax Report, 7 p., PDF, http://www.api.org/oil-and-natural-gas-overview/industry-economics/~/media/47E397E1D3B14F61BAADCB6CA56A9F84.pdf . Electricity While overall energy consumption in the United States increased nearly three-fold since 1950, electricity consumption increased even more rapidly. In 2012, the United States consumed approximately 12,000 kilowatthours per person. Annual power generation is 10 times what it was in 1950. Figure 13 illustrates the trend. Throughout this period, until recently, coal was used to generate about half the rapidly increasing amount of electricity consumed. Petroleum became briefly important as a source of power generation in the late 1960s because it resulted in lower emissions of air pollutants, and consumption continued in the 1970s despite the price surge because natural gas was presumed to be in short supply. By the 1980s, however, oil consumption by utilities dropped sharply, and in 2013 less than 1% of power generation was oil-fired. Natural gas generation has a more complicated history. Consumption by the electric power industry increased gradually as access by pipeline became more widespread. With the price increase in oil in the 1970s, demand for gas also increased, but interstate prices were regulated, and gas availability declined. In addition, federal energy policy viewed generation of electricity by gas to be a wasteful use of a diminishing resource. The Fuel Use Act of 1978 prohibited new power generators from using gas and set a timetable for shutting down existing gas-fired plants. Gas prices were later deregulated, resulting in increased production, and the Fuel Use Act was repealed, but in the meantime generation of electricity from gas fell from 24% in 1970 to 12% in 1985. In the 1990s gas became more popular as technology improved, and as electricity producers faced tighter Clean Air Act requirements. By 2000 16% of total electric generation was gas-fired, and by 2013 the figure reached 27%. Most capacity additions since 1995 have been gas-fired, as illustrated in Figure 14 . Nuclear power started coming on line in significant amounts in the late 1960s, and by 1975, in the midst of the oil crisis, was supplying 9% of total generation. However, increases in capital costs, construction delays, and public opposition to nuclear power following the Three Mile Island accident in 1979 curtailed expansion of the technology, and many construction projects were cancelled. The Chernobyl disaster in April 1986 also contributed to anti-nuclear sentiment. Continuation of some construction increased the nuclear share of generation to 20% in 1990, where it remains currently. Recently, some new projects have entered the licensing and construction stage, but the future of nuclear power remains in question. The accident at Fukushima, Japan, in March 2011 contributed a further consideration regarding future construction. (For more details on U.S. nuclear power activity, see CRS Report RL33558, Nuclear Energy Policy , by [author name scrubbed].) Construction of major hydroelectric projects has also essentially ceased, and hydropower's share of electricity generation has gradually declined from 30% in 1950 to 15% in 1975 and less than 10% in 2000. However, hydropower remains highly important on a regional basis. In the last decade, a new trend has begun: the addition of wind energy. As Figure 14 illustrates, more than 50 gigawatts of wind energy electricity generating capacity has been added to the U.S. power grid since 2003. Sources of power generation vary greatly by region (see Table 6 ). Hydropower in the Pacific Coast states, for instance, supplies over 36% of total generation, and natural gas 38%. Other regions are heavily dependent on coal generation: the North Central and East South Central states, as well as the Mountain states, generate more than 60% of their electricity from coal, whereas other regions, such as New England and the Pacific Coast, use relatively little coal. The West South Central region (Arkansas, Louisiana, Oklahoma, and Texas) generates 45% of its electricity from gas. New England in the 1970s and 1980s was heavily dependent on oil-generated power; in 2005, despite an increased use of natural gas, oil produced 10% of New England's power, compared with the national average of 2.5%. By 2013, the proportion had dropped to less than 1%, and almost half New England's electric power was generated by gas. The price of electricity varies by region, depending on the fuel mix and the local regulatory system, among other factors. The nationwide average retail price to residential consumers increased during the 1970s energy crises but declined starting in the 1980s, as indicated by Figure 15 . An increase starting in 2000 resulted from the expiration in numerous regions of price caps that had been previously imposed when utilities were deregulated. By 2010 prices had begun to level off again, in part because of the falling cost of natural gas to utilities (see Figure 16 ). Other Conventional Energy Resources Natural Gas Consumption of natural gas was more than four times as great in 2013 as it was in 1950. Throughout the period, consumption in the residential and commercial sector grew at about the same rate as total consumption, in the range of 30% to 40% of the total. As shown in Table 7 , consumption for electric power generation increased from about 10% in 1950 to more than 20% at the end of the century and 30% by 2010. The proportion of total gas consumption by the industrial sector declined correspondingly, from more than 50% in 1950 to about 33% in recent years. In part because of increased demand by electric utilities, natural gas prices have become extremely volatile in recent years, as illustrated by Figure 16 , which shows high, low, and yearly average prices for gas delivered to electricity generators. The recent boom in production of shale gas has led to an oversupply and consequently lower prices. Rates for residential natural gas are regulated, but local gas companies are usually allowed to pass fuel costs through to customers, so there is considerable seasonal fluctuation as winter heating demand increases consumption, as shown in Figure 17 . The long-term trend in residential natural gas prices, both in current dollars and in constant 2008 dollars, is shown in Figure 18 . Coal Consumption of coal has more than doubled since 1950, but during that period coal as an energy source changed from a widely used resource to a single-use fuel for generating electricity. (See Table 7 .) In 1950 the residential and commercial sector consumed almost a quarter of the total; by 1980 less than 1% of coal went to those sectors. In transportation, steam locomotives (and some coal-fired marine transportation) consumed 13% of coal; by 1970 they were all replaced with diesel-burning or electric engines. Industry consumed 46% of coal in 1950; by 2000 less than 10% of coal was consumed by that sector. Meanwhile, the electric power sector, which consumed less than 20% of the half-billion tons of coal burned in 1950, used more than 90% of the near-billion tons consumed in 2013. Consumption of coal has declined in the last decade as utilities have stopped adding new coal-generated electric capacity (see Figure 14 ). Renewables A major supply of renewable energy in the United States, not counting hydroelectric power generation, is fuel ethanol, particularly for transportation. Consumption in the United States in 2011 reached about 14.0 billion gallons, mainly blended into E10 gasohol (a blend of 10% ethanol and 90% gasoline). This figure represents 10.2% of the approximately 136 billion gallons of gasoline consumption in the same year. As Figure 19 indicates, fuel ethanol production has increased rapidly in recent years, with the establishment of the renewable fuel standard (RFS), which requires the use of biofuels in transportation. Consumption of fuel ethanol has leveled off since the 2011 peak, largely because of barriers to the use of higher blends than E10. (For details see CRS Report R40155, Renewable Fuel Standard (RFS): Overview and Issues , by [author name scrubbed] and [author name scrubbed].) Another rapidly growing renewable resource is wind-generated electric power, as shown in Figure 20 . The 168 billion kwh of wind energy produced in 2013 is about 4% of the 4,100 billion kwh of total electricity generation in that year. Conservation and Energy Efficiency Vehicle Fuel Economy Energy efficiency has been a popular goal of policy makers in responding to the repeated energy crises of recent decades, and efforts to reduce the energy intensity of a broad spectrum of economic activities have been made both at the government and private level. Because of the transportation sector's near total dependence on vulnerable oil supplies, improving the efficiency of motor vehicles has been of particular interest. Figure 21 illustrates the trends in this effort for passenger cars and for light trucks, vans, and sport utility vehicles. Analysis by the Environmental Protection Agency (EPA), involving the composition of the fleet as well as the per-vehicle fuel rates, indicates that light vehicle fuel economy declined on average between 1988 and 2003. This is largely because of increased weight, higher performance, and a higher proportion of sport utility vehicles and light trucks sold. In 2003, SUVs, pickups, and vans comprised 48% of all sales, more than twice their market share in 1983. After 2004, fuel economy improved and the market share of trucks declined. Further, tighter fuel economy standards for light trucks were implemented beginning in model year 2005, with another increase in 2012. Energy Consumption and GDP A frequent point of concern in formulating energy policy is the relationship between economic growth and energy use. It seems obvious that greater economic activity would bring with it increased energy consumption, although many other factors affecting consumption make the short-term relationship highly variable. Over a longer period, for some energy-related activities, the relationship with economic growth has been essentially level. For the period from 1973 to 2010, for instance, consumption of electricity remained close to 0.4 kwh per constant dollar of GDP. In the case of oil and gas, however, a remarkable drop took place in the ratio of consumption to economic growth following the price spikes and supply disruptions of the 1970s, as illustrated in Figure 22 . Consumption of oil and gas declined from 10,000 Btus per constant dollar of GDP in 1973 to a little more than 6,000 in 1985, and has continued to decline at a slower rate since then. During the earlier period, oil and gas consumption actually declined 15% while GDP, despite many economic problems with inflation and slow growth, was increasing by 45% (see Figure 23 ). During the period 1987 to 2013, oil and gas consumption increased by about 22%, while GDP increased 94%. Major Statistical Resources Energy Information Administration (EIA) EIA home page—http://www.eia.doe.gov Most of the tables and figures in this report are derived from databases maintained by the Energy Information Administration (EIA), an independent agency of the Department of Energy. EIA's Website presents the complete text of its many statistical reports in PDF's and Excel files. EIA, Publications and Reports—http://www.eia.doe.gov/bookshelf.html EIA's most frequently requested reports include the following: Annual Energy Review: all the historical yearly energy data across fuels Annual Energy Outlook: energy projections out to 2035 Country Analysis Briefs: country-level energy overviews Electric Power Monthly: monthly summary of electric power generation and capacity International Energy Annual: international historical yearly energy data across fuels International Energy Outlook: worldwide energy projections to 2025 Monthly Energy Review: all the latest monthly energy data across fuels This Week in Petroleum: weekly prices and analytical summary of the petroleum industry Weekly Petroleum Status Report: weekly petroleum prices, production and stocks data Other Sources Nuclear Regulatory Commission Information Digest: http://www.nrc.gov/reading-rm/doc-collections/nuregs/staff/sr1350/ . Updated annually, this official NRC publication (NUREG-1350) includes general statistics on U.S. and worldwide nuclear power production, U.S. nuclear reactors, and radioactive waste. American Petroleum Institute (API): http://api-ec.api.org/newsplashpage/index.cfm . The primary trade association of the oil and natural gas industry representing more than 400 members. Research, programs, and publications on public policy, technical standards, industry statistics, and regulations. API: State Gasoline Tax Reports: http://www.api.org/statistics/fueltaxes/index.cfm . Bloomberg.Com, Market Data: Commodities, Energy Prices: http://www.bloomberg.com/energy/index.html . BP Statistical Review of World Energy, http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy-2013.html . BP Energy Outlook, http://www.bp.com/en/global/corporate/about-bp/energy-economics/energy-outlook.html . Displays four tables: Petroleum ($/bbl) for crude oil. The generally accepted price for crude oil is "WTI Cushing $" which is listed third in the table. Petroleum (¢/gal) for heating oil and gasoline. Natural Gas ($/MMBtu) Electricity ($/megawatt hour) This site is updated two to three times per day. AAA's Daily Fuel Gauge Report: http://www.fuelgaugereport.com/index.asp . At-the-pump retail fuel prices for gasoline and diesel fuel. Gives average price for today, yesterday, a month ago and a year ago for wholesale and crude oil. Also displays line chart showing the averages for the previous 12 months. National, state, and metropolitan data. International Energy Agency: http://www.iea.org , World Energy Outlook and other publications. The International Energy Agency is an autonomous body within the Organization for Economic Co-operation and Development (OECD). It gathers and analyzes statistics and "disseminates information on the world energy market and seeks to promote stable international trade in energy." A subscription is required to access most of the information on this website, although a limited amount of information is available to nonsubscribers. Members of Congress and their staff should contact CRS for a copy of anything that requires a subscription.

Energy policy has been a recurring issue for Congress since the first major crises in the 1970s. As an aid in policymaking, this report presents a current and historical view of the supply and consumption of various forms of energy. The historical trends show petroleum as the major source of primary energy, rising from about 38% in 1950 to 45% in 1975, and then declining to about 40% in response to the energy crises of the 1970s. Significantly, the transportation sector continues to be almost completely dependent on petroleum, mostly gasoline. Oil prices, which had been low and stable throughout the 1990s, resumed the volatility they had shown in the 1970s and early 1980s. Starting in 2004, perceptions of impending inability of the industry to meet increasing world demand led to rapid increases in the prices of oil and gasoline. The continuing high prices stimulated development of non-conventional oil resources, first in Canadian oil sands, then in the United States in shale deposits. U.S. oil production, which had apparently peaked, showed a dramatic increase starting in 2009. U.S. imports of oil have also been decreasing over the same time period, and there are calls to allow more exports. Natural gas followed a long-term pattern of U.S. consumption similar to that of oil, at a lower level. Its share of total energy increased from about 17% in 1950 to more than 30% in 1970, then declined to about 20%. Recent developments of large deposits of shale gas in the United States have increased the outlook for U.S. natural gas supply and consumption in the near future, and imports have almost disappeared. The United States is projected to be a net natural gas exporter by 2018. Consumption of coal in 1950 was 35% of total primary energy, almost equal to oil, but it declined to about 20% a decade later and has remained at about that proportion since then. Coal currently is used almost exclusively for electric power generation, and its contribution to increased production of carbon dioxide has made its use controversial in light of concerns about global climate change. U.S. coal exports have been on the rise in recent years. Nuclear power started coming online in significant amounts in the late 1960s. By 1975, in the midst of the oil crisis, it was supplying 9% of total electricity generation. However, increases in capital costs, construction delays, and public opposition to nuclear power following the Three Mile Island accident in 1979 curtailed growth in generation facilities, and many construction projects were cancelled. Continuation of some construction increased the nuclear share of generation to 20% in 1990, where it remains currently. Licenses for a number of new nuclear units have been in the works for several years, and preliminary construction for a few units has begun, but the economic downturn has discouraged action on new construction. Construction of major hydroelectric projects has also essentially ceased, and hydropower's share of electricity generation has gradually declined, from 30% in 1950 to 15% in 1975 and less than 10% in 2000. However, hydropower remains highly important on a regional basis. Renewable energy sources (except hydropower) continue to offer more potential than actual energy production, although fuel ethanol has become a significant factor in transportation fuel. Wind power has recently grown rapidly, although it still contributes only a small percentage share of total electricity generation. Conservation and energy efficiency have shown significant gains over the past three decades and offer potential to relieve some of the dependence on oil imports and to hold down long-term growth in electric power demand.

Introduction The Airport and Airway Trust Fund (AATF), sometimes referred to as the aviation trust fund, is the major funding source for federal aviation programs. The trust fund finances Federal Aviation Administration (FAA) capital investments in the airport and airway system as well as supports FAA research and operations costs. In order to for avoid disruptions, both the authority to collect aviation excise taxes and to spend from the trust fund must be reauthorized periodically by Congress. The most recent reauthorization, the FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ), expires on September 30, 2017. If FAA's authorization were to expire without a reauthorization or extension, there would be lapses in aviation excise tax collection authority, and the agency would be unable to spend any revenues allocated from the trust fund. Trust Fund Income Congress established the AATF in the Airport and Airway Revenue Act of 1970 (P.L. 91-258) to provide a dedicated source of federal funding for the aviation system in the United States. Aviation Taxes and Fees Trust fund revenue is derived principally from a variety of taxes paid by users of the national aviation system. Revenue sources for the trust fund include taxes on airline passenger ticket sales, segment fees, air cargo fees, and aviation fuel taxes paid by both commercial and general aviation aircraft (see Table 1 ). The trust fund also accrues interest on its cash balance. In FY2016, the AATF received revenues of over $14.4 billion, with nearly 70% coming from taxes and fees levied on transportation of passengers. Figure 1 illustrates the composition of AATF excise tax revenues collected in FY2016. Trust fund revenue can be volatile, as external factors affect demand for air travel. For example, when the terrorist attacks of September 11, 2001, substantially reduced demand for air travel, trust fund revenues plummeted. The Severe Acute Respiratory Syndrome (SARS) epidemic, which caused passengers to curtail travel to Asia in 2003, had a similar effect. During the last recession, the airline industry responded to a weak economy, lower consumer demand for air travel, and high fuel prices by reducing domestic capacity in 2008 and 2009, which resulted in a decrease in fuel consumption and lower fuel and gasoline tax receipts. Although the stream of trust fund revenues has been relatively stable in recent years, the long-term vitality of the AATF remains a concern for many. AATF revenue is largely dependent on airlines' ticket sales and, therefore, is affected by air travel demand. However, the spread of low-cost air carrier models may have held down ticket prices and, subsequently, AATF receipts. AATF revenues have also been adversely affected by the recent trend among airlines to impose fees for a variety of add-on services and amenities such as checked bags, onboard Wi-Fi access, or seats with additional legroom. Generally, fees not included in the base ticket price are not subject to the federal excise taxes. Air carriers generated over $3.8 billion in baggage fees alone in 2015, which translates into more than $285 million that the trust fund could have received had those fees been subject to the 7.5% excise tax. If airlines continue to seek additional revenue from ancillary fees as an alternative to increasing base ticket prices, federal aviation programs and activities may become more dependent on contributions from the general fund. Lapses of Aviation Trust Fund Taxes Because authority to collect taxes for the trust fund must be authorized, any lapse in aviation tax authority would halt the flow of tax revenues into the trust fund. This has happened three times over the past two decades: in 1996, 1997, and 2011. On January 1, 1996, authority to collect taxes for the AATF expired. Spending from the trust fund, however, continued. The lapse continued until August 27, 1996, when the tax authority was extended to the end of the calendar year by the Small Business Job Protection Act of 1996 ( P.L. 104-188 ). Tax-collection authority then lapsed again on January 1, 1997, until it was authorized by the Airport and Airways Trust Fund Reinstatement Act of 1997 ( P.L. 105-2 ), enacted on February 28, 1997. The trust did not receive an estimated $4 billion in forgone tax collections during the first lapse and another $1 billion during the second. The 1996 and 1997 lapses in the aviation tax authorization and the approaching possibility of another lapse increased support in Congress for a longer-term resolution that would ensure a stable funding source for the trust fund. The Taxpayer Relief Act (TRA) of 1997 ( P.L. 105-34 ) extended the aviation trust fund taxes for 10 years, through FY2007. It also modified the taxes to form the aviation tax structure in place today. These changes included a reduction of the ticket tax to 7.5% , imposition of a flat fee on each domestic flight segment, a tax on frequent flyer awards, and a tax on passengers departing or arriving in the United States on international flights. Another lapse in FAA's authority to collect trust fund revenues and expend money from the trust fund occurred in 2011 and lasted for two weeks, from July 23 to August 5. FAA estimated the 2011 lapse to have resulted in approximately $200 million of forgone trust fund revenues each week, or about $400 million for the entire lapse. Although the Airport and Airway Extension Act of 2011 ( P.L. 112-27 ), signed into law on August 5, 2011, retroactively reinstated the taxes as though they never expired, the Internal Revenue Service granted relief to airlines and to taxpayers who purchased tickets during those two weeks. Aviation User Fees Airlines have long contended that general aviation operators, particularly corporate jets, should provide a larger share of the revenues supporting the trust fund. General aviation interests dispute this, arguing that the air traffic system mainly supports the airlines and that nonairline users pay a reasonable share given the relatively small incremental costs arising from their flights. Until 2015, the Obama Administration proposed a per-flight user charge of $100 on commercial and general aviation jets and turboprops that fly in controlled airspace as an additional revenue source for the AATF. The proposal, estimated to generate roughly $1.1 billion annually, was opposed by general aviation interests, which saw this as a first step toward funding the air traffic control system wholly or substantially through user charges. The Administration's budgets for FY2016 and FY2017 did not include such a proposal. Proposals by the Clinton Administration and the George W. Bush Administration to establish user charges for air traffic services also failed to gain congressional support. A 2007 Senate proposal (the Aviation Investment and Modernization Act of 2007; S. 1300 ; S.Rept. 110-144 ) to finance air traffic system modernization with a $25-per-flight user charge faced similar opposition from business and general aviation interests, and failed to gain traction in Congress. The concept of user-fee funding for air traffic services has resurfaced in current debate over proposals to transfer FAA's air traffic system to a private entity or an independent government-owned corporation. Under some proposals, the air traffic control organization would fund its capital and operating costs from user fees that would not flow into the aviation trust fund. Federal aviation taxes would remain in place to fund other FAA operations. The General Fund Share and the "Public Interest" The U.S. aviation system has historically been funded in part from the AATF and in part from the Treasury general fund ( Table 2 ). The general fund share of FAA appropriations has varied widely, ranging from 0% in FY2000 to 38% in FY1997. The general fund share tends to follow a cyclical trend, typically rising when trust fund revenues fall during economic slowdowns. The only FAA program that can receive funding from general fund contributions is the Operations and Maintenance (O&M) account, which covers air traffic services and FAA safety oversight. General revenues have funded 12% to 48% of annual O&M appropriations since FY2012. Between FY2012 and FY2016, the general fund provided between 7.2% (FY2015) and 28.9% (FY2012) of FAA's total annual funding. The philosophical basis for a general fund contribution to FAA costs is the claim that aviation safety is a public good. Some elements of the aviation industry, especially general aviation, have long maintained that the airways system is a pure public good and should therefore be paid for exclusively by government rather than by users of the system. At the other extreme, critics might assert that many Americans make little or no use of civil aviation while others use it intensively, and that the costs of air traffic control and aviation safety are properly borne by those who use the system rather than by taxpayers at large. Conceptually, that portion of the cost of operating the airway system that is appropriated from the general fund is supposed to equate to the amount military, government, and untaxed beneficiaries of the aviation system might have contributed to the trust fund through the payment of user fees, if there were user fees to be paid. This is sometimes referred to as a "public interest" contribution. Having both general government revenue and AATF revenue to fund FAA provides congressional appropriators with the flexibility of raising or lowering the contribution from the general fund to respond to changing needs or economic conditions. In addition, having some general fund revenues available allows certain FAA operations, such as air traffic control, to continue during a lapse in AATF reauthorization. FAA's Budget Annual FAA expenditures have been in the range of $15 billion to $17 billion in recent years. The FAA budget is divided into four major accounts: Grants-in-Aid for Airports (Airport Improvement Program, or AIP) Facilities and Equipment (F&E) Research, Engineering, and Development (RE&D) Operations and Maintenance (O&M) (partly supported by the trust fund, with the remainder coming from the general fund) The first two accounts, AIP and F&E, are considered "capital" accounts or programs because they deal with the development of airport and airway infrastructure. The AIP provides federal grants for projects such as new runways and taxiways; runway lengthening, rehabilitation, and repair; and noise mitigation near airports. The F&E account provides funding for the acquisition and maintenance of air traffic facilities and equipment, and for the engineering, development, testing, and evaluation of technologies related to the federal air traffic system. It funds the technological improvements to the air traffic control system, including installation of a satellite-based air traffic control system referred to as the Next Generation Air Transportation System (NextGen). The RE&D account funds research on issues related to aviation safety, mobility, and NextGen technologies, including research on improving aviation safety and operational efficiency and reducing environmental impacts of aviation operations. Only the O&M account, which funds FAA operations, including the air traffic control system and safety inspections, receives monies from the general fund. Annual Appropriations Most FAA spending, including most spending from the AATF, requires annual appropriations by Congress. Approximately 20% of FAA's total funds are disbursed as contract authority for AIP, and may be committed prior to appropriations action. The rest may be spent only with a congressional appropriation. This represents a major difference between the AATF and another major transportation trust fund, the Highway Trust Fund (HTF). Almost all money in the HTF can be expended through the Federal Highway Administration's contract authority without an appropriation, although Congress must eventually provide liquidating authority and may place a limitation on obligations for a given year. FAA's O&M account, which principally funds air traffic operations and aviation safety programs, receives more than 60% of total FAA appropriations. The other three accounts are funded entirely through the AATF. Recent authorizations and appropriations for these FAA accounts are shown in Table 3 . In FY2016, the split of the AATF and the general fund contribution to finance FAA operations was approximately 80-20. Figure 2 shows the composition of FAA expenditures in FY2016. In addition to excise taxes deposited into the trust fund, FAA imposes air traffic service fees on flights that transit U.S.-controlled airspace but do not take off from or land in the United States. These overflight fees partially fund the Essential Air Service program, which subsidizes airline flights to eligible small communities that otherwise would not receive commercial airline service. This program is administered by the Office of the Secretary of the U.S. Department of Transportation, not by FAA. Spending Guarantees Since the creation of the trust fund, there has been disagreement over the appropriate use of its revenues. This led to the enactment of a series of legislative mechanisms designed to ensure that the AIP and the F&E account, the main sources of federal capital spending for U.S. airports and airways, are funded at their fully authorized levels. From the establishment of the trust fund in 1970 through the late 1990s, revenues deposited into it have generally exceeded spending commitments from FAA's appropriations, resulting in a growing uncommitted balance—the amount remaining in the trust fund after funds have been appropriated and a limitation on obligation established. To ensure that revenues deposited into the trust fund are used for aviation purposes and that FAA's capital accounts get funded at their fully authorized levels, the Wendell H. Ford Aviation Investment and Reform Act for the 21 st Century of 2000 (AIR21; P.L. 106-181 ) and Vision 100: Century of Aviation Reauthorization Act of 2003 (Vision 100; P.L. 108-176 ) included provisions to require that the total budget resources made available each fiscal year from the trust fund be equal to the level of receipts plus interest paid to the trust fund in that fiscal year. These are known as spending guarantee mechanisms. The current mechanism dates back to 2000, when AIR21 created a budgetary regimen for aviation programs that was closely linked to the availability of funds in the trust fund. In simple terms, appropriators were required to fully fund AIP and F&E at authorized levels, and were directed to further account for all trust fund revenues prior to determining the general fund share that would be provided for O&M in a fiscal year. The spending guarantees were extended by Vision 100. The FAA Modernization and Reform Act of 2012 ( P.L. 112-95 ) amended the trust fund guarantee to require that the total amounts made available from the trust fund be equal to 90% of the estimated receipts plus interest for the year. This would allow a modest accumulation of an unexpended balance in the trust fund that could be used as a buffer if overly optimistic revenue projections or unfavorable economic conditions lead to spending at levels that exceed the amount of revenue going into the trust fund. Status of the Trust Fund At the end of FY2016, the aviation trust fund was projected to have a cash balance of over $14.3 billion. The uncommitted balance—the amount of funds not yet obligated—was estimated to be approximately $5.7 billion at the end of FY2016, reversing several years of decline. While the financial vitality of the trust fund can be evaluated by looking at its uncommitted balance and the cash balance, there are considerable differences between the two indicators. FAA considers the committed balance of the trust fund to include the appropriated amounts from the trust fund plus obligated AIP contract authority for the year. The uncommitted balance, which is the revenue that would remain in the trust fund after subtracting the committed balance, is often used to evaluate FAA's ability to enter into future commitments as provided in authorization and appropriations acts. A low uncommitted balance means that limited funds are available to incur new obligations while still covering expenditures on existing obligations, limiting FAA's ability to move forward with planned projects and programs. The cash balance includes money required to satisfy outstanding obligations as well as funds for which no commitments have been made. It is often used to evaluate the trust fund's ability to pay outstanding bills as they are due. If the cash balance falls below the amount of outstanding obligations, FAA will have to delay payments until it receives sufficient trust fund revenue to cover the obligations, or until Congress increases contributions from the general fund. Congressional Budget Office Forecast In August, 2016, the Congressional Budget Office (CBO) projected that if current law remains in place and if appropriations grow at the rate of inflation, total annual spending by FAA would increase from over $16 billion in FY2016 to $19.7 billion in FY2026. Trust fund receipts, including aviation excise tax revenues and interest earnings, are projected to grow from over $14 billion in FY2016 to more than $20.5 billion in FY2026. According to CBO, the FY2016 uncommitted balance of approximately $5.7 billion is projected to grow to nearly $17 billion by the end of FY2026. The size of future trust fund balances, however, depends on the amount of actual revenues generated in the future by various aviation taxes and fees that are largely determined by the number of airline passengers and average airfares. Balances will also depend on how future outflows from the trust fund compare to revenue inflows, including general fund appropriations from Congress. Two budgetary issues likely to have major impacts on the AATF are FAA's plan for substantial investment in NextGen and possible reforms of air traffic services to incorporate direct fees on users of the air traffic control system. Cost of NextGen NextGen refers to a multifaceted ensemble of technologies and operational procedures to modernize the national air traffic system, shifting from reliance on ground-based radar and navigation to satellite-based navigation and aircraft tracking. Work on NextGen began about 10 years ago, and currently accounts for about $1 billion in annual FAA spending, mostly on activities included under FAA's F&E account. Thus far, NextGen's impact on the AATF has been limited, since NextGen has been planned and funded within the framework of FAA's existing funding structure; there is no separate dedicated funding stream for NextGen. Pressure to accelerate NextGen development, however, could prompt additional annual spending that could have a more pronounced effect on AATF balances. Notably, most aircraft will be required to equip with technology compatible with the NextGen system. The technology, called Automatic Dependent Surveillance-Broadcast (ADS-B), allows aircraft to be identified and tracked by air traffic facilities more precisely than is possible with existing radar technology. This is intended to allow for better airspace utilization and greater efficiency in the form of more direct routings and closer aircraft spacing. Efficiency gains from ADS-B will be realized only when FAA completes and deploys complementary technologies in its facilities, not only to track aircraft with ADS-B, but also to utilize various analytic tools to increase airspace efficiency. Operators of aircraft equipped with ADS-B are likely to be interested in accelerating the deployment of these NextGen technologies over the next three to five years in order to benefit from their investments. This may be an issue of particular congressional debate in the context of pending FAA reauthorization legislation. According to FAA, future NextGen costs through FY2030 will total more than $14 billion in addition to the roughly $6 billion that has already been spent. Moreover, FAA anticipates that annual federal spending on NextGen will accelerate over the next six years, peaking at about $1.6 billion in FY2022 before trailing off to a steady level of about $400 million annually in 2028 and beyond. Accelerating NextGen spending could take the form of shifting peak spending to an earlier fiscal year or distributing it more evenly over a number of earlier fiscal years. Accelerated spending could have the effect of reducing the total cost through 2030 by completing projects at less inflated prices and also by potentially reaping anticipated NextGen benefits earlier. The impacts of NextGen acceleration on the AATF, however, would depend on the continued availability of uncommitted balances that can be tapped for such purposes. Moreover, accelerating NextGen funding may not be feasible if FAA is unable to obligate funds for such purposes at these earlier dates because of administrative or technical constraints that could limit its ability to expedite specific NextGen projects. To the extent that Congress or FAA deems acceleration of NextGen feasible and seeks to speed up NextGen activities, funding needs for NextGen projects could increase demand for AATF funds. Although dedicated funding accounts for NextGen have been proposed in the past as a means to avoid potential strain on the AATF, these proposals have proven controversial, as airspace users, particularly business and general aviation interests, have balked at proposals to impose per-flight user fees to fund NextGen. Air Traffic Control Reform User fees as an alternative to traditional AATF revenue sources have also been discussed in the context of funding day-to-day air traffic control operations, particularly in conjunction with proposals to reform air traffic control services by creating a stand-alone air traffic corporation separate from FAA. In the 114 th Congress, the Aviation Innovation, Reform, and Reauthorization Act of 2016 ( H.R. 4441 ) included language that would have created a not-for-profit government-chartered air traffic control corporation, wholly funded by user fees, to run the air traffic system. Under the proposal, a corporate board would have been able to set fees based on projected operating costs and forecast aviation activity. This proposal was not adopted by the House, but the concept may reemerge during the likely FAA reauthorization debate in the 115 th Congress. The prospect of user-fee funding for air traffic services could raise a number of issues regarding AATF revenues and expenditures. If a user-fee scheme is created to fund air traffic services, almost $10 billion in annual expenditures that are currently funded by a combination of AATF and general fund revenues could instead be covered by user fees. To offset user-fee collections, Congress may consider options to restructure AATF revenues, such as lowering fuel, ticket, and cargo taxes. Within the context of such a debate, Congress may also consider whether to continue to rely on the general fund component of FAA funding—for example, to fund safety-related functions like oversight of airlines and the proposed air traffic corporation—or whether FAA expenditures should be wholly funded with AATF revenue.

The Airport and Airway Trust Fund (AATF), sometimes referred to as the aviation trust fund, has been the primary funding source for federal aviation programs since 1972. It provides all funding for three major accounts of the Federal Aviation Administration (FAA): the Airport Improvement Program (AIP), Facilities and Equipment (F&E), and Research, Engineering, and Development (RE&D). It also pays for most spending from FAA's Operations and Maintenance (O&M) account. The trust fund is funded principally by a variety of taxes paid by users of the national aviation system. Revenue sources for the trust fund include taxes on airline passenger ticket sales, the flight segment tax, air cargo taxes, and aviation fuel taxes paid by both commercial and general aviation aircraft. In FY2016, the trust fund received revenues of over $14.4 billion in aviation taxes and fees. Between FY2012 and FY2016, the trust fund provided between 71% and 93% of FAA's total appropriations, with the remainder coming from the general fund of the U.S. Treasury. In order to avoid disruptions, both the authority to collect aviation excise taxes and to spend from the trust fund must be reauthorized periodically by Congress. The latest such legislation, P.L. 114-190, reauthorized FAA, other civil aviation programs, and the collection of taxes to fund the AATF through FY2017. However, a full FY2017 appropriation has not been enacted. P.L. 114-254 extended funding of FAA programs and activities at the FY2016 annualized level of $16,281 million through April 28, 2017. The balance in the aviation trust fund is projected to increase over the next few years. However, the AATF's long-term vitality remains subject to a variety of forces. Poor economic conditions or external events could curb demand for air travel, reducing revenue from the ticket taxes that are the main source of AATF funding. Changing airline business practices, particularly unbundling of ancillary fees for particular amenities from airfares, are adversely affecting AATF revenue, as only base airfares are subject to ticket taxes. The financial future of the trust fund also depends on future spending decisions, including FAA plans for substantial investment in the Next Generation Air Transportation System (NextGen) satellite-based air traffic control system. Proposals to shift air traffic control services from FAA to a government-owned corporation with an independent board of directors, which are expected to reemerge, raise a number of issues regarding AATF revenues and expenditures. A version of such a proposal approved by the House Transportation and Infrastructure Committee in 2016 would have allowed the corporation to impose user fees on some flights, principally commercial aviation. If user fees were to fund air traffic services, FAA would no longer require aviation tax revenues for this purpose. Congress might then consider options to restructure FAA's financing mechanisms, such as lowering the aviation taxes that flow into the AATF or eliminating the general fund component of FAA funding.

Introduction Four groups of federal programs target unemployed workers: unemployment insurance programs, health care assistance, job search assistance, and training. This report describes these programs, how they interact with each other, and their funding. Unemployed workers and their families may experience substantial income loss. If the unemployed worker's family income is low enough, there are a number of means-tested benefits and programs for which the unemployed worker's family might qualify (e.g., Temporary Assistance for Needy Families, SSI, or Medicaid). Eligibility for such benefits is not conditional on an individual's current employment status. This report does not attempt to discuss these means-tested benefits and programs. Unemployment Insurance for Unemployed Workers A variety of benefits may be available for unemployed workers. When eligible workers lose their jobs, the Unemployment Compensation (UC) program may provide income support through the payment of UC benefits. Those who exhaust UC benefits may be eligible for additional weeks of unemployment compensation through the temporary Emergency Unemployment Compensation (EUC08) program or through the permanent Extended Benefit (EB) program. Since the creation of the EUC08 program in June 2008, Congress has made several changes to the structure of the EUC08 program. These structural changes have consequences for the availability of EUC08 tiers and benefits in states. The current maximum potential duration of EUC08 benefits available to individuals is 47 weeks, depending on state unemployment rates (in addition to the weeks of UC benefits that are available). Certain groups of workers who lose their jobs on account of international competition may qualify for additional or supplemental income support through Trade Adjustment Act (TAA) programs. If an unemployed worker is not eligible to receive UC benefits and the worker's unemployment may be directly attributed to a declared major disaster, a worker may be eligible to receive Disaster Unemployment Assistance (DUA) benefits. Unemployment Compensation The cornerstone of an unemployed worker's income security is the joint federal-state UC program, which provides income support through the payment of UC benefits. The underlying framework of the UC system is contained in the Social Security Act (the Act). Title III of the Act authorizes grants to states for the administration of state UC laws, Title IX authorizes the various components of the federal Unemployment Trust Fund (UTF), and Title XII authorizes advances or loans to insolvent state UC programs. UC is financed by federal taxes under the Federal Unemployment Tax Act (FUTA) and by state payroll taxes under the State Unemployment Tax Acts (SUTA). In FY2012, states spent an estimated $44.3 billion on regular UC benefits. The federal government appropriates funds for UC program administration (an estimated $5.2 billion in FY2012), the federal share of EB payments (an estimated $4.6 billion in FY2012), the EUC08 program (an estimated $40.9 billion in FY2012), and federal loans to insolvent state UC programs. The 2009 stimulus package ( P.L. 111-5 ) provided $500 million in additional funds (i.e., on top of the 2009 federal allocations for administration) for states to use to administer UC programs. The UC program pays benefits to covered workers who become involuntarily unemployed for economic reasons and meet state-established eligibility rules. The UC program generally does not provide UC benefits to the self-employed, to those who are unable to work, or to those who do not have a recent earnings history. States usually disqualify claimants who lost their jobs because of inability to work, unavailability for work, or a labor dispute, who voluntarily quit without good cause, who were discharged for job-related misconduct, or who refused suitable work without good cause. To receive UC benefits, claimants must have enough recent earnings to meet their state's earnings requirements. The 2009 stimulus package ( P.L. 111-5 ) provided up to a total of $7 billion in incentive monies for states to modernize their Unemployment Insurance (UI) programs to include a worker's more recent work history and two of four optional provisions relating to (1) part-time job-seekers, (2) voluntary separations for "compelling family reasons," (3) participation in qualifying training programs, or (4) dependents' allowances. Maximum weekly benefit amounts in July 2012 ranged from $133 (Puerto Rico) to $653 (Massachusetts) and, in states that provide dependent's allowances, up to $979 (Massachusetts). In November 2012, the average weekly benefit was $302. In most states, regular UC benefits are available for up to 26 weeks. The average regular UC benefit duration in November 2012 was 17.1 weeks. In September 2012, 25% of all U.S. unemployed workers received UC benefits. At the end of the week of December 8, 2012, about 3.2 million unemployed workers were receiving UC. Emergency Unemployment Compensation On June 30, 2008, the EUC08 program was created by P.L. 110-252 . This is the eighth time Congress has created a federal temporary program that has extended unemployment compensation during an economic slowdown. The EUC08 authorizing legislation has been amended 11 times, mostly recently by H.R. 8 , the American Taxpayer Relief Act of 2012. H.R. 8 extends the authorization of the EUC08 program until the week ending on or before January 1, 2014. The duration of EUC08 benefits currently available to eligible individuals depends on a state's unemployment rate. The maximum potential duration of benefits from all four tiers of EUC08 in high unemployment states is 47 weeks (in addition to the weeks of UC benefits that are available): Tier I provides up to 14 weeks of benefits and is available in all states. Tier II provides up to 14 weeks of benefits and is available in states with a total unemployment rate (TUR) of at least 6%. Tier III provides up to 9 weeks of benefits and is available in states with a TUR of at 7% (or insured unemployment rate [IUR] of at least 4%). Tier IV provides up to 10 weeks of benefits and is available in states with a TUR of at least 9% (or an IUR of at least 5%). All tiers of EUC08 benefits are temporary and expire in the week ending on or before January 1, 2014. Thus, on December 28, 2013 (December 29, 2013, for New York), the EUC08 program ends. There is no grandfathering of any EUC08 benefit after that date. A current listing of states that have triggered on for various EUC08 tiers, when the EUC08 program is authorized, can be found at http://www.workforcesecurity.doleta.gov/unemploy/claims_arch.asp . Extended Benefits The EB program, established by P.L. 91-373 (26 U.S.C. 3304 note), may extend UC benefits at the state level if certain economic conditions exist within the state. The EB program is permanently authorized, and is triggered when a state's insured unemployment rate (IUR) or total unemployment rate (TUR) reaches certain levels. All states must pay up to 13 weeks of EB if the IUR for the previous 13 weeks is at least 5% and is 120% of the average of the rates for the same 13-week period in each of the two previous years. There are two other optional thresholds that states may choose. If the state has chosen a given option, they would provide the following: Option 1: an additional 13 weeks of benefits if the state's IUR is at least 6%, regardless of previous years' averages. Option 2: an additional 13 weeks of benefits if the state's TUR is at least 6.5% and is at least 110% of the state's average TUR for the same 13-week period in either of the previous two years; an additional 20 weeks of benefits if the TUR is at least 8%. In addition to all state requirements for regular UC eligibility, the EB program requires claimants to have at least 20 weeks of full-time insured employment or the equivalent in their base period, and to conduct a systematic and sustained work search. A current listing of states that have triggered on for EB can be found at http://www.workforcesecurity.doleta.gov/unemploy/claims_arch.asp . Under the 2009 stimulus package ( P.L. 111-5 ), as amended, the federal government temporarily finances 100% of the EB program through December 31, 2013 (under permanent law, the federal government finances 50% of the EB program and states finance the other 50%). Temporary EB Trigger Modifications in P.L. 111-312 P.L. 111-312 made some temporary, technical changes to certain triggers in the EB program. P.L. 111-312 , as amended, allows states to temporarily use lookback calculations based on three years of unemployment rate data (rather than the current lookback of two years of data) as part of their mandatory IUR and optional TUR triggers if states would otherwise trigger off or not be on a period of EB benefits. Using a two-year vs. a three-year EB trigger lookback is an important adjustment because some states are likely to trigger off of their EB periods in the near future despite high, sustained—but not increasing—unemployment rates. States implement the lookback changes individually by amending their state UC laws. These state law changes must be written in such a way that if the two-year lookback is working and the state would have an active EB program, no action would be taken. But if a two-year lookback is not working as part of an EB trigger and the state is not triggered on to an EB period, then the state would be able to use a three-year lookback. This temporary option to use three-year EB trigger lookbacks expires the week on or before December 31, 2013. EUC08 and EB Interactions The EUC08 program should not be confused with the similarly named EB program. The EUC08 program is temporary and the availability of EUC08 tiers depends on state unemployment rate and calendar date. The EB program is permanently authorized and applies only to certain states on the basis of state unemployment conditions specified in law. In the past, states were permitted to determine which benefit, EB or EUC08, was paid first. Alaska was the only state to pay EB first when this option was available. But with the enactment of P.L. 112-96 , states are now required to pay EUC08 benefits before EB benefits. Trade Readjustment Allowance: UI Extension for Workers Affected by Foreign Competition The Trade Adjustment Assistance for Workers program (TAA) provides additional federal assistance to unemployed workers who have been dislocated by international trade. These benefits consist of income support, case management and job search assistance, a health coverage tax credit, and training assistance. Each TAA benefit is discussed is its respective section of this report. To establish TAA eligibility, a group of dislocated workers (or a union, firm, or state on behalf of a group of workers) petitions the Department of Labor (DOL) to establish that their job loss was attributable to foreign competition. If a DOL investigation finds that import competition "contributed importantly" to the petitioning workers' job loss or that their firm has shifted their jobs overseas, the petition is certified and the petitioning workers are eligible for TAA benefits. TAA benefits for individuals are typically obtained through state unemployment insurance agencies and state workforce systems. Trade Readjustment Allowance (TRA) is an extended income support program available to TAA-eligible workers who are enrolled in eligible training programs who have exhausted their UC. A worker's weekly TRA benefit equals his or her final UC benefit and TRA payments begin the first week in which the worker is no longer entitled to UC. Notably, TRA interacts with UC to provide a single duration of benefits. In cases where a worker is eligible for EUC08 or EB, the duration the worker receives income support under TRA may be relatively short. There are two stages of TRA: Basic TRA is available to workers who have exhausted UC and have either (1) enrolled in qualified training, (2) completed a qualified training program, or (3) received a waiver from training. The total basic TRA benefit is equal to 52 times the worker's weekly UC benefit level minus any UC benefits collected. Assuming a constant benefit level, UC and basic TRA combine to offer 52 weeks of income support. UC benefits offset TRA, so in cases where a worker is entitled to 52 or more weeks of UC, the worker will not collect any basic TRA benefits. Additional TRA is available to workers who have exhausted basic TRA and are enrolled in an eligible training program. Workers can collect up to 65 weeks of additional TRA (for a total of 117 weeks of TRA) as long as they remain in an eligible training program. In cases where a worker has collected 117 weeks of TRA and is still enrolled in a training program that leads to a degree or industry-recognized credential, the worker may collect TRA for up to 13 more weeks (130 weeks total), if the worker will complete the training program during that time. As is the case with basic TRA, UC benefits offset additional TRA. In cases where a worker is eligible for more than 52 weeks of UC, the worker's additional TRA benefit is reduced by the number of weeks beyond 52 that he or she collects UC. According to DOL, approximately 26,000 individuals collected TRA in FY2011 at a cost of $208 million. DOL noted that eligibility for EUC08 and EB reduced the number of TRA participants and limited their time in the program. In FY2008, the last full year when EUC08 and EB were not widely available, TRA outlays were $523 million. In its current form, TAA is authorized by the Trade Adjustment Assistance Extension Act of 2011 (Title II of P.L. 112-40 ). The provisions described in this report are authorized through the end of calendar year 2013. In 2014, the program will revert to the more restrictive eligibility criteria and lower benefit levels specified by the Trade Act of 2002 ( P.L. 107-210 ) for one calendar year before authorization for the program expires on December 31, 2014. Reemployment Trade Adjustment Assistance Reemployment Trade Adjustment Assistance (RTAA) is a wage insurance program for TAA-certified workers aged 50 and over who secure reemployment at a lower wage than their certified jobs. RTAA is available to workers with a reemployment wage of less than $50,000 per year and provides a wage supplement equal to 50% of the difference between the worker's reemployment wage and the wage at his or her certified job. Workers can be enrolled in RTAA for up to two years and can collect a maximum benefit of $10,000. RTAA was first established by the Trade Act of 2002 ( P.L. 107-210 ) and was reauthorized along with the rest of the TAA program in October 2011. In FY2011, $40 million was paid to more than 6,100 participants in the RTAA wage insurance program. Disaster Unemployment Assistance The Disaster Unemployment Assistance (DUA) program provides monetary assistance to individuals unemployed as a direct result of a major disaster and who are not eligible for regular UC benefits. DUA is funded through the Federal Emergency Management Agency (FEMA) and is administered by DOL through each state's UC agency. First created in 1970 through P.L. 91-606, DUA benefits are authorized by the Robert T. Stafford Disaster Relief and Emergency Relief Act (the Stafford Act), which authorizes the President to issue a major disaster declaration after state and local government resources have been overwhelmed by a natural catastrophe or, "regardless of cause, any fire, flood, or explosion in any part of the United States" (42 U.S.C. 5122(2)). On the basis of the request of the affected state's governor, the President may declare that a major disaster exists. The declaration identifies the areas in the state eligible for assistance. The declaration of a major disaster provides the full range of disaster assistance available under the Stafford Act, including, but not limited to, the repair, replacement or reconstruction of public and non-profit facilities, cash grants for the personal needs of victims, housing, and unemployment assistance related to job loss from the disaster. In FY2006, DUA benefit payments totaled $401 million. This was an atypical outlay and reflected the severity of the Hurricane Katrina disaster. DUA benefit payments totaled $1.4 million in FY2010, $5.5 million in FY2011, and $7.2 million in FY2012. Health Care Assistance for Unemployed Workers Two federal laws may aid unemployed workers in the purchase of health insurance. The first, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), allows unemployed workers in certain circumstances to purchase continued health insurance coverage from their previous employers. The second, the Health Coverage Tax Credit (HCTC), allows certain TAA and RTAA participants to receive an advanceable and refundable tax credit for purchasing health insurance. Consolidated Omnibus Budget Reconciliation Act of 1985 (P.L. 99-272) Title X of COBRA requires certain employers who offer health insurance to continue to make coverage available for their former employees under certain circumstances. Congress approved the legislation to expand access to coverage at group rates to qualified employees and their families who are faced with loss of coverage due to certain events, including termination or reduction in hours of employment (for reasons other than gross misconduct). Although the law allows employers to charge 102% of the group plan premium, for some this can be less expensive than comparable coverage available in the individual insurance market. COBRA coverage generally lasts 18 months but, depending on the circumstances, can last for longer periods. COBRA requirements also apply to self-insured firms. An employer must comply with COBRA even if it does not contribute to the health plan; it need only maintain such a plan to come under the statute's continuation requirements. State and local workers are also covered by COBRA. However, not all individuals who lose their jobs have access to COBRA. For example, firms with fewer than 20 employees are exempt from federal COBRA, but some states do have special programs for small employers. Additionally, firms that do not provide access to health insurance to current employees (including those that previously provided access but went out of business) are not required to provide access to COBRA coverage. Among those individuals with access to COBRA, the cost of the COBRA premiums may be prohibitive. Since most employers subsidize health insurance premiums for their workers, the 102% COBRA premium may not be affordable for the unemployed, especially when compared to unemployment compensation. In 2011, an average COBRA premium was about $460 per month for individual coverage ($5,538 annually) and about $1,280 per month for family coverage ($15,375 annually). Average weekly unemployment benefits were about $296 in 2011. When converted to a monthly basis of about $1,233 a month, these premiums may consume a large share of one's monthly unemployment benefits, especially for those purchasing family coverage. These premium costs are most likely the reason for low COBRA participation. According to surveys of the unemployed eligible for COBRA, the participation rate ranges from 18% to 26% (or about 1 in 4 workers). Health Coverage Tax Credit TAA-certified workers receiving TRA, UI in lieu of TRA, or RTAA wage insurance may be eligible for a Health Coverage Tax Credit (HCTC). The HCTC is a refundable, advanceable tax credit for eligible individuals who purchase qualified health insurance. The Trade Adjustment Assistance Extension Act of 2011 (Title II of P.L. 112-40 ) set the HCTC at 72.5% of qualified premium costs. The credit can be claimed when an eligible worker files his or her tax return or it can also be paid in advance to insurers, allowing workers to benefit before they file their tax returns. HCTC recipients cannot be enrolled in certain other health insurance, including Medicaid or employment-based insurance for which the employer pays at least half the cost, nor can they be entitled to Medicare. TRA recipients can receive the HCTC for one month longer than they are eligible for TRA. RTAA recipients may receive the HCTC for two years. The HCTC program will expire on January 1, 2014. This expiration will coincide with the availability of new federal tax credits for health coverage under the Patient Protection and Affordable Care Act ( P.L. 111-148 ). Job Search Assistance for Unemployed Workers Federal support for Americans seeking assistance to obtain, retain, or change employment is undertaken by a national system of local One-Stop Career Centers (One-Stops). One-Stops were established by law under the Workforce Investment Act of 1998 (WIA, P.L. 105-220 ), but had been encouraged by the DOL since it began awarding states One-Stop development grants in 1993. Although One-Stops bring together employment and training services of approximately 20 required partners, the central component of all One-Stops is a labor exchange system that is universally accessible to job seekers and employers. This labor exchange system is undertaken by the U.S. Employment Service (ES), first established by the Wagner-Peyser Act of 1933. Wagner-Peyser Act of 1933 The Wagner-Peyser Act established the Employment Service as a system jointly operated by DOL and the state employment security agencies. The central mission of the ES is to facilitate the match between individuals seeking employment and employers seeking workers. Services are open to all without fees. Employment Services Local ES offices are known by many names, such as Employment Service, Job Service, One-Stop Career Center, and Workforce Development Center. These offices offer an array of services to job seekers and employers, including career counseling, job search workshops, labor market information, job listings, applicant screening, and referrals to job openings. States provide ES services through three tiers of service delivery: self-service, facilitated self-help, and staff-assisted. As the names of the tiers imply, progressively more active staff involvement is required as services range from internet job postings to career counseling. Upon the establishment of the Unemployment Compensation program in 1935, ES offices also began to administer the UC "work test" requirements. These offices monitor UC claimants to ensure that they are able to work, available for work, and actively seeking work. For the recently unemployed, the ES processes UC income support claims while helping the individual find new employment. Wagner-Peyser Act Funding Total funding for the Wagner-Peyser activities was $786.7 million for FY2012. These activities include ES grants to states, ES national activities, and workforce information. Also, the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) provided an additional $400 million for ES operations in FY2009. Job Search Assistance for TAA-Certified Workers Workers who are covered by a certified TAA petition are eligible for case management and employment services. Statute specifies a group of employment services for which all TAA-certified workers are eligible and these services may be more intensive than the services immediately available to the general unemployed population. Employment services for TAA-certified workers are typically provided at the same locations and by the same staff that provide the public employment services described in the previous section. In cases where a TAA-certified worker is not able to find a suitable job locally, the worker may be able to obtain a job search allowance to cover the costs of seeking employment outside of the local commuting area. If a worker secures a job that requires the worker to relocate, an additional allowance to cover relocation expenses may be available. Job search and relocation allowances are limited to $1,250 each. These services and allowances are funded out of the TAA Reemployment Services funding, which is granted to states each year using a formula. Case management and job search-related activities account for a relatively small portion of expenditures out of this fund; the large majority of TAA Reemployment Services funding is allocated to training benefits (described later in this report). Job Training Assistance for Unemployed Workers The nation's central workforce development legislation is the Workforce Investment Act of 1998 (WIA). In addition, the act established linkages between WIA training activities and three other populations targeted by federal programs: workers eligible for TAA, military veterans, and workers over the age of 55 covered under the Older Americans Act of 1965. Workforce Investment Act of 1998 WIA includes titles that authorize programs for job training, adult education and literacy (the Adult Education and Family Literacy Act), vocational rehabilitation (the Rehabilitation Act of 1973), and the Employment Service (the Wagner-Peyser Act of 1933). Title I of WIA provides employment and training services for unemployed and underemployed individuals through three state formula grant programs (adults, dislocated workers, and youth) and a number of national programs. WIA programs operate on a program year (PY) of July 1 to June 30 (e.g., PY2012 runs from July 1, 2012, through June 30, 2013). FY2012 appropriations fund programs from July 1, 2012, until June 30, 2013. Although WIA authorized funding through September 30, 2003, WIA programs continue to be funded through annual appropriations. Table 1 provides detailed national funding information for WIA Title I programs. The WIA programs are briefly described below. WIA State Formula Grant Programs for Job Training and Related Services The three formula grant programs for youth, adult, and dislocated workers provide funding for employment and training activities provided by the national system of One-Stop Career Centers. Statutory formulas distribute funds to states on the basis of measures of unemployment and poverty status for youth and adult allocations and unemployment measures only for dislocated worker allocations. States in turn distribute funds, again by formula, to local workforce investment boards. Employment Services for Adults This formula grant funds employment and training services through a "sequential service" strategy to both unemployed and employed individuals aged 18 and older. Any individual may receive "core" services (e.g., job search assistance). To receive "intensive" services (e.g., individual career planning), an individual must have received core services and need intensive services to become employed or to obtain or retain employment that allows for self-sufficiency. To receive job training (e.g., occupational skills training), an individual must have received intensive training and need training services to become employed or to obtain or retain employment that allows for self-sufficiency. In FY2012, funding for state grants for adults was $770.8 million. Employment Services for Dislocated Workers A majority (approximately 80%) of WIA dislocated worker funds are allocated by formula grants to states (which in turn allocate funds to local entities) to provide training and related services to individuals who have lost their jobs and are unlikely to return to those jobs or similar jobs in the same industry. The remainder of the appropriation is reserved by DOL for a National Reserve account, which in part provides for National Emergency Grants to states or entities (as specified under Section 173 of WIA). Grants under this section are for employment and training assistance to workers affected by major economic dislocations, such as plant closures or mass layoffs. In FY2012, funding for state grants for dislocated worker training activities was $1.008 billion and was $224 million for the National Reserve. Employment Services for Youth This formula grant program provides training and related services to low-income youths aged 14-21 who face barriers to employment. Services prepare both in-school and out-of-school youth for employment and post-secondary education by linkages between academic and occupational learning. In FY2012, funding for state grants for youth activities was $824.4 million. National Training Programs for Special Populations WIA authorizes several national grant programs that provide training funds to targeted populations. Job Corps and programs for Native Americans and migrant and seasonal farm workers are generally found in all states. Job Corps This primarily residential job training program, first established in 1964, provides services to low-income individuals aged 16-24 primarily through contracts administered by DOL with corporations and nonprofit organizations. Currently, there are 125 Job Corps centers in 48 states, the District of Columbia, and Puerto Rico. In FY2012, funding for Job Corps was $1.7 billion. Native Americans Program This competitive grant program provides training and related services to low-income Indians, Alaska Natives, and Native Hawaiians through grants to Indian tribes and reservations and other Native American groups. In FY2012, funding for the Native Americans program was $47.6 million. Migrant and Seasonal Farmworker Program This competitive grant program provides training and related services, including technical assistance, to disadvantaged migrant and seasonal farmworkers and their dependents through discretionary grants awarded to public, private, and nonprofit organizations. This program is also referred to as the National Farmworker Jobs Program and was funded in FY2012 at $84.3 million. Other Targeted Competitive Grant Programs Additional competitive grant programs are specified in either the WIA legislation itself or in appropriations language for WIA. Veterans' Workforce Investment Program This program provides training and related services to veterans through competitive grants to states and nonprofit organizations. It has been administered by DOL's Veterans' Employment and Training Service since FY2001. In FY2012, funding for the Veterans' Workforce Investment Program was $14.6 million. Workforce Data Quality Initiative Authorized under Section 171 of WIA, this competitive grant program will provide resources to up to 12 states to implement the Workforce Data Quality Initiative (WDQI), which is a joint initiative started in FY2010 between ETA and the U.S. Department of Education (ED). The WDQI is intended to enable state workforce agencies to build longitudinal data systems to merge workforce and education data. The WDQI complements the ARRA-funded State Longitudinal Data System program in the ED. In FY2012, funding for the WDQI was $6.5 million. Ex-Offender Reintegration This competitive grant program combines two previous demonstration projects, the Prisoner Reentry Initiative (PRI) and the Responsible Reintegration of Youthful Offenders (RRYO). PRI, first funded in FY2005, supports faith-based and community organizations that help recently released prisoners find work when they return to their communities. RRYO, first funded in FY2000, supports projects that serve young offenders and youth at risk of becoming involved in the juvenile justice system. In FY2008, the Reintegration of Ex-Offenders program combined the PRI and RRYO into a single funding stream. In FY2012, funding for this single program was $80.2 million. YouthBuild This competitive grant program funds projects that provide education and construction skills training for disadvantaged youth. Since its inception in 1992, the program was administered by the Department of Housing and Urban Development, but was moved to DOL by the YouthBuild Transfer Act ( P.L. 109-281 ), effective FY2007. Participating youth gain work experience, job training, education (a GED or preparation for secondary education), and leadership development by working to rehabilitate and construct housing for homeless and low-income families. Funding in FY2012 for YouthBuild was $79.7 million. Workforce Investment Act Funding Appropriations for WIA totaled $4.9 billion in FY2012. From that amount, $2.6 billion was allotted to states through programmatic formula grants. These dollars flow through the state workforce investment board and then, by formula, to local boards to serve as the central funding for One-Stop centers. Although unemployed persons are the target population for WIA Title I programs, particularly for training, currently employed individuals also benefit from many WIA services. Table 1 provides program-by-program funding information for FY2012. Targeted Federal Job Training Activities: Trade Adjustment Assistance and Community Service Employment for Older Americans As discussed above, the WIA statute mandates connections between the nation's One-Stop system and a number of other employment, education, and social service programs. Two of these One-Stop partners also specifically fund employment and training activities for their particular populations: workers affected by trade-related layoffs and low-income older Americans. Training Assistance for TAA-Certified Workers In addition to the benefits described previously, TAA-certified workers are eligible for training assistance. Approved training programs include a number of governmental and private programs and may last up to 104 weeks. In FY2011, more than 86,000 workers participated in TAA-funded training. Training for TAA-certified workers is funded out of the TAA reemployment services funding annually allocated to each state. Under the 2011 reauthorization ( P.L. 112-40 ), $575 million is distributed each year using a formula that considers the number of recent TAA-certified individuals in a state and the local cost of providing training. In addition to training activities, states must fund administrative activities and case management out of their reemployment services allocation. Older workers who opt for the RTAA program (described previously in this report) and work full-time may not receive training assistance. RTAA participants that work more than 20 hours per week but less than full-time are required to be enrolled in a training program to receive the RTAA wage supplements. Community Service Employment for Older Americans Title V of the Older Americans Act of 1965 (OAA; P.L. 89-73, as amended) authorizes the Community Service Employment for Older Americans (CSEOA) program, also known as the Senior Community Service Employment Program (SCSEP). Administered by DOL, its purpose is to promote part-time employment opportunities in community service for unemployed low-income persons aged 55 or older and who have poor employment prospects. The program is the primary job creation program for adults since the elimination of public service employment previously authorized under WIA's predecessor legislation. While CSEOA aims to move participants into subsidized employment, it also recognizes that older people who have special needs may need to remain in subsidized employment. However, program participation is limited to 48 months. The program also supplements the income for some workers who cannot find jobs in the private economy. For FY2012, CSEOA funding of $448.3 million represented 23% of OAA funds. CSEOA funds are awarded to both states and national sponsor organizations.

Four groups of federal programs target unemployed workers: unemployment insurance, health care assistance, job search assistance, and training. This report presents information on federal programs targeted to unemployed workers specifically, but does not attempt to discuss means-tested programs (such as Medicaid or SSI) that are available regardless of employment status. When eligible workers lose their jobs, the Unemployment Compensation (UC) program may provide up to 26 weeks of income support through the payment of regular UC benefits. Unemployment benefits may be extended by the temporarily authorized Emergency Unemployment Compensation (EUC08) program. Unemployment benefits may also be extended for up to 13 or 20 weeks by the permanent Extended Benefit (EB) program if certain economic conditions exist within the state. Workers whose job loss is caused by foreign competition may be eligible for extended income support through the Trade Adjustment Assistance for Workers (TAA) program. If an unemployed worker is not eligible to receive UC benefits and the worker's unemployment may be directly attributed to a declared major disaster, a worker may be eligible to receive Disaster Unemployment Assistance (DUA) benefits. Two federal laws may aid unemployed workers in the purchase of health insurance. The first, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), allows unemployed workers in certain circumstances to continue health insurance coverage from their employers. The second, the Health Coverage Tax Credit (HCTC), allows certain TAA participants to receive an advanceable and refundable tax credit for purchasing qualified health insurance. Federal support for Americans seeking assistance to obtain, retain, or change employment is undertaken by a national system of local One-Stop Career Centers (One-Stops) that were established by the Workforce Investment Act (WIA) of 1998. A variety of services and partner programs—notably including UC and TAA—are located within or linked to One-Stops, which primarily provide job search assistance, career counseling, labor market information, and other employment services. Core labor exchange services (matching job seekers and employers) are provided by the U.S. Employment Service (ES), which was first established by the Wagner-Peyser Act of 1933 and most recently amended under Title III of WIA. In addition to ES, Title I of WIA authorizes resources for similar core and intensive employment services for youth, adults, dislocated workers, and targeted populations. Title I of WIA is also the nation's central job training legislation, providing funds for traditional, on-the-job, customized, and other forms of training to individuals unable to obtain or retain employment through other services. This report will be updated with major new legislation.

Introduction Following the collapse of the former Soviet Union, Congress authorized the closure of certain military installations under four BRAC rounds in 1988, 1991, 1993, and 1995. These installations have been closed for many years, and the majority of the properties have been made available for civilian purposes. However, cleanup efforts continue at some of the most contaminated properties, delaying their reuse. Public desire for their redevelopment has motivated ongoing concern about the pace and costs of cleaning up these remaining properties. The completion of cleanup is often a key factor in economic redevelopment, because a property cannot be used for its intended purpose until it is cleaned up to a degree that would be suitable for that use. In 2005, the 109 th Congress approved a new BRAC round. Although the Department of Defense (DOD) is required to close and realign selected installations by 2011, there is no statutory deadline for the cleanup of contaminated property. The timing of cleanup will depend on response actions negotiated with federal and state regulators, capabilities of cleanup technologies, and the amount of funding appropriated by Congress to support cleanup efforts. This report explains the federal statutory requirements that govern the transfer and reuse of contaminated properties on closed military installations, discusses the status of cleanup to prepare these properties for reuse, examines estimates of costs to address remaining cleanup challenges, and identifies issues for Congress. Cleanup Requirements for Property Transfer and Reuse As amended in 1986, the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, commonly referred to as Superfund) generally requires the United States to clean up contaminated federal property prior to transfer out of federal ownership. This requirement applies to all contaminated property declared surplus to the needs of the federal government, including property on closed military installations. The agency with administrative jurisdiction over a property usually administers and pays for the cleanup to satisfy the responsibility of the United States. DOD typically assumes this responsibility for closed military installations. After a property is transferred out of federal ownership, the United States remains liable for any original contamination found not to have been sufficiently remediated. However, the document transferring ownership typically guarantees cleanup only to a level suitable for a specific use, and in some cases may include a deed restriction prohibiting certain uses that would be considered unsafe relative to the level of cleanup performed. Considering this condition, the United States is usually held responsible for further cleanup to the extent that more work is found to be needed to make the originally agreed-upon use safe. If a new owner later decides to use the property for another purpose that would require further cleanup, the new owner ordinarily is held responsible for additional cleanup costs to make the property suitable for that purpose. Property declared surplus to the needs of the federal government is typically transferred to a Local Redevelopment Authority (LRA) responsible for implementing a plan for civilian reuse. While the administering agency generally must complete the cleanup prior to transfer out of federal ownership, CERCLA authorizes early transfer under certain conditions, including assurances that the cleanup will be carried out. Early transfer can speed the redevelopment process, if it may be feasible for cleanup to occur in conjunction with redevelopment planning and construction, or if a short-term use would be suitable for the existing level of contamination while cleanup proceeds to prepare the property for its eventual use. Early transfer also may offer the potential to speed the redevelopment process in situations in which the recipient voluntarily agrees to administer and pay for the cleanup. In such cases, the property is usually sold at a discounted price to offset the cleanup costs borne by the purchaser. A discounted price may lower a purchaser's initial costs to buy the property, but the purchaser does assume some financial risk if the cleanup costs are greater than expected. The cost of environmental insurance to limit this financial risk may offset some of the initial savings gained from a discounted price. If a property on a closed installation still could be of use to the federal government, DOD may transfer it to another federal agency rather than make it available to non-federal entities. If a contaminated property remains in federal ownership, CERCLA does not specify which agency has responsibility for the cleanup. The determination of which agency performs the cleanup is subject to negotiation among the agencies involved, and as such is an Executive Branch decision. Although the agency that caused the contamination most often administers and pays for the cleanup, disagreements over this responsibility sometimes arise in negotiating the transfer of jurisdiction. Congress has sometimes addressed such disagreements in legislation, specifying agency responsibilities. Regardless of who administers the cleanup of a closed military installation, the Environmental Protection Agency (EPA) and state regulatory agencies oversee cleanup decisions to ensure that applicable requirements are met. CERCLA specifically requires EPA to take the lead in overseeing cleanup of federal facilities on the National Priorities List (NPL). States usually oversee cleanup of federal facilities not on the NPL. The Role of Land Use in Cleanup Decisions CERCLA generally requires cleanup actions to achieve levels of exposure to contamination that would be protective of human health and the environment. Land use is critical in determining the potential exposure risks and the cleanup actions needed to address those risks. Cleanup generally is more extensive and more costly for land uses that would result in greater exposure risks. Cleanup typically is the most stringent and the most costly for residential use because of the greater likelihood of exposure among sensitive populations, including children and the elderly. Cleanup is usually the least costly and the least stringent for industrial use, as the exposure risks are not as great. As amended, the Defense Base Closure and Realignment Act requires DOD to give "substantial deference" to an LRA's redevelopment plan in determining the use of surplus property on closed military installations. Still, the locally preferred use can be constrained, if costs or technical challenges would make it infeasible to clean up a property to a certain degree. EPA guidance acknowledges that some uses may not be practical because of such challenges, and indicates that cleanup goals may need to be revised, which could result in "different, more reasonable land use(s)." Program Administration and Funding DOD administers a Defense Environmental Restoration Program to carry out cleanup actions under CERCLA on military installations in the United States. Multiple defense appropriations accounts fund this program. Two Defense Base Closure accounts fund the cleanup of installations closed under the BRAC rounds. The "1990" account consolidates funding for the cleanup of installations closed prior to the 2005 round. This account is now entirely devoted to cleanup, as these installations were closed many years ago. The "2005" account funds the cleanup of installations being closed under the 2005 round. Most of this account currently funds the actions necessary to close and realign the missions of the installations. As these actions are completed, a greater portion of the 2005 account will be devoted to cleanup to prepare surplus properties for reuse. The cleanup of realigned installations that remain in active use will be funded out of the Defense Environmental Restoration Accounts that support cleanup of active installations. See the " Estimated Costs " section of this report for the amount of funding spent on the cleanup of closed installations over time out of the Base Closure accounts. Status of Cleanup To manage cleanup efforts, DOD divides each installation into discrete sites (i.e., parcels of land), based on the nature and boundary of contamination. One installation may contain numerous sites with differing types of contamination. As of the end of FY2007, DOD had identified a total of 5,356 sites on hundreds of installations closed under all five BRAC rounds where contamination was known or suspected to be present. These sites include those on installations that are in the process of closing under the 2005 round. The vast majority of sites on BRAC installations were contaminated with hazardous substances (i.e., chemical contaminants), but some sites contained abandoned or discarded munitions on former training ranges and munitions disposal facilities. Congress enacted specific authorities for the cleanup of munitions sites in the National Defense Authorization Act for FY2002 ( P.L. 107-107 ). See CRS Report RS22862, Cleanup of U.S. Military Munitions: Authorities, Status, and Costs , by [author name scrubbed]. DOD reported that planned response actions were complete at 70% of the 5,356 sites it had identified through FY2007. No response was required or expected at 14% of the sites because investigations revealed that the potential for exposure to contamination was within an acceptable range, based on applicable standards. Response actions were pending at 10% of the site inventory, with varying stages of progress among individual sites ranging from the assessment phase to the construction of cleanup remedies. Evaluations were pending at 6% of the sites, leaving much uncertainty as to the extent of contamination at those locations and the cleanup actions that will be required. Sites requiring no further response actions generally have been made available for their intended use. Some sites where response actions were not complete also have been made available using early transfer authority, or by leasing the property with ownership retained by the federal government. However, remaining contamination and ongoing cleanup could limit the use of these properties. Table 1 presents the status of cleanup through FY2007 at sites on closed military installations by individual BRAC round. Considering that the cleanup of 2005 round installations began many years ago when these installations were still operational, cleanup generally should be at a more advanced stage upon closure than experienced under earlier rounds when cleanup efforts were less mature. As of the end of FY2007, planned response actions were complete, or not required, at half of the sites on 2005 round installations, leaving much of the property inventory suitable for reuse. However, sites where response actions were complete would have been cleaned up to a level compatible with military use at that time. If other uses are desired after closure, additional cleanup may be needed. Estimated Costs Through FY2007, DOD had spent nearly $7.3 billion out of the Base Closure accounts over time to clean up contaminated sites on installations closed under all five BRAC rounds to prepare these properties for reuse. In March 2007, DOD estimated that another $3.9 billion would be needed to complete all planned cleanup actions. DOD estimated the future cleanup costs based on its most recent knowledge of conditions at the sites presented in Table 1 . DOD periodically revises its estimates as more is learned about the type and level of contamination at each site, and the actions that federal and state regulators will seek to address potential risks. In effect, these estimates are "moving targets" that change as more information becomes available to project the costs of future actions. Uncertainties about the degree of cleanup that ultimately will be required at some sites make it challenging to accurately estimate the total costs to complete cleanup. Table 2 presents the past and estimated future costs to clean up contaminated sites at closed military installations by individual BRAC round. Some attention has been drawn to the impact that potentially higher cleanup costs could have on the savings expected from a BRAC round. The closure of a military installation results in annual "savings" in operational expenses, but cleanup costs to prepare decommissioned properties for reuse can reduce these savings. However, some of the cleanup costs would have been incurred regardless, as DOD still is required to clean up its active installations to a degree that would be suitable for military purposes. Issues for Congress The amount of time and resources needed to complete the cleanup of closed military installations generally depends on the level of contamination on those properties, and the actions selected to make them suitable for civilian reuse. Cleanup can take many years in some instances, as the continuing cleanup of certain installations closed between 1988 and 1995 demonstrates. However, the generally more advanced stage of cleanup at 2005 round installations anticipated upon closure may allow contaminated properties to become available for reuse more quickly. Still, the availability of funding and capabilities of cleanup technologies could limit the feasibility of cleanup at some installations, making certain land uses impractical and posing challenges to economic redevelopment. It is difficult to ascertain whether DOD's cleanup cost estimates are a reasonable approximation of the funding that will be needed to prepare closed installations for reuse. Because the civilian uses of installations to be closed in the 2005 round have yet to be decided, DOD's cost estimates are based on a degree of cleanup that would be compatible with recent military use. If a property were to be used for other purposes that would result in a higher risk of exposure to contamination, more stringent cleanup likely would be required to make the property suitable for that use. In these circumstances, more time and resources could be needed to complete cleanup than DOD has estimated.

In 2005, the 109th Congress approved a new Base Realignment and Closure (BRAC) round. As the Department of Defense (DOD) implements the new round, issues for Congress include the pace and costs of closing and realigning the selected installations and the impacts on surrounding communities. The disposal of surplus property has stimulated interest among affected communities in how the land can be redeveloped to replace jobs lost as a result of the planned closures. Environmental contamination can limit the potential for economic redevelopment if the availability of funding or technological capabilities constrains the degree of cleanup needed to make the land suitable for its intended use. Although most of the properties on installations closed under the four earlier rounds in 1988, 1991, 1993, and 1995 have been cleaned up and made available for redevelopment, the most extensively contaminated properties remain in various stages of cleanup to make them suitable for their desired use. Cleanup began many years ago at 2005 round installations when they were still operational. As a result, cleanup generally should be at a more advanced stage upon closure, compared to installations closed under earlier rounds when cleanup efforts were less mature. Still, installations closed under the 2005 round could face delays in redevelopment if a community's desired land use would require a lengthy and costly cleanup.

Introduction Some U.S. policymakers share widespread concern that the United States cannot conduct "whole of government" missions and activities abroad efficiently and effectively. For the 112 th Congress, various proposals to reform interagency authorities, organizations, processes, and personnel dedicated to foreign missions may be of interest, especially as it considers ways to maintain U.S. power and influence as it reduces expenditures. Proponents argue that reforms to rationalize interagency collaboration on foreign missions will not only enhance performance, but also save money by streamlining processes, facilitating cooperation, and reducing duplication. Some reform proposals are relevant to legislation currently before Congress, in particular the Interagency Personnel Rotation Act of 2011, which provides for interagency rotations by U.S. government personnel in national security agencies, and the Contingency Operations Oversight and Interagency Enhancement Act of 2011, as well as the recently approved Global Security Contingency Fund, providing an integrated State Department-Department of Defense budget for certain types of security assistance. The FY2012 NDAA ( P.L. 112-81 ) requires the President to submit to specified congressional committees within 270 days of enactment "an implementation plan for achieving the 'whole-of-government' integration vision prescribed in the President's National Security Strategy of May 2010." (See the section on " The Obama Administration and Interagency Reform ," below.) For nearly two decades, policymakers have pondered many questions regarding "interagency" missions and activities abroad—including stabilization and reconstruction, security assistance, counterterrorism, humanitarian assistance, and counterinsurgency—in a search to improve them. A primary question is the appropriate division of labor between the Department of Defense (DOD) and civilian agencies, particularly the State Department, in conducting these missions and activities. Other questions concern the recommended changes in authorities, processes, organization, structures, and personnel resources to optimize their use. As policymakers and analysts contemplate the range of probable near- and medium-term future threats—particularly the potential spillover effects of state instability and intrastate conflict, and the growth of terrorist and organized criminal activity—a consensus has grown that major challenges to U.S. national security over the next decades will require interagency responses. Nonetheless, despite a growing sense of a need for interagency reform to address multiple systemic problems, there is little agreement on the solutions. Congress has played a leading role in some aspects of interagency reform. For instance, the George W. Bush Administration's creation in 2004 of the State Department Office of the Coordinator for Reconstruction and Stabilization (S/CRS) was promoted by Senator Richard G. Lugar and then Senator (now Vice President) Joe Biden. Some Members call for additional congressional initiatives. To provide context for the 112 th Congress's continuing consideration of interagency reform, this report provides perspectives on the questions and issues raised by a broad range of reform proposals offered by research organizations and selected experts. The focus is on proposals for civilian institutions and personnel. Although DOD is a key player in the missions and activities that are the object of proposed reform, its very dominance in many areas underlies calls for reform to build civilian capacity. Thus, this report discusses DOD reforms only to the extent that they would foster improved interaction with civilians. This report starts with a brief history of the impetus for interagency reform during the 1990s and 2000s, and a sketch of Clinton, Bush, and Obama Administration measures and initiatives, followed by a discussion of key problems in the context of the current interagency structure. ( Appendix A provides a fuller discussion of interagency authorities and structures.) The report then provides a short synopsis of the content of reform proposals recommended or published by some three dozen foreign policy and defense organizations and experts. ( Appendix B , Appendix C , Appendix D , and Appendix E provide a broader discussion of proposed reforms, with tables of the proposals.) The report concludes with a discussion of four broad overarching questions: (1) is interagency reform necessary for missions abroad; (2) which proposals are considered highest priority; (3) can interagency reform produce cost savings; and (4) must congressional reform accompany other national security measures? Background7 For nearly two decades, foreign policy analysts have been troubled by the difficulties that U.S. agencies experience when working together to advance U.S. interests abroad. After the demise of the Soviet Union and the end of the Cold War in 1989, U.S. policymakers were confronted in the 1990s by new types of missions—the conflicts in Haiti, Somalia, Bosnia, and elsewhere—where conflict could not be brought to an end by force of arms alone. In these operations, U.S. military forces were tasked with a variety of state-building responsibilities, such as creating justice systems, assisting police, and promoting governance, which many believed were more appropriately performed by civilians. DOD soon realized that it needed assistance from civilian agencies, but those agencies often lacked the resources to help. Further, the United States' agency-centric national security system could not provide the strong leadership and appropriate mechanisms needed to meld military and civilian contributions into effective efforts. In a first step to address the perceived need to develop coordinated U.S. responses to crises abroad rather than relying on case by case ad hoc responses, the Clinton Administration issued the May 1997 Presidential Decision Directive (PDD) 56. This directive, entitled The Clinton Administration's Policy on Managing Complex Contingency Operations , dealt with interagency planning, collaboration, and coordination problems by creating new planning and implementing mechanisms. PDD 56's provisions were not systematically implemented, due to what some analysts have described as internal bureaucratic resistance, although some of its practices were incorporated into planning processes for some subsequent operations. The first widely distributed call for broad reform of the U.S. national security system was issued in February 2001 by the U.S. Commission on National Security/21 st Century, the so-called "Hart-Rudman" commission. This commission recommended a "significant organizational redesign" of the executive branch "to permit the U.S. government to integrate more effectively the many diverse strands of policy that underpin U.S. national security in a new era—not only the traditional agenda of defense, diplomacy and intelligence, but also economic, counter-terrorism, combating organized crime, protecting the environment, fighting pandemic diseases, and promoting human rights worldwide." Soon after, the terrorist attacks on the United States of September 11, 2001 (9/11), put the problems of interagency cooperation at home and abroad in bold relief for many policymakers and analysts. The U.S. military interventions in Afghanistan (October 2001) and, especially, in Iraq (March 2003) manifested—some would say magnified—the perceived deficiencies of previous interagency missions abroad. These wars heavily stressed U.S. military forces. They demonstrated that U.S. departments and agencies had difficulty working together productively; indeed they sometimes worked at cross purposes. Gradually, consensus grew that the United States needed to foster civilian-led interagency collaboration and cooperation in missions abroad, and to develop adequate civilian organizational structures, procedures, and personnel to make that possible. Perceptions of Interagency Requirements Post 9/11 In the mid-2000s, several studies set forth proposals to reform "the interagency," as the interdepartmental formal and informal cooperation system is known, largely in transitions from conflict and post-conflict settings. Two Defense Science Board (DSB) studies (in 2004 and 2005) advocated broad changes for "stability" operations—defined to include security, transition, counterinsurgency, peacemaking, and other operations needed to deal with irregular security challenges. The DSB studies focused on reforms to be undertaken by DOD and the U.S. military to a far greater extent than any previous or subsequent study. Nevertheless, the 2005 study also stated that DOD and the State Department needed to develop "an extraordinarily close working relationship," and that both departments needed to augment stabilization and reconstruction capabilities. Among the changes in DOD the 2005 study advocated were elevating the profile of stability operations within DOD through the creation of high level posts, and raising the status of stability operations to "core missions," that is, on a par with combat operations. Over the next few years, a second crop of studies on improving missions abroad focused on proposals to bring greater coherence to a variety of peacetime activities. Some of those studies advocated that action be taken to prevent conflict when it initially seemed a possibility (and not just as a reoccurrence in post-conflict situations). They viewed preventive action as critical to U.S. efforts to contain the spread of terrorism and to combat the threats from growing transnational crime. Many saw the early proposals to improve the U.S. ability to deal with conflict and its aftermath as applicable to these "steady state" missions as well. One 2008 study drew "lessons learned" from nearly two decades of stabilization and reconstruction (S&R) operations and stated that those lessons "can also have utility for a broader range of U.S. engagements abroad during both military and nonmilitary activities," including pre-conflict, conflict, and post-conflict activities. These studies, spanning a decade, differed in several respects, but largely agreed on the need for U.S. government reforms. For the most part, their recommendations rested on two fundamental premises: (1) the need to empower civilians to lead and conduct all missions except those in dangerously hostile situations, providing the necessary resources for them to do so, and (2) the need to replace ad hoc , "stove-piped" systems with improved mechanisms for developing contingency plans and procedures for joint civil-military operations and for implementing them. Their recommendations were often based on the judgment that the greatest threats to U.S. security would emerge in states that were either too weak to police their territory or lacked the political will or capacity to do so. State-building (a term some argued more appropriate than nation-building) activities to promote a more stable world by fostering the development of legitimate, open, and effective governments abroad, was at the center of the strategy developed to deal with these threats. This belief ran counter to many policymakers' perceptions during the 1990s that the establishment of new institutions in troubled countries was an overly expensive, if not futile exercise. George W. Bush Administration Initiatives Although the Bush Administration scorned the concept of "nation-building" at first, its post 9/11 military interventions in Afghanistan and Iraq soon changed its perspective. As the need to foster security and build credible institutions to govern in these highly fractionalized countries became evident, the Administration adopted significant initiatives to improve agencies' ability to carry out state-building missions more effectively and to foster interagency cooperation. On the military side, the Bush Administration's Office of the Secretary of Defense embraced a number of the DSB recommendations when it issued in November 2005 DOD Directive 3000.05 (DODD 3000.05), Directive on Military Support for Stability, Security, Transition, and Reconstruction (SSTR) Operation s . By designating stability operations as "a core U.S. military mission," this landmark directive moved DOD away from its Cold War focus on combat operations. It mandated that the armed services' dedicate the same level of systematic attention to doctrine, training, education, exercises, and planning capabilities for stability operations as they did for combat operations. At the same time, the directive clarified that DOD would play a supporting role to civilian leadership in many state-building situations, but cautioned that U.S. military personnel must be prepared to perform state-building functions when capable civilians were lacking. On the civilian side, the Bush Administration's signature initiative was the Civilian Stabilization Initiative, starting with the creation of the State Department Office of the Coordinator for Reconstruction and Stabilization (S/CRS) in July 2004, and concluding with the on-going creation of active and stand-by components for a new interagency Civilian Response Corp. In addition, not only did the Bush Administration set forth its own plan for interagency cooperation in S&R missions in National Security Presidential Directive (NSPD) 44, but it also partially put into force Clinton's PDD 71. Another key Bush Administration initiative was a program to prepare U.S. government personnel to work together on national security missions. On May 17, 2007, through Executive Order 13434, the Bush Administration provided legal authority for the development of an interagency National Security Professional Development program. Under guidance provided by the subsequent National Strategy for the Development of Security Professionals issued in July 2007, the NSPD program was launched as an effort to promote the integration of resources in national security mission areas. Its stated purpose was "to attain unity of effort through awareness, relationships, and experience, and to break down cultural barriers and obstacles to coordination across jurisdictional and organizational boundaries." The program, however, did not allocate or request central resources to accomplish its ends. It left each department and agency to build its own capacity under the program guidelines. Although agencies took the formal steps to incorporate proposed changes, absent constant direction and supervision from the White House to enforce it as a top priority and overcome bureaucratic resistance, the program largely stagnated during the remaining years of the Bush Administration. The Obama Administration and Interagency Reform In his January 25, 2011, State of the Union address, President Barack H. Obama signaled his intent to make the U.S. government more competent and more efficient through a major reorganization, stating that his Administration would "develop a proposal to merge, consolidate, and reorganize the federal government in a way that best serves the goal of a more competitive America." The Obama Administration initially embraced key Bush Administration civilian capacity-building initiatives. In the early months of the Obama Administration, Administration officials signaled their support for civilian S&R capabilities. In her January 2009 confirmation hearings before the Senate Foreign Relations Committee, Secretary of State Hillary Rodham Clinton asserted that the State Department needed to secure funding to carry out S&R missions and to demonstrate competence in conducting them. Then Secretary of Defense Robert M. Gates reiterated his support for increasing civilian capabilities, which he first expressed while serving in that position under former President George W. Bush. Subsequently, the Obama Administration scaled back Bush Administration plans for the Civilian Response Corps and the implementation of the National Security Professional Development program, perhaps because of the cost or difficulty of fully implementing them. However, it also announced a number of its own modest steps in line with the recommendations of the many studies to enhance civilian leadership, capabilities, collaboration, and coordination, and to reduce ad hoc measures. In May 2010, the White House set forth a statement of its intent to strengthen national security through a whole-of-government approach. In its 2010 National Security Strategy, the Obama Administration stated that to foster national security the United States "must update, balance, and integrate all of the tools of American power and work with our allies and partners to do the same." It called for maintaining the military's superiority in conventional welfare and enhancing other military capabilities, as well as investing "in diplomacy and development capabilities and institutions in a way that complements and reinforces our global partners." It outlined three pages of steps to take to improve defense, diplomacy, development, intelligence, homeland security, economic institutions, strategic communication, and partnerships with the for-profit private sector and non-profit nongovernmental organizations. In December 2010, the State Department and United States Agency for International Development (USAID) jointly issued a "Quadrennial Diplomacy and Development Review" or QDDR (modeled after the statutorily required DOD Quadrennial Defense Review Report or QDR), assessing U.S. diplomacy and development capabilities and proposing reforms to make them more efficient and achieve "whole-of-government" cohesion. The 2010 QDDR, undertaken by the Obama Administration without a statutory requirement, embraced a number of the proposals (or variations of those proposals) for national security reform that have been advocated over the past decade. These include efforts to integrate national security budgets, elevate the status of key State Department offices tasked with coordinating interagency efforts, create new regional structures, enhance the ability of Ambassadors to lead embassies and influence policy-making, and promote personnel reforms. (These are further discussed in Appendices B through E, below.) Key Problems and Reform Proposals The United States' system for decision-making and implementing foreign affairs missions and activities is considered dysfunctional by many analysts. One recent study characterizes the exercise of foreign relations as "a mob scene" of individual and independent agencies. The problems are perceived across many national security areas, including counterterrorism, failed states/post-conflict stabilization and reconstruction, democracy promotion, and transnational issues (crime, health, environment, migration, drugs). The three most commonly cited factors responsible for perceived inefficiency and ineffectiveness of interagency efforts abroad are: Inadequate civilian strategic planning and interagency operational planning capabilities and processes; Structural weaknesses in the U.S. government system for conducting missions abroad including (1) department-centric organizations resulting in the tendency for "stove-piping," with each agency reporting up and down through its own chain of command and responsibility for coordination placed on an overburdened White House; (2) insufficient civilian resources, including personnel, discouraging domestically oriented agencies from directing funds and personnel away from core missions; (3) inadequate mechanisms to foster information sharing within and among agencies; and (4) insufficient leadership authority, either de jure or de facto, at the headquarters and field level; and Personnel who are not trained for interagency missions, possessing little, if any, familiarity with the missions, capabilities, and cultures of other departments and agencies. Some analysts also cite strong disagreements among key players over the general purposes of and means to conduct missions as factors impeding successful performance. Improved institutional arrangements and enhanced leadership may provide the means to reduce such disagreements, or their worst effect, in some, but not all, missions. The perceived problems surface and have repercussions at all levels: in the field (U.S. embassies or interagency operations on-the-ground), at an intermediate (regional) level, at department headquarters in Washington, DC, and within the Executive Office of the President, that is, the White House. How these problems manifest themselves in interagency missions is briefly outlined in the section immediately below. The next section provides an overview of proposals to address these problems, with extended discussion in the appendices. Manifestations in U.S. Interagency Cooperation Problems with strategic planning and leadership are most often attributed to deficiencies at the White House, particularly the National Security Council (NSC). The NSC, consisting of the President, the Vice President, the Secretaries of State, Defense, Energy, and others, is the ultimate locus for integrating foreign policy and national security strategy and policy making. Through its directorates and staff, it at times has been responsible for coordinating or even directing policy implementation. The term "National Security Council" is sometimes used to encompass the council itself, as well as NSC directorates and staff. Despite its central role, many analysts consider NSC staff (currently numbering some 300, including detailees) and procedures inadequate to effectively oversee steady state interagency missions and, almost invariably, prone to be overwhelmed by crises. Crises reveal the full range of perceived problems in interagency missions. Strategic planning can break down. The usual practice calls for the relevant State Department regional bureau to direct civilian crisis planning and implementation in conjunction with the NSC, which meshes it with DOD planning if necessary. In the case of disagreements, the NSC may not always be able to play a mediating function. Usually, ad hoc staff-level interagency task forces are formed to coordinate the activities of civilian agencies and DOD. Task forces can form at the department level and the field level. Operations can be complicated by their members' lack of interagency experience and knowledge of other agencies' contributions and different cultures. In the field, task forces can be creative, devising solutions to problems. But task force members can end up at odds when they refer problems the task force cannot resolve up their individual chains of command. Structural weaknesses manifest themselves at the department level, where steady state policies, plans, and programs are developed, and at the field level, where programs are implemented. Both planning and implementation are theoretically conducted in accordance with the President's broad policy guidance as developed through National Security Council (NSC) processes and meetings of the President's Cabinet, but agency interests, personalities, the availability of resources, and other factors affect outcomes. The panoply of players, each with their own priorities and perspectives, illustrates the difficulties of developing plans for civilian foreign affairs activities and efforts. This function is usually led by the State Department and shared (not necessarily equally) by State Department regional and functional bureaus, by USAID and other agencies where appropriate, and by the Ambassadors at U.S. embassies. The implementation of field-level efforts and activities is reviewed, approved or disapproved, and overseen by the State Department regional and functional bureaus, which also secure funding for them. In other civilian agencies (i.e., the Departments of Treasury, Commerce, Justice, and Agriculture, among others), headquarters units involved in foreign affairs play a large role in planning and implementing their activities as their presence abroad is often very limited. At the headquarters level, collaboration and coordination among civilian agencies varies, but often may be minimal. Some analysts perceive a key structural weakness at the field level, where U.S. Ambassadors are responsible for transforming the President's broad foreign policy outline into concrete diplomatic measures and foreign assistance programs. At U.S. embassies (which are the United States' largest civilian permanent structures abroad), the Ambassador or other Chief of Mission (COM) directs and coordinates foreign policy initiatives undertaken by the embassy "country teams." These teams are composed of the representatives of all U.S. departments and agencies present in a country. The degree to which Ambassadors can actually lead and coordinate activities varies greatly according to the interest and management ability of each individual Ambassador. And, many find that the Ambassador lacks the necessary authority to compel agency representatives to direct their activities to fulfill embassy mission, rather than agency, goals. There are particular structural weaknesses at the regional level. Here, DOD is strong; it plans for and implements operations and activities through the regional Combatant Commands (COCOMS), also known as the Geographic Combatant Commands (GCCs). When in combat, the U.S. military operates under its own statutory authorities. In peacetime, military personnel carrying out security cooperation and related functions (developed by the GCC and approved by each country's COM) are attached to the U.S. embassies under COM authority, although the degree to which they view themselves as responsible to the COM rather than the geographic combatant commander varies greatly, according to some analysts. There is no corresponding regional entity on the civilian side. Further, civilian input into GCC planning is considered limited, although some GCCs have attempted over the past decade to incorporate civilian perspectives into their planning systems. Some analysts regard the absence of permanent civilian regional structures like the GCCs as a serious deficiency. The State Department does have regional programs in many areas and a number of "coordinators" reporting directly to the Secretary of State, who play varying roles in conducting or coordinating interagency missions. For instance, the State Department Office of the Coordinator for Counterterrorism (S/CT) encourages and manages interagency regional planning for counterterrorism activities. But these coordinators do not have the power to compel interagency cooperation. Overview of Reform Proposals Proposals for reforming the structures, procedures, and mechanisms for foreign policy and strategy making, planning, and implementation range from all inclusive to narrow. In 2008, the House Armed Services Committee urged Congress to legislate a new National Security Act to reform DOD and the entire spectrum of interagency operations, and to codify new structures that would "flatten, simplify, and integrate" agencies' related processes. The same year, the congressionally mandated Project on National Security Reform (PNSR) also proposed a wholesale overhaul of the National Security Act of 1947. (Subsequently, however, PNSR leaders stated that this proposal did not exclude incremental change.) Absent full-scale reform, some analysts find but faint possibilities for the success of those interagency initiatives undertaken thus far. Stating that the U.S. government operates with core national security processes and organizations dating to the 1950s, one author judged that initiatives such as S/CRS "are bound to fail without corresponding initiatives to transform the foundations of U.S. foreign policy." The argument for wholesale reform rests on the interdependence of the entire national security system, where changes in one area will inevitably affect authorities and practices in another. Nevertheless, given the conceptual and practical difficulties of legislating and implementing wholesale reform, many analysts favor an incremental approach, with selected improvements in key areas. Some focus on a particular agency, or certain missions or activities. Others look at top-level management structures, still others at field level practices. While there is ample overlap in analyses and recommendations, there is also considerable diversity. These proposals are catalogued below under four rubrics: (1) improve strategy-making, planning, and budgeting mechanisms and procedures; (2) correct structural weaknesses by improving institutional structures, arrangements, and authorities for coordination and collaboration at the headquarters and regional levels; (3) address structural weakness at the field level by enhancing the authority and capacity of U.S. Ambassadors; and (4) create interagency personnel policies and mechanisms. Table 1 , before the appendices, presents the spectrum of proposals by author and type. Source citations, and the acronyms identifying them in the tables, are found in the bibliography. Improve Strategy-making, Planning, and Budgeting? A fundamental weakness of the current system perceived by many analysts is a lack of adequate strategy-making, planning, and budgeting capabilities and procedures. Many have pointed to these deficiencies as critically undermining the United States' ability to develop and conduct coherent and effective foreign policies, missions, and assistance activities. They also can produce duplication of efforts in some areas and gaps in others. Many analysts have cited a need for systems and procedures to ensure the development of coherent strategy, guide planning, and bring to bear sufficient leadership and direction. (See the Appendix B text box for the difficulties of compiling comprehensive information on counterterrorism spending and foreign police and other law enforcement assistance.) Possible options offered to address these deficiencies are examined in Appendix B . Some involve modifying the National Security Council (NSC) and NSC staff roles, responsibilities, or structure. These include establishing new NSC positions, establishing new NSC structures, or assigning new responsibilities to the NSC and its national security staff. Others would institute new strategy development processes and documents, or enhance strategy development and planning. Other options include integrating budgets, and improving budgeting processes. Improve Civilian Institutional Authorities and Structures for Coordination and Collaboration? The perceived weaknesses of civilian institutions (including insufficient authority and planning capabilities, ineffective hierarchical arrangements, and a paucity of resources) are viewed as impeding their ability to conduct and coordinate interagency missions abroad. Proponents of reforms to address these problems identify two bureaucratic impediments to interagency reform. One is that agencies prioritize core missions and resist allocating personnel and other resources to peripheral missions. Another is that personnel respond to the direction and perceptions of those who evaluate and promote them, rather than to other superiors who are not in their chain of command. A perceived need to build appropriate structures and to create adequate leadership authority to overcome these obstacles undergirds many proposals for interagency reform. Appendix C discusses these proposals. Because the State Department is responsible for overseeing the conduct of the President's foreign policy, many analysts focus on strengthening its capacity to lead, coordinate, and conduct civilian missions and activities abroad. Some proposals deal specifically with improving the State Department's ability to lead and conduct S&R missions. Others, however, would reallocate S&R responsibilities to other agencies. Other institutional arrangements are proposed. Some would create new institutions specifically for S&R. On a smaller scale, others advocate establishing interagency teams or task forces. Some would enhance civilian input into GCCs and other DOD units, while others would create new civilian regional structures. Some proposals focus on civilian personnel. Some urge a review or augmentation of the numbers of civilian personnel at the State Department and USAID. Others propose augmenting personnel and other capacity government-wide for interagency missions. Some would increase personnel in the Civilian Response Corps. Enhance Authority and/or Capacity of U.S. Ambassadors? As the leaders of the interagency "country teams," Ambassadors are viewed by many analysts as the key to improving interagency coordination and increasing the effectiveness of interagency missions in the bilateral arena. Some analysts view strong country team leadership by an Ambassador as the key reason for what they perceive as successful interagency cooperation in recent U.S. assistance efforts in Colombia, Paraguay, and the Philippines. Because of their vital role in interagency cooperation, there are various proposals to enhance Ambassadors' authority. (See Appendix D .) Some would strengthen their authority over embassy staff or their control over funding for activities carried out by members of the embassy team. Others recommend enhancing Ambassadors' ability to manage the interagency country teams and carry out other responsibilities. One proposal would expand COM authority to enable Ambassadors to effectively lead regional or crisis task forces. Create Interagency Personnel Policies and Mechanisms? Few U.S. government personnel have the necessary knowledge, skills, and experience to work together effectively in interagency missions, according to many analysts. There are many proposals to provide them with interagency education, training, and experience in order to create a U.S. government-wide "interagency" culture, as discussed in Appendix E . (See the Appendix E text box for insight into the differences between DOD and Department of State agency cultures.) Some proposals call for the formation of a group of national security professionals from all levels dedicated to interagency operations, some for building up President Bush's National Security Professional Development program, some for developing interagency career paths, and some for creating an interagency cadre of senior managers. Other proposals would overhaul personnel systems and expectations, linking interagency education, training, and experience to job qualifications, opportunities, and promotions. At the other end of the scale, more limited proposals call for expanding the opportunities and incentives for interagency education, training, and professional experience, and protecting interagency personnel against political currents. Some proposals call for creating new institutions for interagency education and training, or enhancing existing ones. Issues for Congress Congress has considerable authority regarding interagency reform. Through its appropriations power, Congress ultimately controls reforms that require additional resources, such as personnel, facilities, and additional education and training. Congress also sets through statute the organization of the top levels of executive branch departments and agencies, conditioning the executive's ability to put in place new high-level posts and organizational units. These include positions at the NSC, and leadership positions (i.e., Assistant Secretary and above) at the civilian departments, including State, Defense, USAID, and others. Congress also has considerable influence over other personnel matters, through its power to promote civilian and military officers and fix other terms of employment. Even where the executive branch has the authority to make changes on its own, Congress can stimulate reforms by enacting legislation that would break bureaucratic resistance; for instance, Congress can mandate new procedures and processes by requiring strategy and budget documents that deal with these matters. Congress may also encourage changes indirectly through hearings, briefings, and meetings with executive branch officials. While contemplating the utility of specific reforms, Members may also wish to consider a number of issues. Four addressed below are whether interagency reform is necessary; to what extent the U.S. military should be relied upon; how to prioritize proposed reforms; and whether interagency reform will produce budget savings? Is Interagency Reform Necessary for Missions Abroad? The United States' long military involvement in Afghanistan and Iraq has provided much of the impetus for interagency reform efforts, but has also raised doubts about the wisdom of the interagency S&R missions. Perceptions regarding the necessity and desirability of interagency reform for missions abroad may be tied to a policymaker's assessment of the future security environment and the appropriate scope of the U.S. response. The need for overall reform, or even limited reform in certain areas, may depend on whether one judges that (1) the conflict environment and state-building demands of the past two decades will continue into the next several decades; (2) whether there are significant new types of missions that would be made more effective by improved interagency collaboration; and (3) whether one accepts or questions the utility of such engagements. Future Conflict Environment and Missions Initially, the perception that extensive interagency reform for missions abroad is vital to U.S. national security was fostered by the belief that weak, unstable states and post-conflict settings provide fertile breeding grounds for international terrorism. Initial proposals were grounded in the desire to bring to bear in these situations effective whole-of-government efforts to foster security, good governance, and economic development; to prevent outbreaks of conflict; and to forestall reoccurrences of conflict in transitions from conflict and post-conflict settings. Some analysts soon disputed the premise that weak and failed states are per se among the most significant threats to the United States. They pointed out that terrorists find safe-haven and recruits in developed countries as well, and identified many factors—demographic, political, religious, cultural, and geographic—contributing to the spread of terrorism. An emphasis on weak and failed states, they argued, can result in fruitless interventions, pointless expenditures, and too little attention on more tangible threats and areas of greater U.S. interest. The 2010 QDR does not discount potential threats from weak states, but discussed them in terms broader than international terrorism. The changing international environment, it judged, "will continue to put pressure on the modern state system, likely increasing the frequency and severity of the challenges associated with chronically fragile states ... [which] are often catalysts for the growth of radicalism and extremism.... Over the course of the next several decades, conflicts are at least as likely to result from state weakness as from state strength." It points out some fragile states "are nuclear-armed or are critically important to enduring American interests." This document argues for the integration of defense, diplomacy, and development (the so-called "3D") tools to prevent the rise of threats to U.S. interests and to meet the challenges of "a complex and uncertain security landscape in which the pace of change continues to accelerate." It points to counterterrorism, building the capacity of foreign security forces, and preventing conflict as interagency missions that will continue into the foreseeable future. And, it flags a need for interagency approaches to help "strengthen weak states, including those facing homegrown insurgencies and transnational terrorist and criminal networks or those weakened by humanitarian disasters." Utility of State-building Missions To those policymakers and analysts who would discount the need to deal with numerous or high visibility situations requiring extensive state-building in the foreseeable future, the need for interagency reform, especially those aspects of it dealing with increasing civilian capacity and integrative personnel measures, may seem less than pressing. Similarly, this need would be discounted by those who are skeptical that the United States can effect significant changes in other states—weak, failing, or simply seriously flawed—through military or political interventions aimed at creating viable government institutions. The effectiveness of past efforts is a subject of debate, with differing views on the criteria for and the number of successes, draws, and failures, as is the best means to achieve success. There is considerable skepticism that state-building efforts often result in success. In the words of one scholar, "barring exceptional circumstances (the war against the Taliban after 9/11), we had best steer clear of missions that deploy forces (of whatever kind) into countries to remake them anew.... The success stories (Germany, Japan) are the exceptions and were possible because of several helpful conditions that will not be replicated elsewhere." On the other hand, some analysts judge that some international post-conflict state-building efforts have had considerable success. Mozambique and El Salvador are often pointed to as cases where state-building during and after civil strife promoted durable peace in the early 1990s. While two countries where the United States intervened militarily in the 1990s—Haiti and Somalia—are still highly problematic, the Balkans, once aflame with war, is stable despite the persistence of ethnic tensions. A 2003 RAND study that looked at eight U.N. peacekeeping missions (plus Iraq, where the U.N. played a role) judged that "seven out of eight societies left peaceful, six out of eight left democratic ... substantiates the view that nation-building can be an effective means of terminating conflicts, insuring against their reoccurrence, and promoting democracy." The long period of time that it takes conditions in post-conflict countries to stabilize—for instance in Bosnia-Hercegovina (after the Dayton peace accord of December 1995) and in Kosovo as a separate entity from Serbia (after the NATO military intervention of 1999) is not surprising to some analysts in light of assessments that state-building efforts take many years to produce results. U.S. and international efforts to improve the possibilities of success for mitigating conflict and improving state-building operations are demonstrating what some regard as increasing promise. Continuing research and evaluation by the U.S. and other governments, as well as academia and think tanks, are advancing a broader understanding of the sources and drivers of conflict. There is a growing body of academic and government literature on the effectiveness of mechanisms used to defuse and settle conflicts, as well as sets of state-building best practices to prevent or ameliorate conflict. Some analysts judge that future U.S. state-building efforts—when conducted on the basis of this knowledge and carried out by trained and experienced personnel operating under a well-designed interagency framework—may be more successful than in the past. To What Extent Should the U.S. Military Provide Needed State-Building Capabilities? The use of the U.S. military in non-combat roles, particularly state-building, has a long and controversial history. During the Cold War years of the 1950s-1980s, the U.S. military focused on developing combat capabilities for decisive victories in conventional warfare. The inconclusive 1965-1972 counterinsurgency effort in Vietnam, which combined military force with a program of socioeconomic reform, reinforced the notion that combat was the only appropriate mission for U.S. military forces. However, events of the first two post-Cold War decades—the 1990s "peace operations," the problematic post-combat transitions that generated insurgencies in Afghanistan and Iraq, and the efforts to deter the spread of terrorism after 9/11—gradually convinced defense policymakers that future military missions would often require political, economic, and social state-building components. A current question for U.S. policymakers is to what extent should the U.S. military provide the personnel to carry out non-combat national security activities, either in conjunction with combat operations (e.g., counterinsurgency, or post-conflict stabilization and reconstruction), or as a separate military mission (e.g., counterterrorism)? DOD's response—up to this point—may be described as an ambiguous "to whatever extent necessary." The DOD February 2010 QDR cites among its six key missions the need to "succeed in counterinsurgency, stability, and counterterrorism operations," and to "build the security capacity of partner states." DOD, however, does not see the U.S. military as the primary actor in the many non-combat missions that it performs. The 2010 QDR reinforces DODD 3000.05 statements that DOD would often play a supporting role in such missions and activities. However, the meaning of a "supporting role" may vary depending on the availability of civilians to carry out those missions. The 2010 QDR argues that the presence of a "strong and adequately resourced cadre of civilians organized and trained to operate alongside or in lieu of U.S. military personnel" is "an important investment for the nation's security," but it also reaffirms the Directive's intent to ensure that state-building skills and abilities are available. While DODD 3000.05 acknowledges that civilians are better suited to state-building tasks in such missions, it also recognizes that civilian agencies cannot operate in all situations, and perhaps also that they are unlikely to develop these capabilities to the extent needed, at least for some time to come. Implications of a DOD State-Building Role for the U.S. Military Maintaining state-building capabilities within the U.S. military services is not without cost. DOD has made a considerable front end investment in developing doctrine, training, and exercises for these capabilities. Further developing and maintaining appropriate skill levels and special abilities (such as personnel with all needed language capabilities) comes at an additional cost. At a time when increasing budget constraints and a drawdown of active duty troops over the next several years seem likely, defense analysts may raise concerns about the possible trade-offs of maintaining such capabilities. If the price of retaining adequate capabilities requires keeping a substantially larger number of military personnel, this additional cost may be factored into a debate over weapons modernization vs. personnel budgets. Because of these additional costs and the burden that performing such tasks can place on overstretched military forces, as well as the perception that civilians can often perform these tasks better, DOD leaders have long pushed for the development of a civilian capacity for state-building activities. Former Secretary of Defense Robert M. Gates repeatedly urged Congress to fund these capabilities, as have the two recent Chairmen of the Joint Chiefs of Staff. Given these costs, Congress may wish to consider whether DOD should remain the default capability for planning and conducting state-building activities or whether to expand civilian capabilities sufficiently to permit DOD to retain only those needed for situations too hostile for civilians to operate. Policymakers who judge that retaining state-building and other stability operations capacity in DOD may be the best option for the United States into the foreseeable future may wish to improve DOD's ability to carry out such missions. One option might be to implement the DSB 2005 proposal to create a position for Deputy Under Secretary for Defense for Policy (Stability Operations) that has never been instituted. (Responsibility for stability operations remains under the Assistant Secretary of Defense for Special Operations/Low Intensity Conflict, i.e., SO/LIC.) Another would be to ensure that all DODD 3000.05 mandates are fully implemented. Implications for U.S. Foreign Policy Another area of concern is the possible effect on U.S. foreign policy if state-building activities are largely conducted by U.S. military or DOD contracted personnel. A prominent concern is the effect of military dominance on the State Department's lead role in foreign policy coordination and implementation. The current high-profile DOD role may not only undermine the current statutory basis for the conduct of foreign policy, but also empower a department whose culture and processes are more attuned to accomplishing concrete missions than guiding the flow of bilateral and international relations with a view to the long run. In addition, many have questioned whether U.S. efforts to promote democratization and civilian control of governments abroad might be undermined by too prominent a military face on the U.S. presence around the world. A RAND publication predicts adverse consequences in both areas: If nation-building remains a foreign-policy[sic] priority for the United States but the majority of resources and capabilities for that priority are concentrated in DoD, that organization ... will become the lead agency for a major component of U.S. foreign policy. Such a development would weaken the role of the State Department, both at home and abroad. It would raise concerns about the weakening of civilian control over military policy and undermine U.S. diplomatic efforts around the world. In short, it would be a fundamental realignment of how the United States both sees itself and is seen globally. The RAND publication also raises concerns that state-building activities are made more difficult and less effective when the military takes the lead. As DOD documents and officials public comments have repeated, the military is most often rightly the second choice for many state-building tasks. Although military personnel may become more competent at these tasks, many question whether the military could ever become as competent as civilians, hired for their expertise at state-building tasks, without dedicating personnel and units specifically to those tasks. That alternative has been rejected by the military in the past, and is not on the agenda for the future. Short-term Trade-offs Short-term cost considerations may come into play in decisions regarding the DOD role in state-building. The relative budget costs between further developing capabilities in DOD and building new capabilities in civilian agencies may be an issue. As measured against the S&R capabilities envisioned by the Bush Administration's Civilian Stabilization Initiative, current capacity falls far short and is declining still further. As up-front costs are usually higher than sustainment costs, and much further investment is needed in civilian capacity to bring it up to that initiatives' goals, use of the military may be the most cost-effective in the short run. Further, some may argue that continued development of state-building and other S&R capacity is relatively modest in terms of the defense budget. Nevertheless, if the United States begins to draw down military forces with the scale-backs in Iraq and Afghanistan, the anti-nation-building arguments of the 1990s—when a smaller force was stressed by the additional tasks and the costs of the additional personnel needed to perform such missions was measured against investments in weapons modernization—may reemerge. At some point, DOD may find it too costly in terms of over-stressed personnel and foregone investment to continue to embrace stability missions on a par with combat operations, as mandated by DODD 3000.05. Nevertheless, as discussed above, the State Department generally has exercised the lead in state-building and related activities for the past 60 years, with few exceptions. An increase of capabilities and budgets in DOD, even if intended to be only temporary, could translate into a de facto shift from State Department leadership, with possible implications for the balance of authority between these two departments in the future. Which Proposals Are Highest Priority?55 Given that an overarching reform of the national security system appears unlikely, policymakers and analysts may debate the priority order of specific reform elements, and the possible implications of the order in which they are adopted. Should reform efforts concentrate on improving strategy-making, planning, and budgeting capabilities and procedures? Are effectiveness and improved collaboration or coordination better achieved by creating new governmental structures or rearranging existing ones, or by focusing on increasing the number of specially trained or dedicated personnel, particularly civilians? Or would augmenting current authorities and enhancing the capacity of existing structures and personnel be a more cost-effective approach? These questions have not been systematically raised. Addressing all possible questions and exploring the numerous permutations of approaches is beyond the scope of this report. Nevertheless, in forming their judgments, policymakers may wish to consider the following possible approaches to prioritizing reform. Prioritize by System Weaknesses Policymakers may view priorities through many different lenses. Many may judge priorities based on their perception of the crucial strengths and weaknesses of the current system. For instance, those who emphasize the need for coherent strategy-making for crisis operations view the essential fix as at the White House level, with changes in the structure and functioning of the NSC, while those concerned with better "steady state" (i.e., a normal peacetime situation) strategy may look as well to the State Department and the embassy level. Those who believe that personalities dominate strategy-making processes and implementation regardless of structures might de-emphasize the need for higher level structural reform, and possibly emphasize the need for enhancing the capacity, authority, and flexibility of leadership at all levels. Those who see personnel at operational level as capable of correcting flaws and deficiencies of higher levels might prioritize reform at the field level, with an emphasis on the development of interagency personnel. An emphasis on interagency professional development may also be preferred by those who judge that thorough interagency reform will require a generational change best started by institutionalizing reform from the bottom up. On the whole, specific criteria for prioritizing reform elements are lacking. One guide to developing priority criteria may be conclusions drawn from historical case studies. The editors of one compilation of 11 case studies of interagency missions found three recurring weaknesses that some policymakers may chose to make their priorities: (1) little investment in human capital; (2) the absence of "interagency doctrine;" and (3) a lack of appropriate leadership at the highest levels. However, the editors also provide a cautionary note about the limits of interagency reform. Above all, they asserted, competent leaders are more important than structures, statutes, and process. "At the highest levels of government, no organizational design, institutional procedures, or legislative remedy proved adequate to overcome poor leadership and combative personalities." Prioritize and Improve George W. Bush Administration Initiatives Some policymakers may view support for the efforts begun by the Bush Administration as a priority. One such effort is the national security professional development program, as discussed above. Another is the creation of civilian capabilities for stabilization and reconstruction under S/CRS. A prominent feature of six early reports (between 2003 and 2005) on S&R operations was a recommendation to develop rapidly deployable civilian forces to undertake state-building functions, particularly those related to rule of law, even before hostilities had ceased. Many viewed the development of civilian groups as permitting the earlier withdrawal of military personnel than would otherwise be possible. The establishment and deployment of such a corps, now underway, marks a substantial change from past practices. Some policymakers and analysts may view continued attention to and support for the needs of improving this capability as desirable, given the resources already devoted to it. However, as mentioned above, to those who doubt the utility of state-building endeavors abroad, or are wary of undertaking such efforts while the United State faces budget difficulties, these programs may not merit priority status. Prioritize by Effect on International Cooperation Another approach for prioritizing reforms might be to emphasize those changes that might enable the U.S. government to more effectively cooperate with other governments, international agencies, and non-governmental organizations in conducting activities and missions abroad. For instance, deficiencies in U.S. planning, insufficient clarity in agency roles, and agencies' unwillingness to share information and work together on projects can only complicate interactions with non-U.S. government participants and donors. Prioritize by the Ease and Cost of Implementation Finally, some policymakers may view the ease and cost of implementation as the prime ranking factors. Some would say that Obama Administration initiatives seem to be largely based on such criteria. As of 2011, its initiatives seem to be the least costly and those that are relatively easy to implement, reflecting perhaps budget and bureaucratic pressures and a desire for greater certainty of effect before proceeding. For instance, the decision to cut back implementation of the Bush Administration's National Security Professional Development program to one pilot project focused on homeland security seems a cautious, cost-conscious decision that may also reflect resistance among departments and agencies focused on foreign affairs. Similarly, the Obama Administration effort to improve the ability of Ambassadors to better carry out their responsibilities and influence headquarters level deliberations is relatively low-cost and limited, given the more extensive proposals to enhance COM authority. The decision to elevate S/CRS and S/CT functions in the State Department hierarchy may involve significant costs and invoke bureaucratic resistance, but still may be less costly and more expeditious than other options, particularly creating a new, independent agency to assume S/CRS functions. Can Interagency Reform Produce Cost Savings? There is a widespread expectation that interagency reform would save money in the long run. The 2010 QDDR explained the basis for that belief. Discussing plans to develop interagency cooperation on counterterrorism, rule of law, strengthening justice, interior, and health ministries abroad, the QDDR stated: "In the long-term, partnering with and building on the assets of other agencies will offer net policy gains to the U.S. government and reduce overall program implementation costs. This is a significant departure from current practice, one that we believe will save money, improve the U.S. government's ability to advance American interests, and strengthen State's engagement across the interagency." Nevertheless, some analysts believe that the cost effects of interagency reform are difficult to assess. Many analysts with experience in interagency missions expect that cost savings would accrue by eliminating the duplication of effort. The savings from duplication of effort would depend, however, on the size of the mission. Since many interagency missions involve relatively small numbers of people, cost savings on personnel may not be high. Various analysts point to other possible ways in which interagency reform may produce savings: By facilitating the sharing of information technology, which is often expensive; By increasing collaboration and coordination at the planning and budgeting stages, resulting in an improved allocation of resources, because without a coherent strategy even the most efficient operational interagency processes and collaboration are often ineffective; By hastening the date when U.S. military forces can be removed from post-conflict areas and replaced with less-costly civilian personnel. There may be additional costs associated with the process of interagency reform. As mentioned above, some analysts believe that savings will accrue from greater efficiency and effectiveness in missions if conducted by well-resourced civilian agencies with the resident expertise and appropriate core mandate. Nevertheless, there undoubtedly will be upfront personnel investment if the appropriate agency currently lacks the necessary capabilities to perform the mission. Some may question whether streamlining interagency processes and resources would indeed produce savings if personnel were not regularly called into action to exercise interagency skills. Should Congressional Reform Accompany Other National Security Reform Measures? Congress's ability to oversee national security affairs, rationalize national security spending, and promote interagency reform is hampered by its own organization and procedures, according to some analysts. Some wonder whether Congress's current organization, which treats defense and foreign affairs as separate, rather than interdependent national security functions, contributes to the perceived imbalance between military and civilian resources. In 2008, a report by RAND and the American Academy of Diplomacy (AAD) stated that "the integration of instruments of power and influence would be greatly facilitated by changes in the way that Congress conducts its business." Create New Select Committees The 2008 RAND/AAD report proposed the establishment of two new select committees, "one in each house, devoted to reviewing the overall integration of instruments of power and influence and reporting their findings in terms of possible programs and appropriations." This reform, they argued, "would help individual committees (and Congress as a whole) make better-informed decisions about the intersection of elements of power and influence—elements that do not respect institutional boundaries in Congress any more than those in the executive branch." It would not, the report stated, impinge directly on the current distribution of congressional power. The same year, PNSR recommended that the Senate and House each create select committees "for interagency national security matters specifically responsible for reviewing and making recommendations for basic legislation governing interagency coordination and multiagency activities." PNSR went further than RAND and AAD, recommending that if these select committees performed well, the Senate and House "should approve creating permanent select committees for interagency national security activities with oversight and legislative powers." PNSR's proposal also called for these committees to "serve as the focal point for executive-legislative consultations on national security matters." The assignment of such jurisdiction to new committees, whether temporary or permanent, would have significant implications for the current distribution of responsibilities in Congress, particularly for the armed services and foreign affairs committees. Create a National Security Appropriations Subcommittee More recently, the congressionally mandated Quadrennial Defense Review Independent Panel recommended that Congress consider reconvening the Joint Committee on the Organization of the Congress "to examine the current organization of Congress, including the committee structure, the structure of national security and homeland defense authorities, appropriations, and oversight, with the intent of recommending changes to make a more effective body in performing its role to 'provide for the common defense.'" It proposed that Congress consider the possibility of establishing, at a minimum, a single national security appropriations subcommittee for the departments of Defense, State, Homeland Security, as well as USAID and the intelligence community. It also proposed that Congress consider establishing a parallel authorization process to facilitate coordinating authorization action on these departments and agencies. Modify Current Practices and Procedures An option that would not require any structural changes would be for Congress to conform its committees dealing with defense and foreign relations to the standard declared in 1950 by then Senate Foreign Relations Committee Chairman Arthur Vandenberg that "politics stops at the water's edge." Such measures might include maintaining bipartisan staffs that share all tasks and information on subjects that overlap, holding frequent joint foreign relations and armed services hearings, and sponsoring joint legislation on national security matters. Some of these measures are not without precedent. To facilitate long-term strategy development, Congress may also wish to consider options for revising budgeting processes. For instance, Congress may consider mandating multi-year budgets in certain areas. Or, it might require civilian agencies to develop five-year budget plans, as DOD does for non-contingency operation expenditures, in order to develop consensus with Congress on long-term foreign policy goals. While such plans would be subject to much greater fluctuations than DOD weapons systems plans, for example, they still might provide a basis for executive-legislative discussions on long-term resource allocation that could facilitate strategic planning. Looking Ahead The United States' ability to protect its interests and play a global leadership role may be significantly affected by the way in which it brings resources to bear on new and continuing national security challenges. Most immediate are the new state-building needs of transforming Arab states. Over the longer run, if advanced countries' economic troubles increase developing countries' economic distress, the United States may engage even more in counterterrorism and conflict prevention. In an era of constrained budgets, Congress may be increasingly interested in examining the possibilities that interagency reform may improve the use of resources. For instance, improved strategic planning and "whole-of-government" budgeting may focus resource allocation more effectively. Organizations and officials may produce better results if given the authority to harness the necessary resources to accomplish their missions, irrespective of their agency identification. Better trained and experienced personnel may carry out their duties more effectively. Finally, as the U.S. military, especially the U.S. Army, reviews its purposes while it shrinks its forces, the need for rebalancing military and civilian state-building capacity may be further emphasized. Bibliography (Materials listed alphabetically by the acronym or surnames used to identify them in Table 1 .) ACTD 2007 —U.S. State Department Advisory Committee on Transformational Diplomacy, Final Report of the State Department in 2025 Working Group , 2007. Brookings/CSIS 2010 —Brookings Institution and Center for Strategic and International Studies. Capacity for Change: Reforming U.S. Assistance Efforts in Poor and Fragile Countries , by Norm Unger and Margaret L. Taylor, with Frederick Barton, April 2010. Buchanan/Davis/Wight 2009—Buchanan, Jeffrey, Maxie Y. Davis, and Lee T. Wight, "Death of the Combatant Command? Toward a Joint Interagency Approach," Joint Force Quarterly , no. 52 (1 st quarter 2009). Cerami 2007 —Cerami, Joseph R. "What is to be Done? Aligning and Integrating the Interagency Process in Support and Stability Operations, in The Interagency and Counterinsurgency Warfare: Stability, Security, Transition, and Reconstruction Roles , edited by Joseph R. Cerami and Jay W. Boggs, U.S. Army War College, Strategic Studies Institute, Carlisle Barracks, PA, December 2007. CFR 2005 —Council on Foreign Relations, In the Wake of War: Improving U.S. Post-Conflict Capabilities, Report of an Independent Task Force , Task Force Report No. 55, September 2005. CFR 2009 —Council on Foreign Relations, Enhancing U.S. Preventive Action , Council Special Report No. 48, October 2009. CGD 2004 —Center for Global Development Commission on Weak States and U.S. National Security. On the Brink: Weak States and U.S. National Security , May 2004. CGD 2007 —Center for Global Development . The Pentagon and Global Development: Making Sense of the DoD's Expanding Role , November 2007. CSIS/AUSA 2003 —Center for Strategic and International Studies and Association of the U.S. Army, Play to Win: Final Report of the bi-partisan Commission on Post-Conflict Reconstruction , January 2003. CSIS 2004 —Center for Strategic and International Studies, Beyond Goldwater-Nichols Phase I , 2004. CSIS 2005 —Center for Strategic and International Studies, Beyond Goldwater-Nichols Phase II , 2005. CSIS 2007 —Center for Strategic and International Studies, Integrating 21 st Century Development and Security Assistance , 2007. CWC 2011 —Commission on Wartime Contracting in Iraq and Afghanistan, Transforming Wartime Contracting: Controlling costs, reducing risks , Final Report to Congress, August 2011. DSB 2004 —Defense Science Board, Summer Study on Transition to and from Hostilities , December 2004. Flournoy/Brimley 2006 —Flournoy, Michele A. and Shawn W. Brimley, Strategic Planning for National Security: A New Project Solarium , Joint Forces Quarterly, Issue 41, 2 nd quarter, 2006. Heritage 2005 —Heritage Foundation, Winning the Peace: Principles for Post-Conflict Operations , by James Carafano and Dana Dillon, June 13, 2005. Heritage 2008 —Heritage Foundation, Managing Mayhem: The Future of Interagency , by James Carafano, March 1, 2008. Lamb/Marks 2009 —Lamb, Christopher J. and Edward Marks, ), Chief of Mission Authority as a Model for National Security Integration , Institute for National Strategic Studies (INSS), October 2009. NDU 2004 —National Defense University, Transforming for Stabilization and Reconstruction Operations , 2004. Pope 2010 —Pope, Robert S., Lt. Col., USAF, "U.S. Interagency Regional Foreign Policy Implementation: A Survey of Current Practice and an Analysis of Options for Improvement", (A Research Report Submitted to the Air Force Fellows Program, Air University, Maxwell Air Force Base, AL, April 2010), http://belfercenter.ksg.harvard.edu/Files/Pope_10_AFF_Reearch_Paper_FINAL-2022.pdf . PNSR 2008 —Project on National Security Reform, Forging a New Shield (Report mandated by Section 1049, P.L. 110-181 , National Defense Authorization Act for FY2009), November 2008. PNSR 2009 —Project on National Security Reform, Turning Ideas Into Action , September 2009. PNSR 2010 —Project on National Security Reform, The Power of People, 2010. QDR 2006 —U.S. Department of Defense, Quadrennial Defense Review Report , February 6, 2006. QDR 2010 —U.S. Department of Defense, Quadrennial Defense Review Report , February 1, 2010. QDDR 2010 —U.S. State Department and United States Agency for International Development, The Quadrennial Diplomacy and Development Review , Washington, DC, December 2010. QDRIP 2010 —Quadrennial Defense Review Independent Panel, The QDR in Perspective: Meeting America's National Security Needs in the 21 st Century, The Final Report of the Quadrennial Defense Review Panel (Report mandated by Section 1031(f) P.L. 109-364 , the John Warner National Defense Authorization Act for FY2007, as amended by Section 1061, P.L. 111-84 , the National Defense Authorization Act for FY2010), 2010. RAND 2009 —RAND, Improving Capacity for Stabilization and Reconstruction Operations , by Nora Bensahel, Olga Oliker, Heather Peterson, Sponsored by the Department of Defense, Santa Monica CA, 2009. RAND/AAD 2008 —RAND and the American Academy of Diplomacy , Integrating Instruments of Power and Influence: Lessons Learned and Best Practices, Report of a Panel of Senior Practitioners , 2008. RAND/AAD 2006 —RAND and the American Academy of Diplomacy , Integrating Instruments of Power and Influence in National Security: Starting the Dialogue , Conference Proceedings, 2006. Schnake/Berkowitz 2005 —Schnake, Kori and Bruce Berkowitz, National Security: A Better Approach , Hoover Digest, No. 4, 2005. SFRC 2007 —U.S. Congress, Senate Foreign Relations Committee, Embassies Grapple to Guide Foreign Aid , 2007. SIGIR 2010 —Special Inspector General for Iraq Reconstruction. Applying Iraq's Hard Lessons to the Reform of Stabilization and Reconstruction Operations , Arlington, VA, February 2010. Smith 2010 —Dane F. Smith, Jr., Organizing American Peace-Building Operations , Praeger (in cooperation with the Center for Strategic and International Studies), Santa Barbara, CA, 2010. Stimson/AAD 2011 —The Henry L. Stimson Center and The American Academy of Diplomacy, Forging a 21 st -Century Diplomatic Service for the United States though Professional Education and Training , February 2011. U.S. Commission on National Security /21 st Century (known as the Hart/Rudman Commission), Phase III Report, Road Map for National Security: Imperative for Change , February 15, 2001. Williams/Adams 2008 —Williams, Cindy and Gordon Adams, Strengthening Statecraft and Security: Reforming U.S. Planning and Resource Allocation, MIT Security Studies Program, Occasional Paper, June 2008. Acronyms Preface to Appendices, Including Tables Appendix A provides an overview of U.S. interagency institutions and arrangements. The subsequent appendices discuss salient reform proposals from 38 sources, with each appendix addressing one (or a subset of one) of the three problem areas perceived as contributing to the inability of civilian agencies to effectively plan, organize, and implement missions abroad. Appendix B deals with proposals to improve strategy-making, planning, and budgeting. Appendix C surveys a broad sweep of proposals to enhance institutional arrangements, resources, and civilian authority at the headquarters level. Appendix D focuses on enhancing civilian authority at the field level, that is, proposals to enhance the authority and capacity of U.S. Ambassadors. Appendix E examines proposals to create or improve interagency personnel policies and mechanisms. The appendices exclude discussion and proposals concerning specific field or program level interagency issues (such as those involving the structure and operation of provincial reconstruction teams) and proposals to strengthen the capacity of individual agencies and departments, other than the interagency role of the State Department. They also do not include proposals that already have been implemented. For instance, the recent creation of the Consortium for Complex Operations at the National Defense University addresses past proposals for a better interagency "lessons learned" capability, although some may argue that this capability would be better placed in the State Department or at USAID. They do not include proposals on foreign assistance reform, which is covered in a previous CRS report, CRS Report R40102, Foreign Aid Reform: Studies and Recommendations , by [author name scrubbed] and [author name scrubbed]. They also do not address "whole-of-government" reforms that bear on the success of activities and missions abroad, for instance, the need to commit adequate resources for a substantial period of time to achieve stabilization and reconstruction goals in post-conflict settings. As this report focuses on executive branch interagency reform, the tables do not include proposals for the reform of congressional oversight of interagency activities. This topic is covered in a broad sense in the section " Should Congressional Reform Accompany Other National Security Reform Measures? " above. In the tables, the language used for the proposal descriptions is generally an exact quote or a close paraphrasing of the proposal. Quotation marks are often omitted for clarity. These tables do not include recommendations that have already been implemented. This is far from an exhaustive list of all proposals by all individuals or organizations. Proposals were selected because they represent the types of proposals advanced, because they are issued by organizations and individuals with a recognized depth of expertise on the issues, or because they are significantly unique. Appendix A. Interagency Authorities and Structures The National Security Council (NSC) and National Security Staff Role in Policy Coordination Established by the National Security Act of 1947, the NSC is "the President's principal forum for considering national security and foreign policy matters with his senior national security advisors and cabinet officials," according to the White House website. The NSC also advises and assists the President on these matters and "serves as the President's principal arm for coordinating these policies among various government agencies," according to the website. The act specifically sets forth the NSC's "whole-of-government" coordination role, stating that the function of the Council shall be to advise the President with respect to the integration of domestic, foreign, and military policies relating to the national security so as to enable the military services and other departments and agencies of the Government to cooperate more effectively in matters involving the national security. The act also provides that the NSC, "for the purpose of more effectively coordinating the policies and functions of the departments and agencies of the Government relating to the national security," shall "consider policies on matters of common interest to the departments and agencies of the Government concerned with the national security, and to make recommendations to the President in connection therewith." The law does not specifically set "hands-on" coordination in the implementation phase as an NSC staff function. The law leaves wide discretion to the President in many areas. In particular, the NSC may perform "such other functions as the President may direct." NSC supporting units and staff are structured according to the President's design. And the President may appoint NSC members in addition to the statutory members. Because the law leaves the President great leeway in determining NSC and NSC staff size (subject to appropriations), functions, and organization, each Administration has used the NSC differently. Over time, the NSC staff (known as the "national security staff" or NSS) has taken on among its responsibilities "coordination of the interagency policy process and policy implementation follow-up," and "articulation of the President's policies to other departments." Nevertheless, the staff structure and its role in developing and coordinating policy among executive branch agencies varies from Administration to Administration, often depending on a President's relationships with department heads and the National Security Advisor, as well as a President's preferences and the management style of the National Security Advisor. The State Department's Responsibility for Oversight and Coordination The Secretary of State "plays the lead role in developing and implementing the President's foreign policy," and is entrusted under current statutes with primacy for ensuring the coherence of foreign assistance in support of that policy. The Foreign Assistance Act of 1961, as amended (FAA), provides that the Secretary of State, under the direction of the President, "shall be responsible for the continuous supervision and general direction of economic assistance, military assistance, and military education and training programs ... to the end that such programs are effectively integrated both at home and abroad and the foreign policy of the United States is best served thereby." Oversight and direction are not equivalent to coordination, however. This statutory language does not explicitly charge the Secretary of State or the State Department with responsibility for coordinating the implementation of U.S. foreign policy and foreign assistance. Instead, coordination responsibility is vested in the Secretary of State through other legislation or presidential orders, or a combination of those. For instance, the State Department, under the policy guidance of the Secretary of State, has primary responsibility for administering all development (broadly defined to include economic, political, and social aid) assistance. In 1992, Congress adopted legislation stating that "the Secretary of State shall be responsible for coordinating all assistance provided by the United States Government to support international efforts to combat illicit narcotics production or trafficking." Through National Security Presidential Directive (NSPD) 44, entitled Management of Interagency Efforts Concerning Reconstruction and Stabilization , President George W. Bush vested the Secretary of State with responsibility for coordinating and leading "integrated United States Government efforts, involving all U.S. Departments and Agencies with relevant capabilities, to prepare, plan for, and conduct stabilization and reconstruction activities." (The Secretary of State's relationship to DOD under this authority seems more limited. Somewhat ambiguously, the next sentence states that the "Secretary of State shall coordinate such efforts with the Secretary of Defense to ensure harmonization with any planned or ongoing U.S. military operations across the spectrum of conflict.") The State Department organizational structure includes four coordinating offices of highly differing scope. One office focuses on foreign assistance to Europe and Eurasia; another on HIV/AIDS assistance; a third on counterterrorism efforts around the world, usually on a regional basis; and a fourth on stabilization and reconstruction (S&R) activities throughout the world. The last of these was transformed into a bureau in late 2011. The Coordinators, that is, the heads of the first three of these offices, are equivalent in rank to an assistant secretary rank, and are confirmed by the Senate, but they report directly to the Secretary of State rather than through a State Department bureau. The President will nominate an Assistant Secretary for the new S&R bureau. This bureau was created in line with Obama Administration plans, outlined in the December 2010 Quadrennial Diplomacy and Development Review (QDDR), to upgrade the Coordinator offices on counterterrorism and on S&R—in an effort to make them more effective. (See below, the section on creating new agencies or arrangements.) Office of the Coordinator of U.S. Assistance to Europe and Eurasia Well before the call for interagency reform in complex contingency operations became widespread, Congress created two interagency coordinator posts in the State Department, one responsible for assistance to Eastern Europe and the other for assistance to the former Soviet Union. In 2001, these posts were combined into the State Department Office of the Coordinator of U.S. Assistance to Europe and Eurasia. This office oversees the bilateral economic, security, democracy, and humanitarian assistance provided by all U.S. government agencies to the 18 states of the former Soviet Union and Eastern Europe. This office reports to the Secretary of State through the Director of the Foreign Assistance (i.e., "F") bureau. Office of the U.S. Global AIDS Coordinator The Office of the U.S. Global AIDS Coordinator (OGAC) was established in 2003 by the United States Leadership against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 ( P.L. 108-25 ). Section 102(B)(i) of that act charges the Coordinator with "primary responsibility for oversight and coordination of all resources and international activities of the United State Government to combat the HIV/AIDS pandemic." Responsibilities include coordinating among all relevant executive branch agencies and non-governmental organizations, and dispersing funds provided under the U.S. President's Emergency Plan for AIDS Relief (PEPFAR). Office of the Coordinator for Counterterrorism (S/CT) The Office of the Coordinator for Counterterrorism (S/CT) "coordinates and supports the development and implementation of all U.S. government policies and programs aimed at countering terrorism overseas," according to its website. A major S/CT function is to facilitate and encourage interagency collaboration at the regional level, in particular to stimulate ideas for multi-country activities and provide a mechanism for integrating interagency programs. (Despite the use of the term "coordination" on the office's website, the actual function of the office appears to be encouraging collaboration, or voluntary cooperation, among agencies.) It also provides input to DOD counterterrorism activities, such as those conducted under "Section 1206" funding and the Combating Terrorism Fellowship Program (CTFP). However, the office does not have authority to compel other offices and agencies to develop, conduct, or participate in programs, nor a program budget to leverage or compel others to participate. Its origins date back to 1972, when the Office for Combatting [sic]Terrorism was established after the Munich Olympics terrorist attack. (According to the S/CT website, President Richard Nixon appointed a special committee which proposed that the State Department create an office to provide day-to-day coordination for counterterrorism activities and to develop U.S. government policy initiatives and responses.) In 1994, Congress provided a mandate for the Office of the Coordinator for Counterterrorism and defined the coordinator's role as being the principal adviser to the Secretary of State on international counterterrorism matters, and providing "overall supervision (including policy oversight of resources) of international counterterrorism activities." Bureau of Conflict and Stabilization Operations (formerly the Office of the Coordinator for Stabilization and Reconstruction) In mid-2004, the Bush Administration established the State Department Office of the Coordinator for Reconstruction and Stabilization (S/CRS). In December of that year, the office was provided with a congressional mandate (Section 408 of Division D, P.L. 108-447 ); in October 2008, its establishment was codified, along with that of the Civilian Response Corps and Reserve for which it is responsible (Title XVI, P.L. 110-417 ). (Civilian Response Corps active and standby members deploy at the request of regional bureaus and ambassadors to assist with strategic planning in conflict, post-conflict settings and states at risk of instability. The reserve component has never been formed.) In December 2005, through Presidential Decision Directive 44, the Bush Administration provided that the Secretary of State could delegate responsibilities for stabilization and reconstruction activities to the S/CRS Coordinator. In late November 2011, the State Department transferred S/CRS functions to a new bureau for Conflict and Stabilization Operations (CSO), as contemplated by the 2010 QDDR. The bureau is expected to play a greater role than S/CRS in developing policy and planning for missions, becoming " the institutional locus for policy and operational solutions for crisis, conflict, and instability," according to the CSO website. The head of CSO bureau, the Assistant Secretary for Conflict and Stabilization Operations, will also hold the title of Coordinator for Reconstruction and Stabilization. Other Agencies' Roles U.S. Agency for International Development (USAID) USAID is the U.S. federal government agency primarily responsible for administering civilian foreign aid and plays an important role in various interagency activities and missions. An independent agency, USAID receives overall foreign policy guidance from the Secretary of State. It describes itself as "the principal U.S. agency to extend assistance to countries recovering from disaster, trying to escape poverty, and engaging in democratic reforms." USAID programs support economic growth, agriculture, trade, global health, democracy, and conflict prevention throughout the world. USAID has a headquarters staff based in Washington, DC, of 2,255, and a staff overseas of 1,634, supplemented by 4,469 foreign nationals abroad. USAID often carries out its program through contracts or cooperative arrangements with private voluntary organizations, indigenous organizations, universities, American businesses, international agencies, other governments, and other U.S. government agencies. USAID is the lead agency in U.S. disaster relief and other humanitarian assistance. The USAID Administrator (the agency's head) leads interagency disaster relief efforts, which often include DOD and support from the Department of Agriculture. The USAID Office of Foreign Disaster Assistance's Disaster Assistance and Relief Teams (generally known as DARTs) are quickly deployed to a disaster area (after an initial assessment), providing trained specialists to assist U.S. embassies and USAID missions respond to disasters. Besides its state-building and economic development activities, USAID has long played a major role in U.S. state-building and other S&R efforts in conflict and in post-conflict settings from Vietnam forward. The USAID Office of Transition Initiatives (OTI), established in 1994, modeled itself as a rapid response unit after the DART teams. It has had a key role in S&R efforts, in the case of Iraq arriving in Baghdad "about the same time as the first U.S. troops." Other Executive Departments and Agencies Several executive departments have offices or agencies that work abroad and some have foreign service officers posted abroad whose work contributes to interagency efforts, particularly in stabilization and reconstruction missions. These include the Departments of Treasury, Agriculture, Commerce, Energy, Health and Human Services, Homeland Security, Justice, and Transportation. All but Treasury participate in the Civilian Response Corps (CRC) system under S/CRS. U.S. Chiefs of Mission (Ambassadors) and Embassy Country Teams In normal circumstances, U.S. Ambassadors overseas bear the greatest responsibility for ensuring the coordination of foreign assistance and foreign policy in the countries to which they are appointed. Under the U.S. Constitution, the President appoints Ambassadors with the advice and consent of the Senate. An Ambassador serves as the President's personal representative abroad. In addition, an Ambassador, or other civilian serving as a Chief of Mission (COM), has the sole authority to oversee U.S. foreign policy in individual countries. Some experts judge that the authority exercised by Chiefs of Mission "provides the President with the clearest and most forceful cross-departmental executive authority mechanism in use today." Section 622(b) of the Foreign Assistance Act of 1961, as amended, charges the Ambassador, or other responsible official, with the leadership role in ensuring coordination regarding foreign assistance programs, including U.S. military assistance, among government representatives in each country, under procedures prescribed by the President. Section 622(b) states: "The Chief of the diplomatic mission shall make sure that recommendations of such representatives pertaining to military assistance are coordinated with political and economic considerations, and that his [sic] comments shall accompany such recommendations if he so desires." The embassy "country teams," that is, the group in every embassy comprised of representatives of all U.S. departments and agencies present in a country, bear much responsibility for turning the President's broad foreign policy into concrete diplomatic measures and foreign assistance programs. The team operates under the direction and authority of the U.S. Ambassador or other COM. Country teams vary according to embassy size and U.S. interests in a country; some may include representatives from some 40 U.S. departments and agencies. In addition to State Department personnel, many embassies have personnel from at least the departments of Agriculture, Defense, Commerce, Homeland Security, and Justice, as well as USAID. Other departments represented may be Health and Human Services, Interior, Labor, Transportation, and Treasury. Individual agencies from these departments may also be represented on country teams. As codified by the Foreign Service Act of 1980 ( P.L. 96-465 , §207) an Ambassador (or other Chief of Mission) is charged, under the direction of the President, with "full responsibility for the direction, coordination, and supervision of all Government executive branch employees" within the country. This statute also requires that the Ambassador (or other COM) "shall keep fully and currently informed with respect to all activities and operations of the Government within that country," and "shall insure that all Government executive branch employees within that country (except for Voice of America correspondents on official assignment and employees under the command of a United States area military commander) comply with all applicable directives of the chief of mission." National Security Decision Directive (NSDD) 38 gives Chiefs of Mission the authority to determine the size, composition, and mandate of personnel operating under her/his authority. (Each Ambassador, upon assuming his/her post, receives a personal letter from the President spelling out similar responsibilities.) Nevertheless, the nature of Ambassadorial leadership and the use of country teams as integrative mechanisms varies greatly from country to country, according to observers. Much depends on the interest, knowledge, and management ability of the individual Ambassador, as well as his relationship with officials in Washington. Mechanisms to Integrate Civilian Perspectives into DOD Missions and Activities For nearly a decade, the U.S. military has attempted to incorporate an increasing number of civilians from other departments and agencies into its structures, by creating either new interagency groups or new posts for civilian agency representatives. (Note, the State Department has long assigned senior officials as Political Advisors or POLADs to the Geographic Combatant Command, or GCC, commanders.) Beginning in 2002, as discussed below, DOD began to reach out for further civilian input by requiring each GCC to set up a Joint Interagency Coordination Group that would function as an advisory body to the combatant commander, initially on counterterrorism issues. In 2004, a USAID Office of Military Affairs was established at USAID Washington, DC, headquarters, with liaison personnel sent to each GCC to advise on military activities with development implications. A more recent step was the creation of multiple civilian positions within some GCCs. In 2007, the U.S. Africa Command was set up as the model "interagency" command, with designated civilian billets. The U.S. Southern Command (Latin America and the Caribbean) and others subsequently increased civilian participation. Joint Interagency Coordination Groups (JIACG) For several years, GCCs have each hosted a JIACG, an advisory body composed of military personnel from all services and civilian personnel from a variety of agencies, usually numbering about one dozen. JIACGs were established through a memorandum from the NSC Deputies Committee in early 2002 instructing Combatant Commanders to implement the JIACGs concept. (At the U.S. European Command, the JIACG was named the Interagency Engagement Group.) Headed in most cases by a member of the federal Senior Executive Service (SES), the JIACG was designed to facilitate interagency information sharing for the operations and activities of the combatant commands and to enhance the understanding of civilian agency perceptions and activities within the commands. The initial focus of the JIACGs was counterterrorism. JIACG structures and tasks, as well as the use that the combatant commanders make of them, have evolved over time. Some observers express concern that JIACGs have not always fulfilled the civilian advisory function originally intended. Nevertheless, it seems difficult to generalize about JIACGs. Some are little used, some are used extensively, and some have been virtually subsumed under or replaced by other interagency arrangements (see below). USAID Office of Civilian-Military Cooperation In response to increasing concerns about possible conflicts between increasing U.S. military activities and sound development objectives, USAID established in 2005 an Office of Military Affairs (OMA) to provide input and oversight to U.S. military activities abroad. In November 2011, OMA was renamed the Office of Civilian-Military Cooperation. Under this office, senior USAID development officials are assigned to GCCs (see above) and to Pentagon offices. In addition, military liaison officers from the GCCs and from the Special Operations Command are assigned to USAID headquarters. Civilian Posts at the Geographic Combatant Commands While the JIACGs have operated outside the formal organizational structure of combatant commands, some GCCs have created new posts within the command's organizational structure for civilian personnel from other departments and agencies. This personnel augmentation includes senior USAID representatives that have been brought in through the USAID Office of Military Affairs, established in 2005, as well as civilians from other agencies. Two commands have become the most integrated: the U.S. Africa Command (AFRICOM) covering all of Sub-Saharan Africa, and the U.S. Southern Command (SOUTHCOM), covering Central and South America, as well as the Caribbean. According to DOD's June 2011 report to Congress on the organization of the GCCs, AFRICOM had 39 civilian "interagency" personnel assigned fulltime to its headquarters staff, with at least one from each of the civilian agencies relevant to its mission, while SOUTHCOM had 29 from 13 agencies. Both commands have also integrated senior civilian personnel into command leadership by establishing civilian "Deputy to the Commander" posts occupied by senior State Department foreign service officials, as has the U.S. European Command (EUCOM). EUCOM, which covers 51 countries including Russia and the countries of greater Europe, has incorporated its Interagency Engagement Group (i.e., its JIACG) into its command structure as an Interagency Partnering Directorate (currently lead by an Army civilian). As of the end of FY2011, EUCOM expected to have 13 interagency personnel at the command. The U.S. Central Command (CENTCOM), covering 20 states (Egypt, states on the Arabian peninsula, and in Central and South Asia), has "20 liaison members from other U.S. Government departments and agencies" working with CENTCOM staff. The report contained no information on interagency personnel within the staff structure of the U.S. Pacific Command (PACOM) and NORTHCOM. Other Interagency Mechanisms Interagency Task Forces Interagency cooperation for missions abroad has largely been accomplished through multi-agency task forces. Most often these task forces are pulled together in times of crisis or periods of transition when agency roles are not clear, and constitute the very ad hoc structures that are criticized as inadequate and dysfunctional. At the field level, these are sometimes referred to as "hastily formed networks." Established Task Forces There are long-standing task forces in two mission areas involving the protection of U.S. borders. Three task forces are organized under three GCCs to coordinate military and civilian counternarcotics, and in some cases counter-terrorism, efforts. Following Congress's 1988 designation of DOD as the lead agency for the detection and monitoring of aerial and maritime drug trafficking into the United States, DOD set up three task forces to combat drug trafficking. The purpose of the task forces was to coordinate the support and assistance that DOD provides to civilian law enforcement agencies under other authorities. In 1994, two of the DOD task forces served as the base for the establishment of two interagency task forces: the Joint Interagency Task Force-South (JIATFS) under SOUTHCOM in Florida (often pointed to as a model task force), and Joint Interagency Task Force West (JIATFWest) under the U.S. Pacific Command in Hawaii. JIATFS stated function is "to facilitate the interdiction of illicit trafficking and other narco-terrorist threats in support of national and partners' national security." JIAFTWest describes its mission as providing support "to law enforcement for counterdrug and drug-related activities." The third DOD task force, Joint Task Force North (JTFN) under the U.S. Northern Command, is not formally an interagency task force, but it is located at Fort Bliss, near El Paso, TX, near the civilian interagency Operation Alliance, a civilian task force of federal, state, and local civilian law enforcement agencies. JTFN (known as Joint Task Force North until 2004) coordinates activities along the southwest border and the Gulf of Mexico. It provides support to federal law enforcement agencies for counternarcotics and homeland security missions. Task Forces by Another Name The Provincial Reconstruction Teams (PRTs) that have operated in Iraq and Afghanistan may be considered a type of task force. These teams—which have consisted of 20 to 100 members—were first formed in Afghanistan in 2002, and then were established in Iraq in 2005. Members were drawn largely from DOD, the State Department, and USAID. The original concept was for the PRTs to be mixed civilian-military teams that would operate in Afghanistan's provinces, coordinating U.S. government support from civilian agencies to local authorities and providing a secure environment for aid agencies involved in reconstruction work in areas outside Kabul. PRTs were stood up first in Afghanistan and then in Iraq. Their purpose was to build basic infrastructure and to provide assistance, advice, and mentoring to provincial and local government and officials in a wide range of areas, including governance, political and economic development, rule of law, education and culture, and public health. Despite numerous problems—among them what many considered an initial disproportionate representation by DOD, given that civilian agencies at first could not provide the requisite personnel—the PRTs have persisted in Afghanistan. In Iraq, with the transition to a U.S. State Department lead for the U.S. presence there, the 15 PRTs were dissolved in FY2011. Their engagement, stabilization, and liaison functions are conducted through State Department civilian diplomatic posts , and other functions were turned over to Iraqi provincial and local governments. In addition, the interagency Civilian Response Corps (CRC) teams, mentioned above, may be viewed as a form of interagency task force. Although their assignments are still limited, CRC deployed personnel, often from two or more civilian agencies, work together as teams, developing data, conducting interviews, and stimulating the thinking of U.S. government employees in the field about approaches to conflict mitigation and resolution in their countries. Interagency Informal Arrangements Interagency collaboration may occur through informal arrangements developed by those responsible for program planning and implementation. For example, although legislation establishing the DOD Regional Counterterrorism Fellowship Program (CTFP) has no provision for State Department coordination or collaboration, DOD regularly consults with the State Department on CTFP programming. In Afghanistan, DOD and civilian personnel at the field level often have devised informal arrangements to better integrate their work. Appendix B. Proposals to Improve Strategy-Making, Planning, and Budgeting Many foreign policy and interagency reform analyses express concern that successive Administrations have done at best a fair job in integrating the various elements of foreign policy making and have not engaged at all in making strategy, that is, matching resources to policy decisions and priorities. In 2001, the United States Commission on National Security/21 st Century (Hart-Rudman Commission) flatly stated that "Strategic planning is largely absent within the U.S. government. The planning that does occur is ad hoc and specific to Executive departments and agencies. No overarching strategic framework guides U.S. national security policymaking or resource allocation." The Project on National Security Reform (PNSR) in 2008 described the United States' "inability to formulate and implement a coherent strategy" as corroding all governmental processes by "hindering planning, creating gaps, duplicating efforts, frustrating leaders, and encouraging ad hoc short cuts." Further, the PNSR historical case studies identified a link between poor strategy and policy formulation and deficient implementation, with the lack of clarity and unity at top levels fomenting rivalries and "stove-piping" at lower levels. The reasons PNSR cited for these problems at the leadership level ranged from the behavior of top leaders to insufficient information flows at the executive level. Many other analysts have also cited a need for systems and procedures to ensure the development of coherent strategy, guide planning, and bring to bear sufficient leadership and direction. In discussing civil-military operations to quell conflict, from initial intervention to the state-building phase, two experts pointed to three reasons for improving strategy, planning, and leadership that would hold true for many U.S. government missions and activities abroad. These are (1) the mutual dependence among agencies to carry out complex missions, (2) the contentious policy issues that can lead to problems in the field if not addressed at the outset, and (3) the shortages of personnel and other resources that demand their optimal use. From the Hart-Rudman Commission forward, many organizations and experts have advanced proposals to enhance or improve strategy-making and planning processes, including reforms at the NSC ( Table B -1 , Table B -2 , Table B -3 ), creating specific new strategy development processes and documents ( Table B -4 ), or making other changes to rationalize or enhance strategy development and planning ( Table B -5 ). Many have also recommended integrating national security budgets ( Table B -6 ) and/or improving budget processes ( Table B -7 ). The Obama Administration has two initiatives in the budgeting area. One is a request that Congress establish a Global Security Contingency Fund, providing a pool of integrated DOD and State Department funding for security assistance. Another is a plan for Ambassadors to participate in budget-making at the country team level. (See the section on integrated budgets, below.) In addition, State Department, United States Agency for International Development (USAID), and Department of Defense (DOD) planners have recently formed a "3D Planning Group" to improve their collaboration in planning. Modify National Security Council and Staff Roles, Responsibilities, Processes, or Structures Proposals for improving strategy-making and planning have centered on the National Security Council (NSC) processes and NSC staff. Policy and strategy-making for foreign policy and affairs is the prerogative of the President, normally conducted through the NSC and its staff, with the participation of DOD, the State Department, and other agencies. Nonetheless, the President and the NSC staff have been widely viewed for many years as so overwhelmed with the tasks of conducting day-to-day governance that the NSC cannot direct the processes of making coherent policy and strategy. Analysts offer differing solutions. Some would create new NSC staff positions ( Table B -1 ), new NSC staff structures ( Table B -2 ), or assign new responsibilities to the NSC staff ( Table B -3 ). This might require expanding the size of the NSC staff; alternatively, the President might delegate these functions to others. The composition of the NSC itself is largely set by statute, but it is the President's prerogative to determine NSC staff structure and size, subject of course to appropriations. Any substantial changes in staff size, or the creation of new NSC staff units or additional posts elsewhere to handle delegated functions would, through their budgetary implications, be a matter for congressional action. Nevertheless, any codification of size or structure, as mentioned above, may be considered impinging on a President's flexibility to structure the White House in accordance with circumstances and the capacity of available personnel. Create New Procedures to Facilitate Strategy-making and Planning Many proposals to make interagency missions more effective start with or include recommendations for new or improved government-wide, comprehensive strategy and planning reviews or documents. ( Table B -4 ) Such annual or periodic reviews and documents would serve to clarify agency roles and facilitate agency planning and mission integration. The proposals usually call for modeling the documents after improved versions of the President's National Security Strategy Report and the DOD Quadrennial Defense Review (QDR). Some proposals explicitly tie the creation of new strategy documents to the development of national security budgets. There also are a variety of other proposals to rationalize strategy development and planning capabilities and processes by creating new posts, mechanisms, procedures, or practices to facilitate coordination and oversight ( Table B -5 ). In an Obama Administration effort to integrate plans and budgets, Secretary of State Clinton said that Chiefs of Mission will play a role in integrating country-level strategic plans and budgets. At a February 2, 2011, meeting of Ambassadors (billed as the first annual Chief of Mission conference) the Secretary stated, "Each chief of mission will be responsible for overseeing an integrated country strategy that will bring together all country-level planning processes and efforts into one single multiyear overarching strategy that encapsulates U.S. policy priorities, objectives, and the means by which diplomatic engagement, foreign assistance, and other tools will be used to achieve them." Integrate National Security Budgets or Improve Budgeting Procedures Another significant perceived system deficiency is the current practice of budgeting by agency rather than by mission or goal. Many proposals would integrate agency budgets relevant to national security, either as a whole or for a specific sector ( Table B -6 ). Others seek to improve the budgeting process ( Table B -7 ). The concept of an integrated national security budget dates back at least to the 2001 U.S. Commission on National Security. The Commission faulted the budgeting process for its failure to make clear how the allocation of resources in agency budgets addressed national security goals, and to systematically consider tradeoffs in the allocation of those resources. It also noted the problem for congressional oversight from the absence of a unified budget. "At present, therefore, neither the Congress nor the American people can assess the relative value of various national security programs over the full range of Executive Branch activities in this area." Budgeting by agency can lead to duplication of efforts in some areas and gaps in others, as well as incoherent budget information on activities and missions undertaken by multiple agencies. Preparation of a full scale integrated budget would be a complex undertaking. It would involve the pragmatic exercise of bringing intellectual rigor to the concepts and programs involved. Potentially, it could also involve bureaucratic challenges over the appropriate allocation of missions, programs, and funds. Perhaps because of the complexity of preparing a fully integrated national security budget, the Commission on National Security proposed that the first of them "focus on a few of the nation's most critical strategic goals, involving only some programs in the departmental budgets." (The first strategic areas the Commission proposed for the initial document were homeland security, counterterrorism, nonproliferation, nuclear threat reduction, and science and technology.) Eventually, the Commission stated, the national security budget "could evolve into a more comprehensive document." That complexity may also explain why subsequent recommendations called for sector-specific integrated budgets or budget presentations (with proposals limited to security assistance, or counterterrorism), or greater transparency and combined decision-making on State, USAID, and DOD budgets in areas of overlap. Whether an integrated national security budget or integrated sector specific budgets will increase government efficiency and effectiveness may depend on what is meant by the term "integrated." The budget exercise of providing information on all U.S. national security accounts in one document may well bring more transparency. Funding could be totaled by mission areas, providing a comprehensive view of U.S. government spending in vital areas, such as counterterrorism, that is not now available. This could facilitate oversight. However, to achieve efficiencies and increase effectiveness by coordinating programs through shared cross-agency accounts may involve other changes. Reform of strategy and planning structures may be required to manage "blended" funds. Another drawback mentioned by some analysts are possible complications for Congress in handling integrated budgets under its current department and agency-centric committee system. The Budget Control Act of 2011 ( P.L. 112-25 ) provides Congress, through the Joint Select Committee on intelligence, with an opportunity to view the defense and international affairs budgets as a whole. This legislation consolidates the DOD, State Department, and USAID budgets, as well as others, under a comprehensive "security" category. This type of exercise in considering overlapping defense and international affairs spending may produce useful insights for future budget integration. The Obama Administration has endorsed the idea of establishing a full integrated national security budget and is taking preliminary steps to achieve that goal. In a May 2010 speech, Secretary of State Clinton noted that the Administration wanted "to begin to talk about a national security budget ... [where] you can see the tradeoffs and the savings." The December 2010 QDDR, as mentioned above, signals the Administration's intent to advance the discussion. A first step proposed in the QDDR was the pooled DOD-State Global Security Contingency Fund (GSCF). In December 2011, Congress provided authority for the GSCF in the FY2012 National Defense Authorization Act (Section 1207, H.R. 1540 , P.L. 112-81 , signed into law December 31, 2011). Proposed by the State Department as a three-year pilot project, the fund may make clear the degree to which associated changes are needed. Appendix C. Proposals to Enhance Civilian Authority, Institutional Arrangements, and Resources for Interagency Missions Abroad The predominant role of the Department of Defense (DOD) in missions and activities that some policymakers and experts (including some DOD and military leaders) argue would be better placed in civilian hands is often attributed to the weaknesses of civilian institutions and leadership. The weaknesses cited include inadequate authority, inappropriate structures, and insufficient civilian resources, especially personnel. Most of the studies surveyed for this report judged that leaving many of the "nation-building" or "state-building" tasks that DOD has assumed in military hands is problematic. (See the section, above, entitled " To What Extent Should the U.S. Military Provide Needed State-Building Capabilities? ") As a result, improvements to the existing civilian institutions and institutional authorities of the national security system, particularly the Department of State and its Secretary, have been the mainstay of many recommendations for interagency reform. Most often, the Secretary of State leads civilian efforts in missions and activities abroad, but, on occasion, the President looks elsewhere for a leader. The civilian alternatives to leadership by the Secretary of State and the State Department for interagency missions have also been viewed by some as unsatisfactory. Over the years, Presidents have routinely turned to the appointment of "czars" to head interagency efforts in a large number of areas of interagency cooperation. Although their offices offer a venue for interagency operations, the czars themselves often have not possessed the authority or ability to coordinate interagency operations. Further, some Members view "czars" as lacking accountability to Congress; the 112 th Congress expressly denied the Administration authority to fund such offices. (President Obama rejected the prohibition as an unconstitutional intrusion on executive branch prerogatives.) For certain activities and missions, Presidents may appoint "lead agencies" to coordinate interagency efforts. But lead agencies, including the Department of State when it plays this role, are often viewed as ineffective because their mandates to coordinate activities are not accompanied by the requisite authority and resources. Also, in some cases the lead agency's agenda and underlying assumptions may not square with those of other agencies. Thus, civilian agencies often have no incentive to divert personnel and funding for programs that do not further their core functions or otherwise serve their interests. Proposals to enhance civilian authority and institutions are numerous. Many proposals focus on increasing State Department capacity and authority ( Table C -1 , Table C -2 ); others would transfer some State Department stabilization and reconstruction (S&R) functions elsewhere ( Table C -3 ). Others would create new institutions or structures for S&R and other missions abroad ( Table C -4 ), create interagency task forces ( Table C -5 ), enhance civilian regional presence ( Table C -6 , Table C -7 ), and increase civilian interagency personnel capacity ( Table C -8 , Table C -9 , Table C -10 ). Obama Administration interagency reform plans and actions include (1) creating two new bureaus, one for conflict and stabilization operations and the other for counterterrorism; (2) establishing regional hubs; (3) better supporting the military Geographic Combatant Commands; and (4) increasing civilian personnel. These are discussed below. (Plans to enhance Chief of Mission authority are discussed in Appendix D .) Enhance State Department Authority and Capacity The Secretary of State is formally the lead civilian official for developing and implementing foreign policy and, through a patchwork of statutes and executive orders, has authority for a variety of ancillary roles. (See Appendix A .) The Secretary's ability to carry out all her responsibilities is severely constrained by a lack of appropriate authorities and organizational structures, adequate numbers of personnel with the appropriate skills, and a sufficient budget, according to many analysts. There is particular concern that the Department of State does not possess the capacity to take the lead in three key areas: counterterrorism, security assistance, and stabilization and reconstruction. In all three areas, Congress has been willing to provide DOD with authority and resources to carry out missions. Several of the studies surveyed recommend a wide variety of ways to enhance the State Department's ability to lead, coordinate, and conduct interagency missions and activities. These include a new authorities, new procedures, restructuring, and the cultivation of an "operational" ethos for interagency missions ( Table C -1 ). The State Department's ability to lead, coordinate, and conduct S&R missions is of particular concern, and several recommendations were specifically targeted at improving S&R capacity ( Table C -2 ). In 2011, the Obama Administration elevated the status and expanded the functions of two State Department offices coordinating interagency efforts: the Office of the Coordinator for Reconstruction and Stabilization (S/CRS), and the Office of the Coordinator for Counterterrorism (S/CT). As proposed by the 2010 Quadrennial Defense and Diplomacy Review (QDDR) and implemented after consultation with Congress, the Obama Administration created a new Conflict and Stabilization Operations (CSO) Bureau (incorporating S/CRS) and a new Counterterrorism Bureau. On the other hand, some analysts would neither expand nor enhance the State Department's stabilization and reconstruction (S&R) role. They view the State Department's culture, rooted in its core mission of diplomacy, as an insurmountable barrier that no restructuring, increases in personnel, or additional budgetary resources could overcome. Because an agency's core mission shapes recruitment and promotion selection criteria, some analysts argue that the State Department will never make effective use of personnel skilled at planning and conducting operational missions. Some of these analysts also doubt the State Department's ability to effectively oversee missions to prevent and manage conflict. Instead, they would build up the United States Agency for International Development (USAID) or create a new agency to manage operational and preventive missions ( Table C -3 ). Create New Agencies, Arrangements, Authorities Recently, concerns about the gaps in civilian structures to coordinate interagency missions—both steady state and extraordinary—have led some to argue for new arrangements at the national, regional, and field levels. At the national level, some argue for new S&R institutions or arrangements, independent of existing departments and agencies. Some have advocated the use of various interagency task forces, informed by the lessons learned from the various permanent and temporary U.S. government tasks forces, as the means to provide both much needed capacity, flexibility, and adaptability to respond to emerging situations. Some argue for improved regional arrangements. Create New Structures or Arrangements for S&R and Other Overseas Missions In addition to reforms proposed for the NSC (discussed above), several organizations and experts have recommended a reorganization of current responsibilities for dealing with fragile states, for preventing, managing, resolving conflict, or for operational missions abroad in general ( Table C -4 ). Some proposals would redistribute S&R responsibilities, enhancing the role of USAID or incorporating its offices into new combined State-USAID units. Those who propose enhancing USAID's position in S&R structures generally judge its agency focus and culture to be better suited to the operational nature of S&R missions than those of the State Department. Two would create an independent S&R agency; one would make it responsible to the Secretary of State (CSIS 2005), the other to the NSC (Special Inspector General for Iraq, or SIGIR, 2010). SIGIR argues that a new agency "would streamline decision-making and eliminate the 'lead agency' dilemma" that hinders interagency cooperation. The Contingency Operations Oversight and Interagency Enhancement Act of 2011( H.R. 3660 , introduced December 14, 2011) would create a new independent entity, the United States Office for Contingency Operations, reporting to the Department of State and DOD. H.R. 3660 proposes that the functions, personnel, and assets of S/CRS, and the USAID Office of Transition Initiatives, as well certain other S&R functions, personnel, and assets of State, USAID, DOD, and other agencies, be transferred to this new office. Establish New Interagency Teams or Task Forces? Proposals to create new agencies or other arrangements that entail new structures may well be costly, the source of a wide variety of unintended consequences, and subject to bureaucratic infighting. For those reasons, many may prefer the proposals to improve civilian coordination efforts through the tool of improved interagency teams ( Table C -5 ). There are a variety of interagency teams for missions abroad and domestic matters, as noted above ( Appendix A ), but information about how they function are notably lacking. Some may consider teams yet another "ad hoc" mechanism, providing a seeming flexibility at the cost of making the structural and capacity changes needed to create an enduring system for interagency cooperation. Some may view their prospects for success as subject to the same bureaucratic obstacles—resistance to sharing responsibilities, personnel, and resources—as the development of other new interagency structures. Improve Regional Structures and Capacity? A variety of proposals have called for improving regional structures and capacity, either by enhancing the current military Geographic Combatant Commands or by creating new civilian regional arrangements. Especially since 9/11, many analysts perceive that the threats to the United States emanating from non-state actors and the spill-over effects of conflict in one country to its neighbors often demand a regional policy response. Because of its robust military regional commands but relatively weak civilian regional structures, some analysts question whether the United States brings the appropriate leaders to the table for decision-making on regional issues and integrates civilian and military resources to respond effectively. Enhance the Military Geographic Combatant Commands (GCCs) Most reform at the regional level to date has focused on enhancing the GCCs. The U.S. Africa Command (AFRICOM), created in 2008 as a model for interagency organization as mentioned above, set the standard for civilian integration into military geographic commands. However, there has been continued work to improve the model, and about the time that command was created, RAND and the American Academy of Diplomacy offered further suggestions for enhancing civilian input into GCCs, as well as other DOD units ( Table C -6 ). Nonetheless, some analysts are skeptical that combatant commands will be able to attract sufficient personnel from civilian agencies to operate with the degree of interagency integration originally envisioned for AFRICOM. The Obama Administration pledged in the QDDR to support GCCs in a number of ways: making available senior Ambassador-ranked personnel as civilian deputies in addition to existing Foreign Policy Advisors, providing USAID high-level development advisors where appropriate, and, "consistent with personnel availability," detailing mid to senior-level State and USAID personnel to GCCs. Create New Civilian Regional Structures A few analysts advocate creating new civilian regional structures ( Table C -7 ). Some would make the military commands subordinate to them. While none of the think tank studies surveyed for this report advanced proposals for civilian regional "command," one study by an Air Force officer argues for new State Department-led regional-level interagency organizations. Two experts on interagency organization propose that Chief of Mission authority be expanded to provide appropriate leadership for civilian-led interagency teams that could be used at the regional level, as well as elsewhere. The Obama Administration, in the 2010 QDDR, states its intention to establish "regional hubs" in some embassies, creating a home base for personnel dedicated to regional programs in cross-cutting issue areas who will travel to posts throughout the region ( Table C -7 ). This is a key reform in its plan to improve the State Department and USAID ability "to think and act regionally." The QDDR states that regional hubs will offer "cost savings over deploying such experts to every bilateral mission." In a related action, the Administration stated it would improve regional communication among bilateral posts. It would also create a new State Department "regional forum" under the State Department Under Secretary for Political Affairs, where representatives from relevant agencies would "meet regularly to coordinate regional initiatives and proposals." Review and Augment Civilian Personnel Authority and Capacity Only a few studies surveyed here have explicitly recommended reviewing or increasing civilian personnel authorities and capacity. Some recommendations concerned State Department and USAID personnel ( Table C -8 ), some concerned interagency personnel in general ( Table C -9 ), and some concerned the interagency civilian response corps ( Table C -10 ). Nevertheless, the need for an expansion of civilian personnel involved in national security missions—especially State Department and USAID personnel—has been an implicit part of the entire interagency reform discussion. For many analysts, a primary goal is for the civilian agencies to emulate the DOD practice of hiring enough personnel to provide a "float," that is, sufficient excess capacity to allow personnel to engage periodically in interagency education and training without creating vacancies at posts. The Obama Administration's "Diplomacy 3.0" hiring plan to increase the number of State Department Foreign Service and Civil Service and USAID personnel is intended to provide such a float. According to a recent report, for the Foreign Service Officer corps, the State Department's goal is a 15% float, equivalent to that of the U.S. military. Appendix D. Proposals to Enhance Authority and/or Capacity of U.S. Ambassadors As the key locus of interagency coordination for steady state operations, the Embassy country teams under the leadership of an Ambassador (or other official delegated Chief of Mission authority) are uniquely responsible for the conduct of foreign policy. Given the great disparities that observers note in ambassadors' skills and knowledge to manage country teams and oversee the foreign assistance operations of an embassy, improving Chief of Mission (COM) capacity is crucial, according to many analysts. For those who view the "country teams" as the key element in diplomacy and foreign assistance in most circumstances, enhancing an Ambassador's authority, capacity, and control over funding is crucial. Some perceive this step as not only vital, but as an alternative to creating new structures. Over the years, there have been far fewer proposals to augment the authority and capacity of U.S. Ambassadors than for other aspects of interagency reform, and all are relatively recent. New or improved authority is viewed by some as but one possible step in increasing the capacity of U.S. Ambassadors to carry out their responsibility for coordinating foreign policy and foreign assistance ( Table D -1 ). Other possible steps are selecting potential Ambassadors and others in line for Chief of Mission posts for interagency experience, expertise, and inclination, and providing such personnel with adequate training in interagency matters ( Table D -2 ). Some may wish for progress at standardizing the education and training of potential ambassadors, and vetting candidates for skills at interagency collaboration and coordination, before enhancing ambassadors' authority over interagency resources. Proposals to increase COM authority over budgets related to embassy operations and over interagency personnel may be resisted by executive branch agencies. Some may question whether attention to interagency reform at the COM level is sufficient, particularly because many current problems are not bilateral, but require regional or global level attention. Table D -3 presents a unique option to expand COM authority in order to provide COMs with the power to lead, as "mission managers," interagency functional or regional teams or task forces. Some analysts are skeptical that new or improved authorities, structures, systems, training, or selection criteria per se will help an Ambassador overcome the pulls of agency interests and pressures on a country team if that Ambassador does not have support at appropriate times of officials in Washington. A key failing of the system, in the opinion of some analysts, can be the disregard of Ambassadors' authority and expertise within the State Department itself, and a lack of direct support for an Ambassador's position when necessary. The Obama Administration has announced its plans to strengthen the ability of Ambassadors and other COMS to perform their role. The State Department/USAID 2010 Quadrennial Diplomacy and Development Review (QDDR) casts Ambassadors as Chief Executive Officers or "CEOs" of multi-agency missions, not only conducting traditional diplomacy, but also leading and overseeing civilians from multiple federal agencies in other work. The QDDR highlights the key role of country teams and Ambassadors in the conduct of foreign policy and assistance, and sets forth ways in which the Obama Administration will try to improve the knowledge and skills of COMs and their ability to lead country teams. Civilian agencies "possess some of the world's leading expertise on issues increasingly central to our diplomacy and development work," the QDDR states. "The United States benefits when government agencies can combine their expertise overseas as part of an integrated country strategy," when "implemented under Chief of Mission authority, and when those agencies build lasting working relationships with their foreign counterparts." As discussed in Appendix B , Secretary of State Clinton has announced that Chiefs of Mission are to play a role in integrating country-level strategic plans and budgets. The authors of the proposal in Table D -3 predict that implementing it would be bureaucratically contentious, but would "facilitate clear roles and missions," empower good leaders "to be more consistently effective," and provide those charged with "weighty responsibilities" with "commensurate authority." Such an expanded COM authority could provide the President with an additional tool to use for interagency national security missions abroad. It could be used to address the gap, noted in Appendix C , in civilian regional authority. It could also provide an alternative to appointing "czars" or lead agencies. Some might argue that it could replace the need for revising structures and augmenting capabilities at the NSC, as it might alleviate burdens there, or at State Department or other civilian agencies. Nevertheless, as the authors note, it might be subject to bureaucratic pressures. Other analysts might argue that the proposal only adds a new layer of "adhockery" to the national security system. Appendix E. Proposals to Create Interagency Personnel Policies and Mechanisms The current interagency personnel system has few incentives, but many disincentives for U.S. civilian personnel to behave in ways that are conducive to interagency collaboration and coordination. Some civilian personnel may seek interagency missions as important and interesting work, attracted by the challenges of working under difficult conditions where innovation is required. Nevertheless, agencies do not encourage personnel to engage in interagency missions, according to many sources. Agencies generally feel that they are short on personnel for their core missions and generally do not wish to spare many people for interagency activities. Some analysts point to the difficulties that State Department Office of the Coordinator for Stabilization and Reconstruction (S/CRS) and the Geographic Combatant Commands have had in attracting civilian personnel from other agencies as a result of that disinclination. In addition, according to some analysts, agencies do not structure their personnel evaluation and promotion systems to provide credit for interagency work. Systems may penalize those who seek interagency operations because they have not advanced steadily up the agency's career ladder. Compounding the problem of agency disincentives are the cultural problems that can unnecessarily complicate interagency work. The great differences between the military and civilian cultures are often noted, but there are also significant differences among civilian agencies' cultures, for example, the perception of a fast-response operational culture within USAID compared to a slower, reflective State Department culture based upon its reporting and diplomacy functions—thus making certain agencies more suitable than others for some tasks. Others believe that the cultures can change over time, given the appropriate training and incentives for interagency missions. Meantime, some consider efforts to assist with helping personnel engaged in interagency missions to understand the cultures of other agencies an important interim step. Proposals for personnel reform are intended not only to provide incentives for interagency work, but establish the shared knowledge, skills, vision, and trust that some analysts argue is necessary for effective interagency performance. Many analysts consider the 1986 "Goldwater-Nichols" Act a model for the type of fundamental reforms needed to create a productive interagency environment. In October 1986, recognizing that the inability of the four U.S. Armed Forces to work together effectively was jeopardizing military operations, Congress passed the bipartisan Goldwater-Nichols Department of Defense Reorganization Act of 1986 ( P.L. 99-433 ). Among other reforms, this act created more powerful incentives for officers to broaden their experience by seeking formal education and assignments in an inter-service environment with the objective of creating a "joint" culture. Key among the Goldwater-Nichols changes were a requirement for joint education and training, safeguards to protect officers with "joint" experience to ensure they would be treated on a par with those without such experience, and a joint service requirement for promotion to general or flag officer rank. These reforms set the basis for inter-service cooperation and the evolution of "joint" military rather than service-specific loyalties and a "joint" culture. Some argue that Congress should provide similar legislation for civilian personnel, linking interagency education, training, and experience to job qualifications and rewards ( Table E -5 , Table E -6 ), as well as mandating and providing funds for additional education and training ( Table E -7 ) and interagency rotations ( Table E -8 ). Congress might also provide for increases in personnel to allow civilian agencies to create such opportunities while, like the military, maintaining full strength for core missions ( Table E -4 ). (A key difference between military and civilian personnel systems is the DOD excess capacity of about 10% more personnel than needed for day-to-day operations, known as the "float," to accommodate regular periods of education and training, among other service-related needs.) Congress could similarly mandate changes in training and education systems by establishing new schools or providing funds for increased interagency coursework at others ( Table E -10 , Table E -11 ). Others propose that Congress establish a national interagency professional corps, cadres, career track ( Table E -1 ) or senior executive service corps or cadre ( Table E -4 ), and protect interagency personnel during political transitions ( Table E -9 ). In the area of interagency personnel reform, the Obama Administration is slowly advancing the Bush Administration's National Security Professional Development program, which seeks to expand interagency education, training, and rotations. (Discussed below in the section on establishing a national security interagency corps, cadre, career track, or executive service, and referred to in Table E -2 .) Legislation currently before Congress, the Interagency Personnel Rotation Act of 2011 ( S. 1268 and H.R. 2314 ), would expand opportunities for interagency experience. Establish a National Interagency Professional Corps, Cadre, Career Track, or Executive Service The most far-reaching recommended changes to the current personnel system involve proposals to establish a national security corps or cadre ( Table E -1 ). A special corps or cadre, proponents argue, would foster the development of a group of federal employees whose loyalties are not principally to an agency or department, as has been the case until now, but to the other people and entities devoted to interagency missions. Although proponents believe that these proposals hold great promise for transforming the United States' ability to perform interagency missions, they may also be the most costly, involving the creation of new units and management structures. Depending on how the corps or cadre was structured and manned, these proposals may meet bureaucratic impediments. Some proposals would continue efforts to build an interagency cadre based on the existing National Security Professional Development program ( Table E -2 ). This program was established in 2007 by the Bush Administration under Executive Order 13434. It called for each agency with a national security function to create a program of interagency education, training, and rotations for its personnel. The program soon stagnated. In its 2010 report, the Project on National Security Reform (PNSR) cited several reasons for that stagnation: (1) sporadic leadership to improve human capital systems, (2) a lack of authority to direct an overall program, (3) unclear roles and responsibilities, (4) no common lexicon and poor communication among programs, (5) no direct funding source, (6) no defined metrics for system evaluation, and (7) a lack of coordinated congressional oversight. Some skeptics judge such agency-centric efforts unlikely to surmount numerous resource allocation and cultural issues. Early in his term, President Obama directed the NSC's National Security Staff to "reinvigorate" the National Security Professional Development program. Since then, 19 executive departments have participated in NSC-led efforts to define and draft a guiding strategy. The long-run goal, according to the 2010 Quadrennial Diplomacy and Development Review (QDDR), is to form a cadre of interagency professionals. As of 2011, the Obama Administration has launched a second iteration of this professional development program. This iteration is focusing on a single pilot program to enhance interagency cooperation in Emergency Management, leaving aside for the moment efforts to further develop interagency professionals for other national security matters. (Further information on Obama Administration activities can be found in CRS Report RL34565, National Security Professionals and Interagency Reform: Proposals, Recent Experience, and Issues for Congress , by [author name scrubbed], pp. 17-21.) Related proposals call for the development of a special interagency career track within individual agencies and departments ( Table E -3 ). Although participating personnel would remain with their agency or department, they would be considered "interagency" personnel available to be tasked for interagency missions. Advocates argue that as specially trained and experienced personnel, attuned to the capabilities and cultures of other agencies and the requirements of interagency missions, individuals in this career track would be effective in such missions at carrying out their roles, coordinating their activities with others, and representing their agencies. On the other hand, without the provision of an excess capacity "float," such a career track may well encounter bureaucratic resistance, as funding personnel in that track might divert agency funding from core missions. In addition, such "interagency" personnel may be perceived as secondary citizens within their home agencies, which still are dominated by people devoted to the core functions. A third set of proposals regards the creation of a senior executive interagency leadership cadre of personnel versed in the requirements of interagency missions ( Table E -4 ). Again, the effectiveness of members of this cadre may depend not only on their interagency experience and expertise, but also their ability to maintain close relationships with their home bureaus and departments when deployed. These proposals may all require new institutional arrangements. If personnel were to be grouped in new units formed outside existing agencies, they would require new budgets. Even if incorporated into existing agencies, the ability of such personnel to perform their tasks may well benefit from the establishment of separate budget lines, so that funds do not have to be squeezed from core functions to accomplish interagency missions. Link Interagency Education, Training, and Experience to Job Qualifications, Opportunities, and Promotion. Proposals to link interagency education, training, and experience to job qualifications, opportunities, and promotions ( Table E -5 , and for senior leaders specifically Table E -6 ) would be the most akin to the changes in the military personnel system mandated by the Goldwater-Nichols Act. As a result of changes initiated in 1986 under this act, soldiers, sailors, and airman remain in and retain their loyalties to their service, but enjoy opportunities for inter-service education and experience. Further, inter-service education and experience is required for their promotion to senior levels. These "joint" inter-service opportunities are widely viewed as contributing to continuing improvements in military missions. Nevertheless, for civilian personnel, the proposals are not always accompanied by the types of structural changes that also were legislated by Goldwater-Nichols, that is, the development of the inter-service Combatant Commands that plan, organize, and conduct all military activities and operations aside from service-specific personnel training and education. Also, given that analysts view the development of a joint service culture as still a work in progress, some may question whether such education, training, and experience opportunities are sufficient to create cohesive interagency units. Still, these practices may break down misconceptions and prejudices and help individuals understand the capabilities and operating cultures of other agencies, facilitating interagency relations at the field level, where analysts say many problems are worked out, even if they are not likely to create new loyalties and overcome "stove-piping." Expand Opportunities, Requirements, and Incentives for Interagency Education, Training and Professional Experience Over the years, many analysts have viewed enhancing interagency education and training ( Table E -7 ) and rotations ( Table E -8 ), as basic steps to more effective interagency missions. Some also find a need to protect interagency personnel during political transitions ( Table E -9 ). Enhance Existing or Create New Education and Training Institutions A few organizations have championed the idea of creating entirely new education and training institutions ( Table E -10 ). Others have argued for incorporating new courses and curricula into existing institutions ( Table E -11 ). Several U.S. government or government-funded institutions have inaugurated or increased interagency coursework; these include the Foreign Service Institute (FSI) and the National Defense University (NDU), as well as the Naval Post Graduate School, and the United States Institute of Peace (USIP). Some analysts judge these offerings still insufficient and urge continued work on expanding the curriculum at all institutions. Some would also try to tap into coursework at state and private educational institutions and consider whether such institutions might be encouraged to offer comprehensive coursework to meet the full range of interagency practitioner needs.

Within the past two decades, prominent foreign policy organizations and foreign policy experts have perceived serious deficiencies in the authorities, organizations, and personnel used to conduct interagency missions that prevent the United States from exercising its power to full advantage. For the 112th Congress, proposals to address these problems may be of interest for their perceived potential not only to enhance performance, but also to save money by streamlining processes, encouraging interagency cooperation, and reducing duplication. These proposals also provide context for current and recent legislation, including the Interagency Personnel Rotation Act of 2011 (S. 1268 and H.R. 2314) and the Contingency Operations Oversight and Interagency Enhancement Act of 2011 (H.R. 3660), as well as the new Global Security Contingency Fund contained in the FY2012 National Defense Authorization Act (NDAA, Section 1207, H.R. 1540, P.L. 112-81, signed into law December 31, 2011). The FY2012 NDAA requires the President to submit to Congress a "whole-of-government" implementation plan. Despite a growing perception during the 1990s that reforms were needed to foster interagency cooperation in missions abroad, it was not until the terrorist attacks on the United States of September 11, 2001, during the presidency of George W. Bush, and subsequent U.S. military interventions that the need became urgent enough to result in significant changes. The earlier first steps of the Clinton Administration toward interagency reform were in short order embraced and then expanded by the Bush Administration, which also implemented reforms of its own. The Barack H. Obama Administration has endorsed these changes and undertaken some of its own. Three problems with the current interagency cooperation system are most commonly cited. These are (1) a government-wide lack of strategic planning and interagency operational planning capabilities among civilian agencies; (2) a variety of structural deficiencies in the U.S. government for conducting missions abroad that lead to a tendency for "stove-piping" responses, with each agency operating independently, and to civilian agencies' reluctance to divert scarce resources, including personnel, from their core missions to interagency missions; and (3) personnel who are not trained for interagency missions and often unfamiliar with the missions, capabilities, and cultures of other agencies. This report draws on over three dozen studies with recommendations to improve the current national security system. The studies surveyed include three prepared by the Project on National Security Reform, with comprehensive recommendations, four prepared or co-sponsored by the Center for Strategic and International Studies (CSIS), and two by RAND in conjunction with the American Academy of Diplomats, as well as reports by the Council on Foreign Relations, the Defense Science Board, the National Defense University, and others. This report draws from these studies, as well as a few articles, for recommendations to improve strategy-making, planning, and budgeting; to improve institutional authorities, structures, and arrangements; and to create interagency personnel policies and mechanisms. As the breadth and variety of the recommendations indicate, there is no consensus on how to fix the perceived problems. Nor is there agreement among policymakers on a number of overarching questions: whether interagency reform is necessary for missions abroad, which proposals are considered highest priority, whether reforms would save money, and whether reform of congressional organization or procedures must accompany other national security reform measures.

Introduction The mission of the U.S. Geological Survey (USGS) is to serve the United States by providing reliable scientific information to describe and understand the Earth; minimize loss of life and property from natural disasters; manage water, biological, energy, and mineral resources; and enhance and protect the nation's quality of life. The USGS is housed in the Department of the Interior (DOI), and part of its mission is to provide scientific information to other agencies and bureaus within DOI. This information is used to manage land, fish, and wildlife resources under the supervision of DOI. More broadly, the USGS conducts domestic as well as international scientific activities related to global scientific and natural resource issues. The aim of these activities is to improve the effectiveness of the U.S. government to carry out domestic missions, address U.S. foreign policy and national security interests, and increase the competitiveness of the U.S. private sector in the global economy. The USGS conducts scientific activities under seven interdisciplinary mission areas: (1) water resources; (2) climate and land use change; (3) energy and minerals; (4) natural hazards; (5) core science systems; (6) ecosystems; and (7) environmental health. In the USGS accounts for appropriations, environmental health is combined with the Energy and Minerals mission area, and there is a Science Support and Facilities account. (See descriptions later in the report for more detail.) Within these program areas, the USGS relies on geologists, geophysicists, hydrologists, biologists, volcanologists, and cartographers, among others, to conduct research, monitoring, and data collection. USGS researchers often work in cooperation with other federal and state agencies, and in some cases with local cooperators, through agreements. Unlike other agencies within DOI, the USGS does not have authority to manage large tracts of public lands, nor does it have authority to construct infrastructure or modify waterways or habitat. Further, the USGS does not have regulatory authority under any statute. Congress has a broad interest in the activities of the USGS. Many scientific studies conducted by the agency affect areas of congressional interest. For example, the USGS conducts oil, gas, and mineral resource assessments that help Congress evaluate federal land use policy and provide broad-scale information for private-sector resource development. The USGS also collects data from large-scale ecosystems (e.g., Chesapeake Bay and the Great Lakes) that are used to inform ecosystem restoration initiatives. The agency also conducts large- and small-scale studies of water resources throughout the country, addressing both water quality and quantity, which assist decision makers at all levels of government that manage water use. Congress has been involved in the direction and oversight of the USGS since its inception and has enacted several laws that authorize its activities. The USGS has evolved to be one of the primary scientific agencies of the U.S. government, covering a broad range of scientific topics for multiple audiences in the federal, state, local, and private sectors. The expanded role of the USGS since its Organic Act, however, has caused some in Congress to question if study areas such as ecosystem science and coastal stewardship, among others, represent the best direction and best allocation of resources for the USGS. They note that the USGS Organic Act specifically addresses classifying public lands and examining geologic structures and mineral resources, but that current USGS mission areas are much broader. Others praise the USGS for being one of the foremost scientific agencies of the U.S. government, and note that conducting research in each of its mission areas (e.g., energy and mineral resources, water resources, climate change, and others) addresses many issues of broad importance to the United States. The broadened nature of the USGS mission since it was established may be a direct result of Congress diversifying USGS activities by expanding its authority in legislation. The Appendix of this report provides a chronology of authorizing legislation affecting the USGS. Because of recent congressional interest in the scope of the USGS mission, how it has changed since its inception, and how the agency is currently structured and funded, this report explores the evolution of the USGS since the USGS Organic Act in 1879 and its present structure. Table 1 provides a snapshot of current USGS appropriations, and Table 2 provides a chronology of some of the key developments in USGS history since 1879. Origin of the USGS The roots of the USGS existed before it was officially created and authorized as a federal agency in 1879. The Louisiana Purchase in 1803 and subsequent territorial acquisitions necessitated that mapping and surveying land in the United States be a priority of the federal government. Mapping was critical for classifying lands, organizing the distribution of lands, and securing the frontier. Various government entities participated in mapping throughout the 19 th century, and these efforts were later integrated, in part, within the USGS. State and federal involvement in geology also contributed to the creation of the USGS. States created geological surveys to foster internal improvements and develop natural resources. Some note that the state-run geological surveys resulted from an interest in mining for gold and other precious metals. The creation of the USGS was prompted in part by a report by the National Academy of Sciences that provided recommendations for surveying various topographical and geological aspects of the United States. Among other things, the report called for the creation of three new bureaus under DOI, of which one was the USGS. The primary purpose of the USGS, according to the report, would be to study the geological structure and economic resources of the United States. Largely based on this report, Congress authorized the creation of the USGS in an appropriations bill, named the Sundry Civil Expenses bill, passed on March 3, 1879, which became known as the USGS Organic Act. The act established the USGS to classify the public lands and examine the geological structure, mineral resources, and products within the national domain. A key excerpt from the act stating the authority of the Director of the USGS states: The Director of the United States Geological Survey, which office is established, under the Interior Department, shall be appointed by the President by and with the advice and consent of the Senate. This officer shall have the direction of the United States Geological Survey, and the classification of the public lands and examination of the geological structure, mineral resources, and products of the national domain. The Director and members of the United States Geological Survey shall have no personal or private interests in the lands or mineral wealth of the region under survey, and shall execute no surveys or examinations for private parties or corporations. The USGS Organic Act specifically authorized the examination of the geological structure and mineral resources of the nation, but did not specifically address water resources, ecosystem resources, natural hazards, and climate change, all of which are current mission areas in the USGS. Some have argued that "products of the national domain" could include water and ecosystem resources, but the intent behind the definition and scope of the word "product" was not specified in the authorizing language. The first Director of the USGS, Clarence King (1879-1881), apparently sensed that the mandate for the USGS was broad and established a framework for USGS activities. He stated that Congress intended the agency's mission to include a classification of all public domain lands, and later attempted to expand the scope of the USGS from a western focus to include the entire United States. King also led USGS efforts to establish and implement a mining geology program to collect mineral statistics in the western states. Changes to the Authority of the USGS and Scope of Its Activities The interpretation and application of the authorities in the USGS Organic Act were molded by subsequent actions of its directors and by Congress. Further, the scope of the USGS was expanded by administrative decisions and laws that directly or indirectly authorized many current activities. (See Figure 1 for an illustration of key authorities and transitions for the USGS since 1879; see Table 2 for a chronology of specific events.) Starting with its first Director, discussed above, the USGS defined and changed the scope of the agency beyond its initial implementation of the 1879 Organic Act. For example, under its second Director, John Wesley Powell (1881-1894), the USGS broadened its work to include topographical mapping, paleontological studies, and stratigraphic studies to support the geological mapping program. The shift toward topography at this time was short-lived, however, as the budgets of the USGS and other federal science agencies were reduced substantially in the early 1890s. The USGS subsequently broadened its role to aid any industry (not just the mineral industry) in the knowledge and application of geology under its next director, Charles Walcott (1894-1907). USGS involvement in water resources, including the deployment and monitoring of streamgages, was also initiated under Wolcott's Administration. In addition to actions of the USGS Directors, Congress authorized and appropriated funds for certain projects and initiatives that defined and changed the scope of the USGS. Further, Congress passed laws that directly amended the Organic Act to expand the scope of the USGS. For example, the Organic Act was amended in 1986 to authorize the USGS to conduct projects in cooperation with other federal, state, and private entities. Congress also authorized specific projects, which later expanded into program areas within the USGS. For example, efforts to study water resources by the USGS began in 1888 with an authorization by Congress to study the irrigation capacity of arid regions of the United States. This study identified areas where irrigation was necessary for agriculture; investigated water storage behind dams; measured streamflow; and designated sites that had the potential for reservoirs, canals, and ditches for irrigation purposes. This congressional authorization marked the beginning of USGS involvement in water resource studies of the United States. Ecosystem studies in the USGS derived from the incorporation of biological studies into the USGS mission in 1996. In 1994, all of the biological research functions from all of the bureaus within DOI were consolidated into a new bureau, the National Biological Survey (NBS). The intent behind the NBS was to have an independent science agency to conduct research in a manner that insulates the science from those who manage federal lands and draft government regulations. Scientists from DOI agencies were transferred to this new bureau, mostly coming from the Fish and Wildlife Service (FWS). Some argued that the NBS would distance scientists from the political pressures facing DOI agencies, and that the NBS would give visibility to research being conducted within DOI and reduce overlap of DOI research. However, in 1996 this bureau (then called the National Biological Service) was moved into the USGS and named the Biological Resources Division (BRD). The transfer of NBS to the USGS was intended to encourage the independent nature of scientific research. Further, according to the conference report for P.L. 104-134 , the BRD was to pay attention to "wildlife resources entrusted to the stewardship of the Department; fisheries, including restoration of depleted stocks; fish propagation and riverine studies; aquatic resources; nonindigenous nuisances that affect aquatic ecosystems; impacts and epidemiology of disease on fish and wildlife populations; chemical drug registration for aquatic species; and effective transfer of information to natural resources managers." The BRD was transformed during a 2011 reorganization and became part of the Ecosystem program area. The general framework of independent scientific research stayed in place. The scope of USGS activities also has expanded in response to domestic and worldwide events. During both world wars, USGS activities broadened to include searching for strategic minerals and improving topographic maps. In the 1920s, energy shortages prompted Congress to direct the USGS to determine the known geological structure of producing oil and gas fields so that leases could be issued. This activity followed the enactment of the Mineral Leasing Act of 1920, which authorized the federal government to issue mining leases on federal lands. In 1964, a 9.2 magnitude earthquake in Alaska prompted USGS scientists to participate in a task force that guided rebuilding efforts. Consequently, the USGS Center for Earthquake Research was established in Menlo Park, CA, during that same year. The scope of scientific work done by the USGS expanded beyond U.S. borders several times during its history. Amendments to the Organic Act in 1962 stated that the Secretary of the Interior is authorized, through the USGS, to conduct scientific activities outside of the national domain, when it is determined by the Secretary to be of the national interest. For example, international work currently conducted by the USGS includes addressing scientific and technological issues associated with climate variation, providing global petroleum and mineral resource assessments, and monitoring natural disasters such as volcanic eruptions, flooding, and earthquakes. Despite an increase in the scope of its authority and activities, on several occasions the USGS has shed some responsibilities and activities. In some cases, departments within the USGS have splintered off to form separate federal agencies and bureaus. For example, the U.S. Reclamation Service was originally established within the USGS under the authority of the Reclamation Act of 1902. The Reclamation Service studied potential water development projects in each western state with federal lands. The Service became the Bureau of Reclamation in 1907 when work under the Reclamation Act progressed from planning to construction. Other examples include the U.S. Bureau of Mines and the U.S. Forest Service, which were both derived from USGS functions. In 1982, part of the USGS staff and operating budget were reorganized and formed the separate Minerals Management Service (MMS), reorganized again following the Deepwater Horizon oil spill to become the Bureau of Ocean Energy Management (BOEM), the Office of Natural Resources Revenue (ONRR), and the Bureau of Safety Environment and Enforcement (BSEE). 2011 Reorganization of the USGS Most organizational changes to the USGS throughout the 20 th and 21 st centuries have been confined to specific departments and programs. However, in 2011 the USGS reorganized its science programs into interdisciplinary program areas related to those outlined in the USGS 2007-2017 Strategic Plan. The USGS shifted to interdisciplinary mission areas, including Ecosystems; Climate Variability and Land-use Change; Energy and Minerals; Environmental Health; Natural Hazards and Risk Resilience Assessments; Water Resources; and Informatics and Data Integration. In addition, the USGS created an office for science quality and integrity. (See Figure 2 .) The justification for realignment was to reduce barriers in the budget and management structure of the USGS that hindered the interdisciplinary nature of problem solving. The realigned program areas represent interdisciplinary entities that are intended to reflect the best structure for solving current natural science challenges, according to the USGS. Further, the realignment was intended to facilitate collaboration among various departments and programs within the USGS and increase collaboration across geographic boundaries among management. Organizational Structure of the USGS USGS activities are organized under seven interdisciplinary mission areas that cover (1) water resources; (2) climate and land use change; (3) energy and minerals; (4) natural hazards; (5) core science systems; (6) ecosystems; and (7) environmental health. In its budget request, USGS also includes Science Support and Facilities under its mission areas. The following sections provide an overview of the responsibilities for each mission area, as well as the Science Support and Facilities program areas. Ecosystems —Under this mission area, scientists investigate how ecological and geological processes affect the structure, function, and resilience of ecosystems. Many studies are regionally based in ecosystems such as the Chesapeake Bay, Great Lakes, and Florida Everglades. Other studies are national in scope. Authority for conducting activities under the Ecosystem program area is derived largely from laws that authorize the Secretary of the Interior to conduct research on recreation, and fish and wildlife issues. Water Resources —This mission area covers scientific activities that involve collecting, assessing, and disseminating hydrological data; and analysis and research on hydrological systems and methods for water conservation. This program contains the National Streamflow Information sub-program and the Cooperative Water sub-program, both of which fund streamgages throughout the nation. Climate and Land Use Change —This mission area is split into several components that collectively provide science to inform policy makers and stakeholders on the effect of climate and landuse change on natural resources within the United States. The mission area covers five sectors including National Climate Change and Wildlife Science Center and DOI Climate Science Centers; climate research and development; carbon sequestration science; land remote sensing; and land change science. Work in this area reflects the DOI Strategic Plan goal for providing science to address ecosystem, landuse, and climate effects on resources. The Land Use Change subprogram enables users to access and use Earth observation imagery collected via satellites. Energy and Minerals —This mission area includes research and assessments on the nation's mineral and energy resources. There are two components within this program area: mineral resources and energy resources, Within this context, scientific activities address how energy and mineral resources influence landscape, water, climate, ecosystems, and human health. Environmental Healt h —This mission area addresses the relationship between environmental and human health and the physical environment. Specifically, contaminant biology and toxic substances hydrology are two sub-programs. The contaminant biology sub-program reflects the goal to understand energy and mineral resources in the context of the life cycle of the energy or mineral commodity. Interactions between ecological processes, geological processes and contaminants and pathogens are studied under this area. Studying the effects of toxic chemicals on fish reproduction and the effect of insecticides on honeybee die-offs are examples of work done under this mission area. Natural Hazards —This mission area provides scientific information and knowledge necessary to address and mitigate the effects of natural hazards such as volcanic eruptions, earthquakes, storm surges, and landslides. The Coastal and Marine Geology sub-program addresses the coastal effects of natural hazards, such as the impacts of hurricanes and tsunamis on the coast, and the effects of rising relative sea level on coastal ecosystems and communities. Core Science Systems —The Core Science Systems program provides data in a geospatial framework for managing resources and planning for natural hazards. Science Support —This budget area includes funding for administrative activities and information needs. Some examples include education services and the evaluation of science quality and integrity. Facilities —The Facilities budget area includes funding for sites where USGS activities are housed—offices, laboratories, storage, parking, and more—as well as eight large research vessels. FY2015 Budget for the USGS The FY2015 budget request for the USGS was $1.073 billion, which was $41.3 million more than the FY2014 enacted level of $1.032 billion. The House Interior, Environment, and Related Agencies Appropriations Committee reported an Interior, Environment, and Related Agencies Appropriations Bill for FY2015. The USGS would receive $1.036 billion under this reported bill; this would be approximately $3.7 million over the FY2014 enacted amount and $37.6 million less than the Administration's request. (See Table 1 .) The Administration requested increases compared to the FY2014 enacted amounts for all USGS programs except for Science Support, which would receive a $2.4 million decrease, and Natural Hazards, which would receive flat funding. For the Ecosystems program area, there was an increase of approximately $10.8 million, including an increase of $4.0 million for the Invasive Species sub-program. Further, there was a requested increase of $18.4 million for the Climate Variability sub-program, including an increase of $11.6 million for Climate Science Centers administered by the USGS. The USGS is charged with implementing and maintaining the National Climate Change and Wildlife Science Center (NCCWSC) and its regional entities—referred to as the DOI Climate Science Centers (CSCs). These centers support research, assessment, and synthesis of global change data for use at regional levels. The CSCs aim to evaluate global climate change models at scales that are appropriate for research managers of species and habitats, and facilitate data integration and outreach to collaborators and stakeholders, including federal agencies. For FY2015, the Administration proposes to use the centers to conduct adaptation planning for issues such as sea level rise and drought, as well as work with tribal communities, and to create a system for facilitating adaptation coordination among agencies. The House reported bill proposed small increases or flat funding for all USGS programs compared to the FY2014 enacted level except Core Science Systems and Science Support, which would be decreased by $0.5 million and $2.7 million, respectively. The largest difference between the House reported bill and the Administration's request was for the Climate Variability sub-program. The Administration request of $72.0 million for the Climate Variability sub-program is $18.4 million above the FY2014 level; the House reported bill would be $3.0 million above the FY2014 level. (See Table 1 for more details.) Historically, appropriations for the USGS rose dramatically after the Second World War, and peaked in inflation-adjusted dollars in the late 1970s ( Figure 3 ). Funding for the agency rose again in the 1990s, but has yet to reach its peak funding level (inflation-adjusted). Issues for Congress This section reviews some selected issues related to the USGS that have been of interest to Congress. Mission of USGS Some in Congress contend that the mission of the USGS has expanded beyond the scope of its organic act to the detriment of its original focus on geology and resources. They note that with competing interests, such as ecosystem research, potentially less funding and effort is devoted to traditional USGS endeavors such as assessing energy supplies. In contrast, some others note that the USGS has expanded its scope due to congressional direction in terms of authorities and allocation of funding. Further, they note, the mission of the USGS has changed over time to reflect the needs of the country. For example, Ecosystems Program Area, created in the 2011 reorganization within USGS is targeted toward integrating the cross-disciplinary nature of USGS ecosystem related studies into one mission area to serve the scientific needs of large-scale ecosystem restoration initiatives, some of which have been authorized by Congress. However, critics of this expanded USGS mission contend that ecosystem based research should not be a focus of USGS; rather, research on fish and wildlife and their habitat should be the responsibility of other agencies such as the U.S. Fish and Wildlife Service (FWS). The USGS role as the scientific agency within DOI was partly defined by the need to separate scientific inquiry from regulatory responsibility. Stakeholders did not want scientific results to come from the same agency that has regulatory responsibilities. The USGS role as the primary scientific agency has continued to evolve. Ecosystem level scientific studies that relate to restoration, habitat assessment, and species survival that are integral to DOI's mission, some contend, should continue to be the responsibility of the USGS. Another distinction between research at USGS and other government entities is that USGS conducts science in support of natural resource management versus managing natural resources, a priority for FWS and other DOI agencies. Some contend that the role of USGS as the scientific agency of DOI might be eroding due to the expansion of scientific expertise and programs within other DOI agencies. For example, FWS has a science support program area that the Administration is attempting to increase. In the FY2015 Administration's request, $31.6 million is proposed for Science Support under FWS, almost double the amount of funds appropriated to this program in FY2014. Increasing the scientific capacity of FWS might weaken the argument that the USGS is the scientific agency for DOI and some might question if FWS and USGS scientific efforts are overlapping or coordinated in certain mission areas. A related question is how USGS balances its efforts among program areas and whether certain program areas should have greater resources than others. While the allocation of funding for programs under USGS is a responsibility of Congress, USGS does address the issue of balance through a process for framing and guiding its research. Approximately every 10 years the USGS creates a Science Strategy to guide its scientific efforts. The latest strategy was created in 2007 and extends through 2017. This strategy formed the basis for reorganizing the USGS from its traditional discipline-based program areas to interdisciplinary program areas in 2011. The question of whether USGS is overreaching its authorities in conducting scientific activities in nontraditional subject areas might be answered through an analysis of congressional authorizations for USGS activities. (See Appendix for citations and descriptions of selected USGS authorities.) While the Organic Act provides the Director with broad authority, USGS has interpreted this language as providing flexibility to carry out a wide variety of scientific activities that address issues of national significance. Further, some USGS activities not directly specified by law are considered complementary to DOI actions and activities authorized under law. The DOI agency support role for the USGS has allowed the agency to conduct many activities or initiatives that are not specifically authorized by law, but instead are initiated by the Director or the Secretary of the Interior. For example, the USGS is participating in the DOI Powering Our Future Initiative by supporting agencies responsible for alternative energy permitting and developing methodologies to assess the impacts of wind energy, among other things. Streamgages The USGS maintains a network of over 8,000 streamgages that monitor streamflow throughout the country. These streamgages monitor water flow and quality and aid in the collection and retention of streamflow data for the nation. Streamgage data have many applications including measuring flows to manage water supplies for urban, agricultural, and municipal water uses; measuring flows for assessing flooding or drought events; measuring water quality; and providing data to help inform compact or treaty requirements; among other things. Streamgages are funded through the USGS National Streamflow Information Program (NSIP), the USGS Cooperative Water Program, other federal agencies and over 800 state and local funding partners. (See box below for the most recent authorizing legislation concerning streamgages.) The NSIP was formed in 1999 by the USGS to consolidate and better manage the network of approximately 3,086 streamgages that are funded completely by the federal government. Other streamgages are cooperatively funded with other stakeholders and are administered through the Cooperative Water Program (CWP) of the USGS. This program is a partnership between the USGS and approximately 1,400 state, local, and tribal agencies. The USGS and its cooperating parties sign joint-funding agreements to share the cost of specific data collection and investigations undertaken by the USGS. Some streamgages are partially funded by other federal agencies, including the U.S. Army Corps of Engineers and the U.S. Bureau of Reclamation. Funding streamgages is a perennial challenge for the USGS. Each year, there is a mix of certain streamgages that are proposed for discontinuation and other streamgages that are proposed for construction. Stakeholders that rely on streamgages which are proposed for discontinuation usually petition the USGS or cooperative entities to continue to fund the streamgages. An underlying question for the program is how many resources should be devoted to the NSIP streamgage network versus the Cooperative Water Program streamgage network. For FY2015, the Administration has requested an increase of $1.2 million for the NSIP, but a decrease of $3.3 million for the Cooperative Water Program. This could indicate a slight shift to fortifying the national network of streamgages and monitoring from cooperative efforts. In several cases, cooperative efforts to administer streamgages were discontinued due to the stakeholders not providing sufficient funds to support the streamgages. While there does not appear to be opposition to streamgages in Congress, the question remains of how much funding should be allocated toward maintaining streamgages and a streamgage network. Long-Term Continuous Observation: The Example of Landsat Landsat satellites record and transmit space-based images of the Earth's land surface. The Landsat program represents the world's longest continuously acquired collection of land remote sensing data. Stakeholders working in fields such as agriculture, geology, forestry, regional planning, education, mapping, emergency response and disaster relief, and global change research use Landsat data. Landsat is a joint initiative between USGS and the National Aeronautics and Space Administration (NASA). On February 11, 2013, NASA launched Landsat 8, a remote sensing satellite jointly operated by the USGS and NASA that represents the latest in a line of Earth-observing satellites that first began on July 23, 1972, with the launch of Landsat 1. In the current partnership, NASA develops the satellite and the instruments, launches the spacecraft, and checks its performance. After it is launched, USGS takes over satellite operations and manages and distributes the data. All Landsat data held in the USGS archive are available for download with no charge and with no restrictions. Since 1972, Landsat satellites have continuously gathered land imagery from space using several instruments mounted on the satellite. The instruments have generally improved in capability with the launch of each successive mission, and the resulting imagery data provide a long-term record of natural and human-caused changes to the Earth's land surface. Currently two satellites—Landsat 7 and Landsat 8—orbit the Earth at an altitude of 438 miles and complete 14 full orbits each day and cross every point on Earth once every 16 days. Landsat 7 carries an instrument called the enhanced thematic mapper, which captures visible, near-infrared, shortwave infrared, and thermal radiation reflected back from the Earth's surface. These observations allow users to distinguish soil from vegetation, and deciduous from coniferous trees; estimate peak vegetation; discriminate soil moisture content; and provide other information about the land surface. Landsat 8 carries two instruments: an operational land imager, which observes many of the same bands of radiation as Landsat 7 but with improvements; and a thermal infrared sensor as well. The record of continuous observations by Landsat satellites over 40 years means that users can identify land-cover changes that happen slowly and subtly and are revealed by comparing current observations against those decades ago, like changes in the course of a river; and those that occur rapidly and devastatingly, like a volcanic eruption. The long-term comparability of observations is generally considered a prime value of the Landsat program. Some would also argue that the no-cost data policy for Landsat imagery is also a prime value of the program, but the current no-cost policy does not reflect the varied history of the program and earlier attempts to privatize Landsat. In addition to recurring interest in privatizing or commercializing Earth observing satellite data, such as Landsat, other issues regarding the future of Landsat may be of interest to Congress. A perennial question would be whether the value of the imagery to its user community is worth the cost and effort of designing, building, launching, and operating the next Landsat satellite. Typically the timeline from design and planning to launch and operations takes years, sometimes approaching a decade or longer. Also, are there other sources of moderate resolution remote sensing data similar or comparable to Landsat available from other satellites operated by other countries? If so, what would be the advantages and disadvantages of acquiring data from those sources, versus a U.S.-built and operated satellite? Part of that discussion would necessarily include an evaluation of the intrinsic value of 40+ years of continuous observations from a series of comparable satellites and instruments—unique to Landsat—and what would be the consequences of terminating that long-term record. Natural Hazards Several natural disasters have hit the United States in recent years, ranging from hurricanes to drought. These disasters have generated congressional interest in the science behind natural hazards and efforts to mitigate their effects and predict their occurrences. The Disaster Relief Act of 1974 ( P.L. 93-288 , also known as the Stafford Act) gives authority to federal agencies to issue disaster warnings. The Stafford Act and other statutes provides the USGS with the authority to issue warnings on geologic hazards, such as earthquakes, volcanic eruptions, and landslides. The Earthquake Hazards Reduction Act of 1977 ( P.L. 95-124 ) and subsequent laws established the National Earthquake Hazards Reduction Program (NEHRP), that authorizes the USGS to improve the basic understanding of earthquakes and characterize national earthquake risks, which are published as seismic hazard maps and used in support of building codes, among other applications. Under its Natural Hazards Program area, the USGS pursues activities for other natural hazards, such as volcano hazards, landslide hazards, floods and droughts, and wildfire hazards. Arguably, the Organic Act provides authorization for these activities under the language directing the Survey to "... examine the geological structure ... of the national domain." All of the types of natural hazards addressed by the USGS have some fundamental relationship to geological structure, some perhaps more clearly than others. Slip along geologic faults is the primary mechanism for earthquakes, and movement of magma in the Earth's crust leads to volcanic eruptions. Floods, droughts, and wildfires may be less clearly linked to underlying geologic causes. Ultimately, however, the motion of tectonic plates around the globe is responsible for the modern arrangement of the continents and oceans, which in part leads to weather and climate patterns, the underlying reasons for causing floods and droughts. The USGS has investigated the geological aspects of natural hazards for a large part of its history. For example, the USGS has managed the Hawaiian Volcano Observatory (HVO) continuously since 1947, and also managed the HVO between 1924 and 1935. The United States has 58 historically active volcanoes, mostly in Alaska, Hawaii, and the Pacific Northwest. The USGS is also active in monitoring earthquakes and volcano hazards worldwide. For example, the Global Seismic Network (GSN), comprising over 150 seismic stations, is distributed globally to provide a permanent network of seismometers that help provide earthquake locations, information for earthquake hazard mitigation, and earthquake emergency response. The GSN works with the International Monitoring System which is part of the monitoring organization that ensures compliance with the Comprehensive Nuclear Test Ban Treaty. Prior to the GSN, the USGS funded the development and deployment of the Worldwide Standardized Seismographic Network in the early 1960s, which served research purposes as well as for treaty monitoring of nuclear testing. Some of the advances in modern global seismology emerged from the effort to monitor underground nuclear explosions beginning during the Cold War. Induced Seismicity One relatively recent addition to the natural hazards responsibilities at the USGS is how to deal with what is known as "induced" seismicity. The issue of induced seismicity has gained national attention because of its possible links to the deep-well injection and disposal of wastewaters from oil and gas operations. The number of deep disposal wells has spiked over the past 5-10 years because of the increase in the number of unconventional wells, namely shale gas and shale oil that benefitted from the process of hydraulic fracturing to recover oil and gas that was previously unrecoverable in economic quantities. (See text box, below, for a description of hydraulic fracturing and induced seismicity.) A challenge to the USGS seismic hazard evaluation is how to gage the earthquake hazard posed by induced seismicity versus the earthquake hazard that is related to tectonic forces. Other Roles? Several Members of Congress and some stakeholders have suggested that the USGS expand its role in the area of natural hazards. The USGS has contributed an improved fundamental understanding of geological processes, together with improvements in technology, on mitigating the negative impacts of natural hazards. For example, several Congressmen have supported a letter requesting the Administration to provide additional funds to fully develop an Early Earthquake Warning System that would cover the West Coast. Although it is currently impossible to predict earthquakes accurately, an earthquake early warning system may provide some small amount of advance warning to mitigate severe damage and loss of life. An early earthquake warning system would work by detecting the first seismic wave to arrive after an earthquake—the P wave—and immediately transmitting the expected intensity and arrival time of the more damaging S- and surface-waves to critical locations and facilities. Just seconds of warning could allow critical power systems to go into a safe mode, alert medical professionals to stop delicate procedures, and mobilize emergency personnel to regions most likely affected by the strongest shaking. However, implementing such a system could be costly, potentially in the hundreds of millions if done for the nation. Other hazard mitigation initiatives include USGS work on understanding coastal processes and improving the ability to assess the nation's vulnerability to extreme coastal storms such as hurricanes. The improved will also likely yield better ways to predict how beaches will change after a big storm, and help support better management of coastal infrastructure and resources. For example, Figure 4 shows the elevation changes pre- and post-Superstorm Sandy within the Fire Island National Seashore, indicating where sand was eroded and resulted in a new channel opening up that cut through the island. Studies such as the one shown in Figure 4 provide some indication of the potential magnitude of change along sandy beach communities in the United States from a severe coastal storm. This type of information may help community planners, local zoning boards, and emergency response authorities, as well as local government leaders charged with evacuation responsibilities in the event of a pending coastal storm. Brief Chronology of the USGS Table 2 provides a chronology of selected milestones in the history of the USGS since 1879. Appendix. Selected USGS Authorities57 The USGS Organic Act 43 U.S.C. 31 et seq . The USGS Organic Act of March 3, 1879, as amended, establishes the United States Geological Survey. This act directs the Director of the USGS to classify the public lands and examine the geological structure, mineral resources, and products within and outside the national domain. This act establishes the Office of the Director of the United States Geological Survey under DOI. The Director of the USGS is appointed by the President by and with the advice and consent of the Senate. A section by section breakdown of the act follows: § 31. Director of United States Geological Survey (a) Establishment of office; appointment and duties; examination of geological structure, mineral resources, and products of national domain; prohibitions in respect to lands and surveys The Director of the United States Geological Survey, which office is established, under the Interior Department, shall be appointed by the President by and with the advice and consent of the Senate. This officer shall have the direction of the United States Geological Survey, and the classification of the public lands and examination of the geological structure, mineral resources, and products of the national domain. The Director and members of the United States Geological Survey shall have no personal or private interests in the lands or mineral wealth of the region under survey, and shall execute no surveys or examinations for private parties or corporations. (b) Examination of geological structure, mineral resources, and products outside national domain The authority of the Secretary of the Interior, exercised through the United States Geological Survey of the Department of the Interior, to examine the geological structure, mineral resources, and products of the national domain, is expanded to authorize such examinations outside the national domain where determined by the Secretary to be in the national interest. § 31i. Report on resource research activities Once every five years the National Academy of Sciences shall review and report on the resource research activities of the Survey. § 31j. Biological research activity of Survey ; review and report by National Academy of Sciences Beginning in fiscal year 1998 and once every five years thereafter, the National Academy of Sciences shall review and report on the biological research activity of the Survey. § 32. Acting Director The Secretary of the Interior may authorize one of the geologists to act as Director of the United States Geological Survey in the absence of that officer. § 34. Scientific employees The scientific employees of the United States Geological Survey shall be selected by the Director, subject to the approval of the Secretary of the Interior exclusively for their qualifications as professional experts. § 36. Purchase of books The purchase of professional and scientific books and periodicals needed for statistical purposes by the scientific divisions of the United States Geological Survey is authorized to be made and paid for out of appropriations made for the said Survey. § 36a. Acquisition of scientific or technical books, maps, etc., for library The Director of the United States Geological Survey, under the general supervision of the Secretary of the Interior, is authorized to acquire for the United States, by gift or devise, scientific or technical books, manuscripts, maps, and related materials, and to deposit the same in the library of the United States Geological Survey for reference and use as authorized by law. § 36b. Acquisition of lands or interests there in for use in gaging streams or underground water resources The Secretary of the Interior may, on behalf of the United States and for use by the United States Geological Survey in gaging streams and underground water resources, acquire lands by donation or when funds have been appropriated by Congress by purchase or condemnation, but not in excess of ten acres for any one stream gaging station or observation well site. For the same purpose the Secretary of the Interior may obtain easements, licenses, rights-of-way, and leases limited to run for such a period of time or term of years as may be required for the effective performance of the function of gaging streams and underground water resources: Provided, That nothing in this section shall be construed as affecting or intended to affect or in any way to interfere with the laws of any State or Territory relating to the control, appropriation, use, or distribution of water used in irrigation, or any vested right acquired thereunder, and the Secretary of the Interior, in carrying out the provisions of this section, shall proceed in conformity with such laws, and nothing in this section shall in any way affect any right of any State or of the Federal Government or of any landowner, appropriator, or user of water, in, to, or from any interstate stream or the waters thereof. § 36c. Acceptance of contributions from public and private sources ; cooperation with other agencies in prosecution of projects In fiscal year 1987 and thereafter the United States Geological Survey is authorized to accept lands, buildings, equipment, and other contributions from public and private sources and to prosecute projects in cooperation with other agencies, Federal, State, or private. § 36d. Cooperative agreements Notwithstanding the provisions of the Federal Grant and Cooperative Agreement Act of 1977 (31 U.S.C. 6301–6308), the United States Geological Survey is authorized to continue existing, and on and after November 10, 2003, to enter into new cooperative agreements directed towards a particular cooperator, in support of joint research and data collection activities with Federal, State, and academic partners funded by appropriations herein, including those that provide for space in cooperator facilities. § 38. Topographic surveys ; marking elevations In making topographic surveys west of the ninety fifth meridian elevations above a base level located in each area under survey shall be determined and marked on the ground by iron or stone posts or permanent bench marks, at least two such posts or bench marks to be established in each township, or equivalent area, except in the forest clad and mountain areas, where at least one shall be established, and these shall be placed, whenever practicable, near the township corners of the public land surveys; and in the areas east of the ninety-fifth meridian at least one such post or bench mark shall be similarly established in each area equivalent to the area of a township of the public land surveys. § 41. Publications and reports ; preparation and sale Except as otherwise provided in section 1318 of title 44, the publications of the United States Geological Survey shall consist of geological and economic maps, illustrating the resources and classification of the lands, and reports upon general and economic geology and paleontology. All special memoirs and reports of said survey shall be issued in uniform quarto series if deemed necessary by the director, but otherwise in ordinary octavos. Three thousand copies of each shall be published for scientific exchanges and for sale at the price of publication, and all literary and cartographic materials received in exchange shall be the property of the United States and form a part of the library of the organization; and the money resulting from the sale of such publications shall be covered into the Treasury of the United States, under the direction of the Secretary of the Interior. § 42. Distribution of maps and atlases, etc. The Director of the United States Geological Survey is authorized and directed, on the approval of the Secretary of the Interior, to dispose of the topographic and geologic maps and atlases of the United States, made and published by the United States Geological Survey, at such prices and under such regulations as may from time to time be fixed by him and approved by the Secretary of the Interior; and a number of copies of each map or atlas, not exceeding five hundred, shall be distributed gratuitously among foreign governments and departments of our own Government to literary and scientific associations, and to such educational institutions or libraries as may be designated by the Director of the Survey and approved by the Secretary of the Interior. On and after June 7, 1924, the distribution of geological publications to libraries designated as special depositaries of such publications shall be discontinued. § 42a. Use of receipts from sale of maps for map printing and distribution In fiscal year 1984 and thereafter, all receipts from the sale of maps sold or stored by the United States Geological Survey shall be available for map printing and distribution to supplement funds otherwise available, to remain available until expended. § 43. Copies to Senators, Representatives, and Delegates One copy of each map and atlas shall be sent to each Senator and each Representative and Delegate in Congress, if published within his term; and a second copy shall be placed at the disposal of each such Senator, Representative and Delegate § 44. Sale of transfers or copies of data The Director of the United States Geological Survey shall, if the regular map work of the Survey is in no wise interfered with thereby, furnish to any person, concern, institution, State or foreign government, that shall pay in advance the whole cost thereof with 10 per centum added, transfers or copies of any cartographic or other engraved or lithographic data in the division of engraving and printing of the Survey, and the moneys received by the Director for such transfers or copies shall be deposited in the Treasury. § 45. Production and sale of copies of photographs and records ; disposition of receipts The Director of the United States Geological Survey on and after March 4, 1909 may produce and sell on a reimbursable basis to interested persons, concerns, and institutions, copies of aerial or other photographs and mosaics that have been obtained in connection with the authorized work of the United States Geological Survey and photographic or photostatic reproductions of records in the official custody of the Director at such prices (not less than the estimated cost of furnishing such copies or reproductions) as the Director, with the approval of the Secretary of the Interior, may determine, the money received from such sales to be deposited in the Treasury to the credit of the appropriation then current and chargeable for the cost of furnishing copies or reproductions as herein authorized. § 49. Extension of cooperative work to Puerto Rico The provisions of law authorizing the making of topographic and geological surveys and conducting investigations relating to mineral and water resources by the United States Geological Survey in various portions of the United States be, and the same are, extended to authorize such surveys and investigations in Puerto Rico. § 50. Survey ' s share of cost of topographic mapping or water resources investigations carried on with States The share of the United States Geological Survey in any topographic mapping or water resources data collection and investigations carried on in cooperation with any State or municipality shall not exceed 50 per centum of the cost thereof. § 50 – 1. Funds for mappings and investigations considered intra - governmental funds Beginning October 1, 1990, and thereafter, funds received from any State, territory, possession, country, international organization, or political subdivision thereof, for topographic, geologic, or water resources mapping or investigations involving cooperation with such an entity shall be considered as intragovernmental funds as defined in the publication titled ''A Glossary of Terms Used in the Federal Budget Process.'' § 50a. Working capital fund for United States Geological Survey There is hereby established in the Treasury of the United States a working capital fund to assist in the management of certain support activities of the United States Geological Survey (hereafter referred to as the ''Survey''), Department of the Interior. § 50b. Recording of obligations against accounts receivable and crediting of amounts received ; work involving cooperation with State, Territory, etc. Before, on, and after October 18, 1986, in carrying out work involving cooperation with any State, Territory, possession, or political subdivision thereof, the United States Geological Survey may, notwithstanding any other provision of law, record obligations against accounts receivable from any such entities and shall credit amounts received from such entities to this appropriation. § 50c. Payment of costs incidental to utilization of services of volunteers Appropriations herein and on and after December 22, 1987, made shall be available for paying costs incidental to the utilization of services contributed by individuals who serve without compensation as volunteers in aid of work of the United States Geological Survey, and that within appropriations herein and on and after December 22, 1987, provided, United States Geological Survey officials may authorize either direct procurement of or reimbursement for expenses incidental to the effective use of volunteers such as, but not limited to, training, transportation, lodging, subsistence, equipment, and supplies: Provided further, That provision for such expenses or services is in accord with volunteer or cooperative agreements made with such individuals, private organizations, educational institutions, or State or local government. § 50d. Services of students or recent graduates The United States Geological Survey may on and after November 29, 1999, contract directly with individuals or indirectly with institutions or nonprofit organizations, without regard to section 6101 of title 41, for the temporary or intermittent services of students or recent graduates, who shall be considered employees for the purposes of chapters 57 and 81 of title 5, relating to compensation for travel and work injuries, and chapter 171 of title 28, relating to tort claims, but shall not be considered to be Federal employees for any other purposes. Other USGS Authorities Title 7 — Agriculture 7 U.S.C. 136 . The Federal Environmental Pesticide Control Act of 1972 amends the program established by the Federal Insecticide, Fungicide and Rodenticide Control Act of 1947 for controlling the sale and distribution of certain pesticides. The law requires registration of pesticides to avoid unreasonable adverse effects to humans or the environment. USGS measures pesticides in surface and ground water, and created the Pesticide National Synthesis Project. Pesticide use maps that show the geographic distribution of estimated average annual pesticide use were created under this Project. 7 U.S.C. 2201 . The Department of Agriculture Organic Act of 1956 requires the Secretary of Agriculture to obtain the advice of the Secretary of the Interior as to whether certain lands that are being patented, disposed of, or exchanged, are mineral in character. USGS conducts mineral assessments to help determine whether lands are mineral in character. 7 U.S.C. 2204(b) . The Rural Development and Policy Act of 1980 authorizes the Secretary of Agriculture to enter cooperative agreements with other federal agencies and organizations to address water management issues in rural areas. USGS conducts the Cooperative Water Program which partners the USGS with other entities to monitor and assess water resources. Title 15 — Commerce and Trade 15 U.S.C. 2901- 2908 . The National Climate Program Act of 1978 established a national climate program to assist the nation and the world in understanding and responding to natural and human-induced climate processes and their known and potential effects. The USGS Climate and Land Use Change program area conducts research to uncover the potential effects of climate change. 15 U.S.C. 2921 et seq. The Global Change Research Act of 1990 establishes the United States Global Change Research Program, which is aimed at understanding and responding to global change. This also includes studying the cumulative effects of human activities and natural processes on the environment and promoting discussions toward international protocols in global change research. 15 U.S.C. 5631 et seq. The Land Remote Sensing Policy Act of 1992 authorizes the USGS to provide data continuity for the Landsat program. This act also assigns responsibility for maintaining the National Satellite Land Remote Sensing Data Archive to the DOI. This act authorizes the DOI and other federal agencies to carry out research and development programs to make Landsat data available and useful to the public. Title 16 — Conservation 16 U.S.C. 17 et seq. Parts of the National Park Service Organic Act of 1916, as amended, apply to the USGS. Notably, the Outdoor Recreation Act of 1936 authorizes the Secretary of the Interior to sponsor, engage in, and assist in research related to outdoor recreation; undertake studies and assemble information concerning outdoor recreation; and cooperate with educational institutions and others to assist in establishing education programs and activities, among other things. USGS conducts various studies related to outdoor recreation in lands managed by the National Park Service. 16 U.S.C. 661 et seq. The Fish and Wildlife Coordination Act of 1934 authorizes the Secretary of the Interior to prepare plans to protect wildlife resources, conduct surveys on public lands, and accept funds or lands for related purposes; authorize the investigation and reporting of proposed federal actions that affect the development, protection, rearing, and stocking of all species of wildlife and their habitat; and conduct actions to minimize impacts on fish and wildlife resources. The USGS Ecosystems program area conducts studies that address these authorities. 16 U.S .C. 703- 712 . The Migratory Bird Treaty Act of 1918, as amended, implements four international treaties that affect migratory birds common to the United States, Canada, Mexico, Japan, and the former Soviet Union. The act establishes federal responsibility for protection and management of migratory and nongame birds. USGS actively studies migratory bird populations in its Northern Prairie Wildlife Research Center in North Dakota. 16 U.S.C. 715 . The Migratory Bird Conservation Act of 1900 establishes the Migratory Bird Conservation Commission and authorizes the Secretary of the Interior to conduct investigations and publish documents related to North American birds. USGS conducts several studies on migratory birds through its research centers. 16 U.S.C. 742(a) et seq. The Fish and Wildlife Act of 1956 authorizes the Secretary of the Interior to conduct investigations, prepare and disseminate information, and make periodic reports to the public regarding the availability and abundance and the biological requirements of fish and wildlife resources. The act also authorizes the Secretary to provide a comprehensive national fish and wildlife policy and to develop, manage, and conserve fisheries and wildlife resources. The USGS addresses all of these requirements through activities in its Ecosystem program area. 16 U.S.C. 742(l) . The Fish and Wildlife Improvement Act of 1978, as amended, authorizes the Secretary of the Interior to enter into cooperative agreements with colleges and universities, state fish and game agencies, and nonprofit organizations, for the purpose of developing research and training programs for fish and wildlife resources. The USGS has entered into cooperative agreements with various states and universities to address the conservation of fish and wildlife resources. For example, see the Florida Cooperative Fish and Wildlife Research Unit. 16 U.S.C. 931- 939 . The Great Lakes Fishery Act of 1956 implements the Convention on Great Lakes Fisheries between the United States and Canada; authorizes construction, operation, and maintenance of sea lamprey control works; sets forth procedures for coordination and consultation with States and other Federal agencies; and establishes the Great Lakes Fisheries Commission. The USGS has a Great Lakes Science Center that coordinates USGS research throughout the Great Lakes region. 16 U.S.C. 1131 et seq. The Wilderness Act of 1964, as amended, requires the USGS to assess the mineral resources of each area proposed or established as wilderness. The studies are to be on a planned and recurring basis. The original series of studies was completed, and no recurring studies have been requested or funded, according to the USGS. 16 U.S.C. 1361 et seq. The Marine Mammal Protection Act of 1972, as amended, gives DOI the responsibility to conserve marine mammals such as the sea otter, walrus, polar bear, dugong, and manatee. USGS has conducted several population level studies on these species. 16 U.S.C. 1451 et seq. The Coastal Zone Management Act of 1976 provides that each department, agency, and instrumentality of the Executive Branch of the federal government assist the Secretary of Commerce in carrying out research and technical assistance for coastal zone management. The USGS coordinates with states and other federal agencies in conducting studies that address coastal management. 16 U.S.C. 1531 et seq. The Endangered Species Act of 1973, as amended, provides for the conservation of threatened and endangered species of fish, wildlife, and plants, and authorizes the establishment of cooperative agreements and grants-in-aid to states that maintain programs for endangered and threatened wildlife and plants. The USGS has conducted several studies that analyze the population dynamics of species listed under the Endangered Species Act. 16 U.S.C. 1604. The Forest and Rangeland Renewable Resources Planning Act of 1974, as amended by the National Forest Management Act of 1976, authorizes the USGS as a party in an interagency agreement with the Forest Service to assess the mineral resources of National Forests. 16 U.S.C. 3141 et seq. The Alaska National Interest Lands Conservation Act of 1980 designates certain public lands in Alaska as units of the National Park, National Wildlife Refuge, Wild and Scenic Rivers, National Wilderness Preservation and National Forest Systems. The act requires the Secretary of the Interior to assess the oil and gas potential of federal lands in Alaska north of 68 degrees north latitude and east of the western boundary of the National Petroleum Reserve–Alaska. The act also authorizes the Secretary of the Interior to initiate and carry out a study of all federal lands in designated areas of Alaska. The study is to contain an assessment of the potential oil and gas resources of these lands; review of the wilderness characteristics of the lands; and a study of the wildlife resources of these lands. The law states that the USGS "has made and may be called upon to make water studies pertinent to implementation of the act." Further, the law authorizes the Secretary to conduct studies of the oil and gas potential of non-North Slope federal lands, and ecosystem and wildlife resources that would be affected by oil and gas exploration. Under the authority of this law, the USGS has the responsibility to assess the oil, gas, and other mineral potential on all public lands in Alaska. The law also contained a requirement to present an annual minerals report to Congress. The preparation of this report was delegated to the USGS. The annual reporting requirement was terminated, effective May 15, 2000, pursuant to section 3003 of P.L. 104-66 , as amended. 16 U.S.C. 3501 et seq. The Coastal Barrier Resources Act of 1982 designates various underdeveloped coastal barrier islands depicted by specific maps for inclusions in the Coastal Barrier Resource System. USGS conducts research on coastal barrier ecosystems and their resiliency under stress of flooding and storm surges. P.L. 106-514 . The Coastal Barrier Resources Reauthorization Act of 2000 reauthorizes and amends the Coastal Barrier Resources Act of 1999. The act authorizes cooperative efforts between the Secretary of the Interior and the Director of FEMA to provide existing digital spatial data of the John H. Chafee Coastal Barrier Resource System. If data do not exist to carry out this pilot project, the USGS is instructed to obtain and provide the data required to the Secretary. 16 U.S.C. 4701 et seq. The Nonindigenous Aquatic Nuisance Prevention and Control Act of 1990 establishes a federal program to prevent introduction and control the spread of introduced aquatic nuisance species. USGS conducts studies that characterize invasive species, their spread, and potential control. Title 25 — Indians 25 U.S.C. 450 et seq. The Tribal Self-Governance Act of 1994 authorizes USGS participation in the Tribal Self-Governance Program. The USGS discusses programs and activities with interested tribal governments. Title 30 — Mineral Lands and Mining 30 U.S.C. 21(a) . The Mining and Minerals Policy Act of 1970 provides the DOI with the responsibility for assessing the mineral resources of the Nation. The USGS Mineral Resources Program aims to provide scientific information for mineral resource assessments, and conducts research on mineral production, consumption, potential, and environmental effects. 30 U.S.C. 201 . The Federal Coal Leasing Amendments Act of 1976 provides that no lease sale may be held on federal lands unless the lands containing the coal deposits have been included in a comprehensive land-use plan. Under this act, the Secretary of the Interior is authorized to collect data and information to evaluate the extent, location, and potential for developing the known recoverable coal resources within the coal lands. The USGS provides data and information from coal research and field investigations to the Bureau of Land Management to meet the requirements of the coal leasing program. 30 U.S.C. 641 authorizes the Secretary of the Interior to search for domestic mineral reserves and to establish and maintain a program for mineral exploration by private industry within the United States, territories, and possessions. 30 U.S.C. 1026 requires the Secretary of the Interior to (1) maintain a monitoring program for significant thermal features within units of the National Park System, and (2) establish a research program to collect and assess data on the geothermal resources within units of the National Park System in cooperation with the USGS. Under this law, the USGS is directed to conduct a study of the impact of present geothermal development in the vicinity of Yellowstone National Park on the thermal features within the park. 30 U.S.C. 1028 . The Energy Policy Act of 1992 directs the Secretary of the Interior, through the USGS and in consultation with the Secretary of Energy, to establish a cooperative government- private sector program with respect to hot dry-rock geothermal energy resources on public lands. The act authorizes recurring assessments of the undiscovered oil and gas resources of the United States. 30 U.S.C. 1101, 1121, 1123 . The Geothermal Energy Research, Development, and Demonstration Act of 1974 gives DOI the responsibility for evaluating and assessing the geothermal resource base and the development of exploration technologies. The USGS and other appropriate agencies are directed to develop and carry out a plan to inventory all forms of geothermal resources of federal lands; conduct regional surveys; publish and make available maps, reports, and other documents developed from the surveys; and participate with non-federal entities in research to develop, improve, and test technologies for the discovery and evaluation of geothermal resources. 30 U.S.C. 1201 - 1202, 1211 . The Surface Mining Control and Reclamation Act of 1977, as amended, establishes the Office of Surface Mining Reclamation and Enforcement (OSM). OSM depends, in part, upon the USGS for researching the potential hydrologic consequences of mining and reclamation operations. 30 U.S.C. 1419 et seq. The Deep Seabed Hard Mineral Resources Act of 1980 authorizes a program of ocean research that includes the development of studies on the ecological, geological, and physical aspects of the deep seabed in areas of the ocean where exploration and commercial development are likely to occur. The USGS provides geological and mineral resource expertise in responding to the requirements of the act. 30 U.S.C 1601 et seq. The National Materials and Minerals Policy, Research and Development Act of 1980 gives the responsibility of assessing the mineral resources of the nation to DOI. 30 U.S.C. 1901 - 1902 . The Methane Hydrate Research and Development Act of 2000 authorizes appropriations for the establishment of a methane hydrate research and development program within the Department of Energy (DOE). DOE is directed to carry out this program in consultation with the United States Navy, USGS, Minerals Management Service, and National Science Foundation through grants, contracts, and cooperative agreements with universities and industrial enterprises. The law also authorizes studies on the use of methane hydrate as a source of energy. Title 33 — Navigation and Navigable Waters 33 U.S.C. 883(a) . The Great Lakes Shoreline Mapping Act of 1987 authorizes the USGS to participate in the creation of a shoreline map of the Great Lakes. 33 U.S.C. 1251- 1274, 2901 . The Federal Water Pollution Control Act Amendments of 1972, Clean Water Act of 1977, and Water Quality Act of 1987, authorize water quality planning, studies, and monitoring under the direction of the Environmental Protection Agency (EPA). The USGS contributes to this effort by providing surface and ground water data to the EPA. Under this act, EPA is authorized to establish national programs for the prevention, reduction, and elimination of pollution, including the establishment of a water quality surveillance system for the purpose of monitoring the quality of the navigable waters and ground waters, using the resources of the USGS and others. This act also authorizes research on water quality in large ecosystems throughout the country, including the Chesapeake Bay, the Great Lakes, and Puget Sound. The USGS actively monitors and studies water quality in these ecosystems and others. 33 U.S.C. 1271 . The Water Resources Development Act of 1992 establishes a National Contaminated Sediment Task Force, with USGS as a member, to conduct a comprehensive national survey of aquatic sediment quality. 33 U.S.C. 2701, 2761 . The Oil Pollution Act of 1990 authorizes the establishment of an Interagency Coordinating Committee on Oil Pollution Research, of which the DOI is a member. One task of the Committee is to develop a plan for oil pollution research, oil extraction development, and a demonstration program. Title 42 — The Public Health and Welfare 42 U.S.C. 300(f) et seq. The Safe Drinking Water Act Amendments of 1996 authorize research on the causes, propagation, and prevention of contaminants in drinking water. The USGS and EPA have an interagency agreement for conducting studies on sole source aquifers. 42 U.S.C. 2021(b) et seq. The Low-Level Radioactive Waste Policy Act of 1980 requires intra-state or regional arrangements for disposal of low-level radioactive waste. The USGS provides geo-hydrologic research and technology to federal and state agencies for developing plans to address low-level waste management. 42 U.S.C. 4001 et seq. The National Flood Insurance Act of 1968 authorizes floodplain mapping and collecting data on flood frequency. Both activities are aided by USGS efforts to measure floodplains and estimate flooding under various scenarios. 42 U.S.C. 5121, 5132 . The Disaster Relief Act of 1974 ( P.L. 93-288 , also known as the Stafford Act) gives authority to federal agencies to issue disaster warnings. The Stafford Act provides the USGS with the authority to issue warnings on geologic hazards, such as earthquakes, volcanic eruptions, and landslides. 42 U.S.C. 5845(c) . The Energy Reorganization Act of 1974 directs federal agencies to provide research for the Nuclear Regulatory Commission, consult and cooperate with the Commission on research matters of mutual interest, and provide such information and physical access to its facilities to help the Commission perform its licensing and related regulatory functions. The USGS conducts geological mapping in areas where nuclear reactor construction is anticipated and conducts investigations of geologic processes that could imperil the safe operation of reactors or other critical energy facilities. 42 U.S.C. 6217 . The Energy Act of 2000 extends energy conservation programs authorized under the Energy Policy and Conservation Act. The USGS acts on behalf of the Secretary of the Interior to conduct and update an inventory of all onshore energy production on federal lands. The inventory identifies reserve estimates of the oil and gas resources underlying these lands and restrictions or impediments to development of such resources. 42 U.S.C. 6901 et seq. The Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984 require the EPA to promulgate guidelines and regulations for identifying and managing solid waste, including disposal. The USGS assists this process by defining and predicting the hydrologic effects of waste disposal. 42 U.S.C. 7401 et seq . The Clean Air Act of 1977 regulates air quality and emissions from mobile and stationary sources. The act also establishes requirements to prevent significant deterioration of air quality in the nation, and aims to preserve air quality in national parks, national wilderness areas, national monuments and national seashores. The USGS monitors air quality in specific areas and measures the effects of air quality on ecosystems and surface waters (e.g., effects of acid rain). 42 U.S.C. 7701 et seq. The Earthquake Hazards Reduction Act of 1977 sets as a national goal the reduction in the risks of life and property from future earthquakes in the United States through the establishment and maintenance of a balanced earthquake program encompassing prediction and hazard assessment research, seismic monitoring and information dissemination. Subsequent public laws establish a National Earthquake Hazards Reduction Program and authorize the USGS to improve the basic understanding of earthquakes and characterize national earthquake risks, which are published as seismic hazard maps and used in support of building codes, among other applications. 42 U.S.C. 8901 et seq. The Acid Precipitation Act of 1980 authorizes activities to address acid rain. The USGS conducts research on acid rain and coordinates interagency monitoring of precipitation chemistry. The USGS National Coal Resources Data System was named by the EPA as the official database for information on coal quality. The EPA, utility companies, and coal mining industries use the database to estimate the amount of air pollution derived from coal combustion. 42 U.S.C. 9601 et seq. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) establishes a Hazardous Substance Superfund (26 U.S.C. 9507) to help finance cleanup programs at heavily contaminated sites with toxic wastes. The USGS works with the EPA and state agencies to investigate and determine the extent of contamination and remedial measures at some of these sites. 42 U.S.C. 10301 et seq. This law addresses water resources research and authorizes research activities through State Water Resource Research Institutes. Further, this law provides for water resources research, information transfer and student training in grants and contract programs that aim to augment federal and state efforts to discover practical solutions to water shortage and quality deterioration problems. 42 U.S.C. 10367. This law authorizes the continued implementation of the National Streamflow Program implemented by the USGS, and authorizes the Secretary of the Interior to measure hydrological extremes (e.g., droughts and floods), and streamflow and other environmental variables in national significant watersheds. Title 43 — Public Lands 43 U.S.C. 31 et seq . The Organic Act of the USGS directs the director of the USGS to classify the public lands and examine the geological structure, mineral resources, and products within and outside the national domain. The Organic Act was amended by the National Geologic Mapping Act of 1992. This authorizes the creation of the National Cooperative Geologic Mapping Program (43 U.S.C. 31(a–h)). Further, it directs the Secretary of the Interior to provide biennial reports on the status of the program, progress in developing the national geologic map database, and recommendations for legislative or other action to achieve the purposes of the act. The act also requires the National Academy of Sciences to review and report on the resource research activities of the USGS, and report on the biological research activity of the USGS once every five years. This section of the code authorizes several other activities of the USGS, including, for example: creating topographic surveys, writing and distributing scientific reports and geological maps; cooperative work with state or municipalities on topographic and water resources work that does not exceed 50% of the cost; and international work that addresses issues of national interest. 43 U.S.C. 371 . The Reclamation Projects Authorization and Adjustment Act of 1992 directs the President to undertake a comprehensive review of federal activities in the 19 western states that directly or indirectly affect the allocation and use of surface or subsurface resources. The Secretary of the Interior, through the USGS, conducts investigations and reviews ground water resources in these states. 43 U.S.C. 1334 et seq. The Outer Continental Shelf (OCS) Lands Act authorizes the Secretary of the Interior to prescribe rules and regulations that aim to conserve natural resources of the OCS; to allow for geological and geophysical explorations of the OCS; and to direct the Secretary of the Interior to conduct a study of any region containing a gas and oil lease sale. The study is done to obtain information on the management of environmental impacts oil and gas extraction might have on human, marine and coastal areas. Title 50, Appendix— War and National Defense 50 U.S.C. 98 . The Strategic and Critical Materials Stock Piling Act of 1946 directs? USGS to assess the quantity of domestic minerals, especially minerals used for strategic and critical purposes. The act also authorizes USGS efforts to study the economic conditions affecting mining and materials processing industries and conduct scientific, technological, and economic investigations on the development, mining, preparation, treatment, and utilization of ore and other minerals.

The U.S. Geological Survey (USGS) aims to provide unbiased scientific information to describe and understand the geological processes of the Earth; minimize loss of life and property from natural disasters; manage water, biological, energy, and mineral resources; and enhance and protect the nation's quality of life. The USGS is a scientific agency that is housed within the Department of the Interior. Its primary mission is conducting science; it has no regulatory authority, nor does it manage any significant federal lands. The USGS also collects and stores scientific information that is compiled into long-term continuous data sets. These data sets range from satellite imagery of land and ecosystem features to streamflow data on major rivers and streams. The USGS conducts scientific activities under seven interdisciplinary mission areas: (1) water resources; (2) climate and land use change; (3) energy and minerals; (4) natural hazards; (5) core science systems; (6) ecosystems; and (7) environmental health. The agency is funded through Interior, Environment, and Related Agencies appropriations laws. The FY2015 budget request for the USGS was $1.07 billion, which is $41.3 million more than the FY2014 enacted level of $1.03 billion. Congressional interest in the USGS is high because many USGS activities have nationwide and regional policy implications. USGS partners with several stakeholders in its monitoring and scientific endeavors and contributes scientific knowledge to seminal policy decisions such as the listing of species under the Endangered Species Act, the management of water supplies, and the placement of emergency response resources following major storm events or hurricanes. Some potential congressional concerns about the USGS involve the scope of its mission. For example, some in Congress contend that the mission of the USGS has expanded beyond the scope of its Organic Act, to the detriment of its work on geological issues. In contrast, some others note that the USGS has expanded its scope in response to congressional authorizations and that its mission has changed over time to reflect the needs of the country. Some specific USGS programs—for example, the agency's role in assessing the nation's mineral, oil, and natural gas resources—have also been of interest to Congress. Often, the results of these studies and assessments have led to congressional decision-making regarding resource development and federal land use. Other USGS activities that have generated congressional interest and debate include the National Streamflow Information Program, which deploys streamgages across the country to measure water flows and quality; the Landsat Program, which collects remotely sensed data from satellites and distributes it to stakeholders; and the Natural Hazards Program, which is involved in evaluating, observing, studying, and contributing to the mitigation of natural hazards such as earthquakes, volcanoes, landslides, and coastal storms, among others.

Introduction The authorization of the Museum and Library Services Act (MLSA) expired with FY2009. Its reauthorization may be considered by the 111 th Congress. One issue that may arise during reauthorization is the current status of conservation and preservation of museum and library collections. Other issues that may arise include general issues of funding across museum and library services, the changing role of libraries in communities, and alternative funding models for museum services. This report describes the background, history, and current policy and programs of both library services and museum services. In addition, it discusses major changes related to the 2003 reauthorization of MLSA and issues for Congress to consider in the next reauthorization. Library Services and Technology Background In FY2007, the United States had 9,214 public libraries serving areas that encompassed 97% of the total U. S. population. In the same year, nationwide circulation of public library materials was 2.2 billion, or 7.4 per capita. Library funds are provided through a mixture of local, state, federal, and other sources. Funding for public libraries by each of these sources in FY2007 equaled 84.1%, 6.7%, 0.4%, and 8.7%, respectively. The federal government has provided direct aid for public libraries since 1956, the year the Library Services and Construction Act (LSCA) was enacted. This act and its successors represent the largest federal investment in public libraries; although, as the above data show, the federal contribution represents a small percentage of public libraries' total expenditures. In addition to its support of public libraries, the federal government also supports a variety of other libraries. Among other things, it funds the Library of Congress and executive agency libraries; it provides assistance to research libraries and school libraries; and it supports the collection of statistics on libraries. In 1996, the Library Services and Technology Act (LSTA) was enacted, replacing the LSCA, through Title VII, Subtitle B, of the FY1997 Labor, Health and Human Services, Education, and Related Agencies Appropriations Act ( P.L. 104-208 ). In addition to the LSCA, the LSTA consolidated and replaced a number of other programs, including library assistance programs formerly authorized by Title II of the Higher Education Act (HEA), and Title III, Part F, of the Elementary and Secondary Education Act (ESEA) . A wide variety of libraries—public, public school, college or university, research (if they provide public access to their collections), and (at state discretion) private libraries—may receive aid under the Library Services and Technology Act, not just the public and research libraries eligible for aid under the predecessor legislation, the Library Services and Construction Act (LSCA). History LSTA was most recently reauthorized as Title II, Library Services and Technology (LST), of the Museum and Library Services Act of 2003 (MLSA). The major changes adopted through this reauthorization are discussed later in this report. These changes include, among other things, prohibiting the funding of projects deemed obscene, increasing the amount of initial LST state grants, expanding IMLS responsibility for advisory functions and data collection, and requiring the director of IMLS to carry out and publish analyses of the impact of museum and library services. While states have had a large degree of discretion in selecting grantees and deciding how funds could be used under both the former LSCA and the current LST, overall state discretion was increased under the current program. At the same time, some funds—particularly aid for construction under the former LSCA Title II—were intended for specific purposes that are not authorized for LST grants. In fact, P.L. 108-81 includes a provision explicitly prohibiting the use of funds for construction. The library services and technology provisions of P.L. 108-81 also focused more thoroughly on relatively new forms of information sharing and networking, such as the internet, than the LSCA did. Current Policy and Programs LST programs are currently authorized through FY2009 as Title II of the Museum and Library Services Act of 2003 ( P.L. 108-81 ). P.L. 108-81 authorized $232 million for LST in FY2004, and such sums as may be necessary for FY2005-FY2009. The bulk of LST funding is distributed to states via formula grants. Funding is also provided for Native Americans and for national leadership projects. LST grants to the states are allocated to state library administrative agencies (SLAAs), and may be used for the following basic purposes: expanding services for learning and access to information in a variety of formats in all type of libraries, developing and improving electronic or other linkages and networks connecting providers and consumers of library services and resources; and/or targeting library services to underserved or disadvantaged populations, such as persons with disabilities, those with limited literacy skills, or children from poor families. Although the bulk of funds appropriated for LST are used for state grants , a percentage of total funds is reserved for national activities, Native Americans , and federal administration . Of the total LST appropriations for a given year, 3.75% must be reserved for national activities . These funds support competitively awarded grants or contracts for research, demonstration programs, the preservation of collections, and the conversion of materials to digital form, as well as education and training for librarians. In addition, 1.75% of appropriations is reserved for services to Native Americans (including Indian tribes, Alaskan Natives, and Native Hawaiians), and up to 3.5% of appropriations may be used for federal administration of LST programs. Of the total funding reserved for state grants, each state receives a "flat grant" (an initial amount that is the same for each state) of $680,000 ($60,000 in the case of outlying areas). P.L. 108-81 provided for an increase in initial state grants for library services and technology to $680,000 (from $340,000) in years in which the amount appropriated for the year, and available for state grants, exceeds the amount of grants to all states in FY2003. In addition, initial state grants for outlying areas were increased to $60,000 (from $40,000) if appropriations in a given year are sufficient to meet the higher initial state grant amount of $680,000. FY2009 was the first year in which appropriations for the IMLS were sufficient to trigger the higher state grant amounts authorized by P.L. 108-81 . Participating states are required to develop five-year plans that set goals and priorities consistent with the purposes of LST (i.e., to enhance information-sharing networks and target library services to disadvantaged populations). The plans must provide for independent evaluations of federally assisted library services. The federal share of the total costs of assisted activities is 66% in all cases. If there is no year-to-year decline in federal funding for LST, states must maintain levels of spending for library programs or their LST grants will be reduced in proportion to the reduction in state funding. No more than 4% of each state's grant may be used for administration; however, there is no limit on the share of funds that can be used at the state level to provide services, as opposed to being allocated to local libraries. LST grants are intended to provide states with considerable latitude in the use of funds. LST funds are allocated within states on a competitive basis by the SLAAs. LST is administered by the Institute of Museum and Library Services (IMLS). The IMLS was created through expansion of the pre-existing Institute of Museum Services (IMS). The IMLS contains an Office of Museum Services (OMS) and an Office of Library Services and Technology. The IMLS directorship alternates between persons with "special competence" in library and information services or in museum services. The current IMLS director is Anne-Imelda Radice, who previously served as the acting assistant chairwoman for programs at the National Endowment for the Humanities. An Office of Library Services and Technology within the IMLS is directed by a deputy director who is required to have a graduate degree in library science and expertise in library and information services. The FY2008 Administration budget proposed centralizing more federal library functions within the IMLS. In FY2008, IMLS was given responsibility for two library surveys previously conducted by the Department of Education's National Center for Education Statistics (NCES), namely the Public Library Survey and the State Library Agency Survey. NCES continues to be responsible for the Academic Libraries Survey and the School Library Media Center Survey. In the same year, IMLS was made responsible for functions previously performed by the National Commission on Library and Information Science (NCLIS). These functions include advising the President and Congress on library and information policies; conducting surveys and studies on library and information needs; recommending plans to ensure the American people have adequate library and information services; and advising federal, state, local, and private agencies on library and information science. The most recent reauthorization of MLSA (via P.L. 108-81 ) included new provisions requiring IMLS to carry out and publish analyses of the impact of museum and library services, and to increase from 3% to 3.5% the amount available for federal administrative costs, to provide funding for this new function. Recent IMLS-commissioned research issued in response to this new charge includes the following studies: Interconnections: The IMLS National Study on the Use of Libraries, Museums and the Interne t (February 2008); Nine to Nineteen: Y outh in Museums and Libraries: A Practitioner's Guide (April 2008); and A Catalyst for Change: LSTA Grants to States Program Activities and the Transformation of Library Services to the Public (June 2009). The June 2009 report on LST state grant programs found that libraries are expanding "their traditional mission of collecting and circulating physical holdings to one that also provides access to computers, software, a host of new services and an ever increasing pool of digital information resources." The report found that library services fall into three broad categories: information infrastructure projects, human capital projects, and library service expansion. These three broad categories represented 59%, 29%, and 12%, respectively, of identified projects between FY2003 and FY2006. Between FY1998 and FY2007, the report found a growing trend toward using program funds for statewide initiatives rather than for specific library projects. According to the report, this shift may be attributable to changes in technology that make technology-related services more cost effective when purchased and administered at the state level. Museum Services Background Museums serve multiple functions in our society. They provide opportunities for lifelong learning and enhance communities throughout the nation. Museums also serve an educational role, often partnering with educational institutions and engaging with public schools. Because of the broad mission of many museums, multiple stakeholders from various levels of government, charitable foundations, and the public take an interest in museums and their operations. Museums receive funding from multiple sources. The main sources of federal funding for museums are the IMLS, the National Endowment for the Arts (NEA), the National Endowment for the Humanities (NEH), the National Science Foundation (NSF), and congressionally directed grants. IMLS published a study of federal sources of museum funding for FY2000 through FY2006, which reports funding levels for museums across four federal agencies (IMLS, NEA, NEH, and NSF) by state. In addition, IMLS reports on congressionally directed grants distributed to museums during this time period. Across the five sources of federal support to museums between FY2001 and FY2006, direct support to museums averaged approximately $200 million per year. Museums are also supported by state and local sources of funding. Collecting data on state and local levels of support for museums is challenging, however, due to the disparate nature of the types of museums that comprise the sector. States vary in terms of the level and type of investment in museums, the level of integration in the state's cultural sector, and the perceptions about the public character and role of museums. Local support for museums is also difficult to quantify due to the disparate nature of the museum sector. Some localities report consistent funding through property taxes and sales taxes, but the specific amount of support provided to museums is unclear. History The federal government has provided aid for museums through the MSA since the initial adoption of the Arts, Humanities, and Cultural Affairs Act in 1976 ( P.L. 94-462 ); however, the authority to administer museum services has changed frequently over time. With the initial adoption of P.L. 94-462 , federal aid for museums was administered by the Institute of Museum Services (IMS) as part of the Department of Health, Education, and Welfare. In 1979, Congress transferred IMS to the Department of Education (ED) as part of the Department of Education Organization Act ( P.L. 96-88 ). In 1980, Congress amended the MSA through the Arts and Humanities Act of 1980 ( P.L. 96-496 ) and it remained under the administration of ED. Shortly thereafter, in 1981, Congress transferred IMS from ED to the National Foundation on the Arts and Humanities (NFAH) through an Interior and Related Agencies Appropriation Act ( P.L. 97-100 ). At that time, IMS was administered under the same general authority as the NEA and NEH (i.e., the NFAH). Congress made technical amendments to MSA through P.L. 98-306 and P.L. 99-194 ; however, the administration of museum services remained under the authority of NFAH until the establishment of IMLS by the Museum and Library Services Act, part of the Omnibus Appropriations Act for FY1997 ( P.L. 104-208 ). The act that established the IMLS combined OMS and LST into one agency, though the appropriations for the two divisions remained separate; OMS was funded through Interior and Related Agencies appropriations and LST was funded through the Labor, Health and Human Services, Education, and Related Agencies appropriations (L-HHS-ED). Most recently, the museum services program was reauthorized by P.L. 108-81 , the Museum and Library Services Act of 2003 (MLSA) as Title III, Museum Services of the MLSA. The latest reauthorization transferred OMS to be under the jurisdiction of the L-HHS-ED appropriations. Currently, both OMS and LST are under the jurisdiction of the L-HHS-ED appropriations. Current Policy and Programs The Museum Services program is currently authorized by P.L. 108-81 , the Museum and Library Services Act of 2003 (MLSA) as Title III, Museum Services of the MLSA. P.L. 108-81 authorized $38.6 million for Museum Services in FY2004, and such sums as may be necessary for FY2005-FY2009. A "museum" is defined in the MLSA as a public or private nonprofit agency or institution organized on a permanent basis for essentially educational or aesthetic purposes that utilizes a professional staff, owns or utilizes tangible objects, cares for the tangible objects, and exhibits the tangible objects to the public on a regular basis. The definition includes aquariums, arboretums, botanical gardens, art museums, children's museums, general museums, historic houses and sites, history museums, nature centers, natural history and anthropology museums, planetariums, science and technology centers, specialized museums, and zoological parks. The MLSA authorizes the director, subject to the policy advice of the Museum and Library and Services Board, to enter into arrangements, including grants, contracts, cooperative agreements, and other forms of assistance, with museums and other entities to pay the federal share of support for museums. The federal share of support for museums is an amount provided by the federal government that represents a proportion of the overall cost of museum services. The federal share of museum services is defined in legislation, and it is not more than 50% of a broad range of museum services. The federal share is designed to incentivize museums to leverage other sources of financial support (e.g., state and local support, private grants, endowments, etc.) to pay the non-federal share of museum services. From the amount appropriated for Museum Services, the director must reserve 1.75% to award grants to, or enter into contracts or cooperative agreements with, Indian tribes and organizations that primarily serve and represent Native Hawaiians. From the remaining amount, the director may enter into arrangements to pay the federal share of support for museums. Again, the federal share of support to museums is defined in legislation as not more than 50%. The director may, however, use up to 20% of funds for museum services to enter into arrangements in which the federal share exceeds 50%. The federal share of support for museums may be used to pay the cost of a broad range of services, including providing access to collections, building partnerships with schools, conserving and maintaining collections, supporting professional development, supporting research and program evaluation, and encouraging the dissemination of model programs of museum and library collaboration. The Museum Services program is administered by OMS within IMLS. Currently, OMS administers five competitive grant programs (Museums for America, Museum Professionals for the 21 st Century, Conservation Project Support, Native American and Native Hawaiian Museum Services, and National Leadership Grants for Museums) and two cooperative agreements (Museum Assessment Program and Conservation Assessment Program). The OMS also administers a related program, the African American Museum Services program, authorized separately through the African American History and Culture Act ( P.L. 108-184 ). Each IMLS grant program has unique priorities and requirements. The largest grant program is Museums for America, which was designed to meet the full range of statutory purposes of Museum Services. Projects under this program can be designed to build institutional capacity, enhance collections stewardship, and engage communities. Other IMLS grant programs are much more targeted. For example, the Museum Professionals for the 21 st Century specifically supports professional training and leadership development for museum staff. The Conservation Project Support program provides funding to help museums identify their conservation needs and conduct activities to ensure the safekeeping of their collections. There are also two programs that support museums that primarily serve certain populations. For example, the Native American/Native Hawaiian Museum Services Grants provide grants for museums that serve Native populations with the goal of furthering professional development and enhancing museum services in general. Similarly, the Museum Grants for African American History and Culture program provides funding for the staffs of African American museums to gain knowledge in the areas of management, operations, programming, collections care, etc. The Museum Assessment Program (MAP) and Conservation Assessment Program (CAP) are cooperative agreements administered by IMLS. MAP is a cooperative agreement with the American Association of Museums that provides technical assistance to help institutions assess their strengths and weaknesses and plan for the future. Similarly, the CAP is a cooperative agreement with Heritage Preservation that provides professional assistance in analyzing all aspects of care, assessing current practices, and recommending actions that need to be taken. These programs are particularly popular with small and midsized museums that may not have the institutional capacity to conduct these activities without assistance. The National Leadership Grants are provided for both museum and library services. These grants are provided to support innovative projects to develop new tools, research, models, services, practices, or alliances that will influence the library and museum sectors. National Leadership Grants are offered in the following areas: Library and Museum Collaboration, Advancing Digital Resources, Research, Demonstration, and Collaborative Planning. IMLS Funding for Museum and Library Services Table A-1 in the Appendix shows the FY2000-FY2010 appropriations for Museum Services and Library Services and Technology. For FY2010, the Museum Services program was funded at $33.727 million. In addition, the Museum Grants for African American History and Culture was funded at $1.485 million in FY2010. For FY2010, LST was funded at $213.523 million. Reauthorization Issues 111th Congress One issue likely to be considered during reauthorization concerns the conservation and preservation needs of museum and library collections. A report on conservation issues, commissioned by IMLS, was issued in 2005. The study found significant problems with the current status of conservation and preservation of museum and library collections. According to the study: 820 million objects are at risk; 190 million objects urgently need conservation care; 59% of institutions need better storage; 80% of institutions lack adequate emergency plans; and 40% of institutions have no budget for conservation. In June 2007 the IMLS held a national summit on this subject. It has subsequently been working to educate the public, and libraries and museums nationwide, about collection conservation and preservation. Library Services and Technology Potential reauthorization issues related to LST may include the following: Funding . As discussed earlier in this report, FY2009 was the first year initial state grant awards had increased (from $340,000 to $680,000) since 1971. Some argue that $340,000 is simply too small an amount for states to use to implement a state grant program. The upcoming reauthorization may include consideration of whether the authorization of appropriations for LST should be increased to help ensure that initial state grant awards do not fall below $680,000. The Laura Bush 21 st Century Librarian program. This program was originally created via FY2003 Appropriations legislation. It has been funded each year since its inception, with funding increasing from $9.9 million in FY2003 to $25.5 million in FY2009. This program has funded 3,220 master's degree students, 186 doctoral students, 1,256 pre-professional students, and 26,206 continuing education students. Some argue that there is a continuing need for this program, and they argue that it should receive a specific authorization in the upcoming reauthorization. The FY2003 Budget Request to Congress stated that librarians had "one of the highest median ages of any occupation (47 years old)." The Budget Request indicated that impending retirements, among other things, supported the need for a new program to recruit and educate the next generation of librarians. The most recent BLS employment projections indicate that more than two out of three librarians are 45 or older. BLS reports that the retirement of these librarians will result in several job openings over the next decade. BLS also notes that recent enrollments in MLS programs have been rising—potentially increasing the pool of new librarians entering the field. R ole of Libraries as a Community Hub . Libraries have increased the variety of resources and services they provide to communities. The free internet access provided by libraries has become increasingly important in many communities; 72.5% of libraries indicated that they provided the only free internet access in their communities. Many individuals rely on this access to download government forms and learn about government services. Libraries also provide access to job announcements and training resources for job seekers. In addition, they provide after school activities, online homework help, early childhood literacy programs, technology training, and adult literacy classes, among other things. Library advocates argue that the involvement of libraries in this wide array of community resources and services could be expanded with more support; they are encouraging that an increased emphasis on these activities be incorporated into the upcoming legislation reauthorizing the IMLS. They also argue that the role for libraries in providing needed services to communities during national disasters should be addressed in the upcoming reauthorization. Role of Libraries as a P rovider of Employment and Job-Training Resources . One of the new activities being provided by more libraries is assistance for job seekers. Many employers now require all job applications to be filed online. In addition to free internet access, examples of services that are currently being provided by libraries include online job searches, provision of career information, and training on resume development. Reauthorization may include discussion of how to expand these services, and how to coordinate them with existing federal government job-training programs and related services. More Flexibility in the Use of LST State Grant Funds . LST State Grants are intended to provide states with wide latitude in their use of funds. Funds are to be used to expand services in a variety of formats to all types of libraries, to improve electronic and other linkages to better serve consumers of library services, and to target library services to underserved or disadvantaged populations. An important aspect of meeting these objectives is continually improving the capacity of library staff to become experts in the new technologies and services being provided by libraries. Library advocates indicate that there is an ongoing need for continuing education for library staff, but that the current legislative language in LST may not be sufficiently flexible to allow funds to be used for this purpose. For that reason, some recommend that language be added during reauthorization to ensure that LST State Grant funds can be used for continuing education for library staff. Enhancing Policy Research and Coordination of Library Services. As discussed earlier in the report, the 2003 reauthorization of IMLS included new language requiring the agency to undertake analyses of the impact of library and museum services. The upcoming reauthorization may consider making this role more expansive by including more extensive, detailed requirements of IMLS. Possible amendments would also reflect consideration of the implementation of existing provisions to date. In addition, there may be proposals for new authorizing language regarding the responsibilities (previously housed with NCLIS and the Department of Education) that have been delegated to IMLS (also discussed earlier in this report). Museum Services Potential reauthorization issues related to Museum Services may include the following: Funding . The issue of federal funding levels for museums consistently arises during reauthorizations of museum services. Beyond rethinking the federal role for funding museum services, museum organizations are requesting significant increases in funding. For example, the American Association of Museums has recommended the reauthorization of OMS within IMLS and an incremental appropriation reaching $95 million over a five-year time period. The FY2010 appropriation for Museum Services was approximately $34 million. An annual appropriation of $95 million over a period of five years would represent a significant increase in the rate of funding over the previous five years. Assistance to Small and Midsize Museums . In public hearings conducted by IMLS, participants expressed concern about the special needs of small to midsize museums. Because IMLS support for Museum Services is distributed through competitive grants, small and midsized museums may be disadvantaged in competing for these grants due to their relative lack of institutional capacity, lack of grant writers on staff, and lack of experience needed to administer federal funds. In addition, some participants felt that the accountability requirements attached to federal funds made them less likely to apply because the application and reporting requirements placed a heavy burden on a small staff. Although there was general consensus about the special needs of small and midsized museums, there was disagreement concerning the most appropriate way to address these needs. A frequently cited solution was to develop federal-state partnerships for Museum Services (see below). Federal-State Partnerships . In response to requests from several members of Congress, IMLS conducted several studies regarding the state of public support for museum services and the feasibility of alternate funding mechanisms. One study was an initial investigation of federal-state partnership models as a mechanism for distributing federal funds. A federal-state partnership model would require the creation of intermediary organizations at the state level that would represent museum services as a whole. The study found that current federal-state partnership programs for museum services tend to be discipline based; that is, art museums, planetariums, zoos, and other museum disciplines had their own state-level organization. Currently, there is no state-level organization that represents museums as a whole. Other federal arts and humanities agencies, such as the NEA and NEH, have state-level organizations that represent the arts or the humanities sector as a whole (i.e., the State Arts Agencies and State Humanities Councils, respectively). Using federal-state partnerships as a mechanism to distribute federal funds for Museum Services may require the cooperation of multiple state-level organizations or a reorganization of state-level organizations. IMLS states that there are several potential barriers to the development of federal-state partnerships for Museum Services. First, there is a lack of consistent state-level information on the number of museums and the capacity of museums that make up the sector. Systemic data collection activities may be required to assess state-level infrastructure and institutional capacity. Similar data collection activities have been undertaken by the library sector; however, given the decentralized, discipline-based organization of museums, these data collection activities may be more cumbersome for the museum sector. Grants to States Program . IMLS has also investigated the potential of using a population-based state grant program as a mechanism to distribute federal funding for Museum Services. At the IMLS public hearings, some participants advocated for a federal funding formula for Museum Services; however, other participants had concerns that the current funding levels for OMS would not support a federal funding formula and that, in the current fiscal climate, OMS could not reasonably expect an increase in funding that would allow a formula grant program to be effective. In addition to interest at the public hearing, several organizations have created a national initiative to institute a federal funding formula. Most advocates of a federal funding formula prefer a population-based state grant program. One potential difficulty with using a population-based formula is that the number of museums per state varies, and there is no clear correlation between the number of museums in a state and the state's population. If Congress chose to implement a state grant program for Museum Services, it might consider several approaches toward equitable or optimal allocation of funds. For example, Congress might chose to design a population-based funding formula that allows the museums within a state a proportional share of funding based on the number of likely visitors to the museums within that state. Alternatively, Congress might choose to design an institution-based funding formula that provides states with a greater number of museums more federal funding than states with fewer museums, independent of the state's population. Summary of the 2003 Reauthorization On September 25, 2003, the Museum and Library Services Act of 2003 was signed into law ( P.L. 108-81 ). The LSTA was reauthorized as Title II, Library Services and Technology of the MLSA. The MSA was reauthorized as Title III, Museum Services of the MLSA. The major changes in the reauthorized Museum and Library Services Act of 2003 include the following: prohibiting the funding of projects deemed obscene; defining "obscene" and the term "determined to be obscene"; clarifying and expanding the definition of "museum" to include aquariums, arboretums, botanical gardens, art museums, children's museums, general museums, historic houses and sites, nature centers, history museums, natural history and anthropology museums, planetariums, science and technology centers, specialized museums, and zoos; revising the museum subsection on "purpose" to restate the importance of museums' public service role of connecting the whole of society to our cultural heritage; reemphasizing the educational role of museums through leadership and innovative technologies; creating the highest standards of management and services for museum operations; and supporting resource sharing and partnerships among museums, schools, and other community organizations; requiring the director of the IMLS to establish procedural standards for reviewing and evaluating grants; increasing initial state grants for library services to $680,000 if the amount appropriated for a year, and available for state grants, exceeds the amount of grants to all states in FY2003. increasing initial state grants for outlying areas to $60,000 if appropriations in a given year are sufficient to meet the higher initial state grants of $680,000; if remaining funds are insufficient to reach $60,000, they are to be distributed equally among outlying areas receiving such funds; authorizing $232 million for Library Services and $38.6 million for Museum Services for FY2004, and such sums as may be necessary for FY2005-FY2009; authorizing the director to enter into contracts and cooperative agreements to help pay the federal share (50% share, with an exception that, by arrangement, 20% of the funds may be used to pay above a 50% share for museum services) for a broader range of museum activities, including learning partnerships and collaborations among museum, libraries, schools, and other community organizations; new technologies to enhance access to museums; and specialized programs for underserved areas; locating advisory functions (which for libraries were previously delegated to the National Commission on Libraries and Information Sciences) within a new National Museum and Library Services Board (previously, solely a Museum Services Board) in the IMLS; requiring the director to carry out and publish analyses of the impact of museum and library services, and increasing from 3% to 3.5% the amount available for federal administrative costs, to provide funding for this new function; prohibiting the use of IMLS funds for construction; and permitting the director of the IMLS to make national awards for library service, in addition to the already authorized national awards for museum service.

The authorization of the Museum and Library Services Act expired with FY2009. Its reauthorization may be considered by the 111th Congress. It was last reauthorized by P.L. 108-81, the Museum and Library Services Act of 2003 (MLSA), signed into law on September 25, 2003. MLSA authorizes funding for Library Services and Technology (LST) and for Museum Services. MLSA is administered by the Institute of Museum and Library Services (IMLS). P.L. 108-81 authorized $232 million for LST in FY2004, and such sums as may be necessary for FY2005-FY2009. It authorized $38.6 million for Museum Services in FY2004, and such sums as may be necessary for FY2005-FY2009. The bulk of LST funding is distributed to states via formula grants. Funding is also provided for library services for Native Americans and for national activities. Participating states are required to develop five-year plans that set goals and priorities consistent with LST purposes (i.e., to enhance information-sharing networks and target library services to disadvantaged populations). The plans must provide for independent evaluations of federally assisted library services. A wide variety of types of libraries—public, public school, college or university, research (if they provide public access to their collections), and (at state discretion) private libraries—may receive LST aid. P.L. 108-81 provided for an increase in initial state grants for LST from $340,000 to $680,000 if the amount appropriated for a year, and available for state grants, exceeds the amount of grants to all states in FY2003. In addition, initial grants for outlying areas were increased to $60,000 if appropriations in a given year are sufficient to meet the higher initial state grant of $680,000. FY2009 was the first year appropriations were sufficient to trigger the higher initial state grant amounts authorized by P.L. 108-81. Funding for Museum Services is administered by IMLS, Office of Museum Services (OMS), through competitive grant programs and cooperative agreements. Funding is used by museums to pay the federal share of the cost of museum services (i.e., not more than 50%). Under Museum Services, the OMS currently administers five grant programs (Museums for America, Museum Professionals for the 21st Century, Conservation Project Support, Native American and Native Hawaiian Museum Services, and National Leadership Grants for Museums) and two cooperative agreements (Museum Assessment Program and Conservation Assessment Program). The OMS also administers a related program, the African American Museum Services program, authorized separately through the African American History and Culture Act (P.L. 108-184). This report will be updated in response to legislative developments.

Introduction The Fair Labor Standards Act (FLSA) is the primary federal statute dealing with minimum wages, overtime pay, and related issues. Under Section 13(a)(1) of the act, employers of persons employed "in a bona fide executive, administrative, or professional capacity" (EAP employees) are freed from the act's otherwise applicable minimum wage and overtime pay requirements. Employees classified as executive, administrative or professional are not protected by the act's regular wage and hour provisions. The Section 13(a)(1) exemption was written into the initial version of the FLSA in 1938 and, in one form or another, has continued to be a part of the statute. On March 31, 2003, the Wage and Hour Division, United States Department of Labor (DOL), proposed revision of the regulations (29 CFR 541) that define the terms executive, administrative and professional and govern implementation of the FLSA exemption. When the opportunity for public comment closed on June 30, 2003, the Department had received in excess of 75,000 communications and the issue had become a focus of intense debate, both with the public and in Congress. When a final rule was issued on April 23, 2004, debate continued. Within the weeks that followed, the new regulation was the subject of various congressional hearings and had been subject to floor action both in the Senate and in the House of Representatives. In late August 2004, the new rule was implemented. Public debate would continue throughout the fall, but without avail. This report sketches the evolution of the Section 13(a)(1) since 1938, noting the occasions on which the regulations governing the exemption (29 CFR 541) were modified. It identifies entries in the Federal Register (with other related sources) to which one might refer for the precise language of the evolving regulation. It does not trace each nuance of change as each modification to the definitions of executive, administrative and professional was added. SECTION I Initial Implementation of the "EAP" Exemption Following a year of hearings and debate, Congress approved the federal wage and hour law (the Fair Labor Standards Act) in June 1938. The act provided, inter alia , for minimum wages (Section 6) and overtime pay (Section 7) for covered workers. Neither then nor now were all workers covered under the protections of the statute; but, in Section 13, Congress wrote into the act certain specific exemptions. Among them was the following: The provisions of sections 6 and 7 shall not apply with respect to (1) any employee employed in a bona fide executive, administrative, professional ... capacity ... (as such terms are defined and delimited by regulations of the Administrator....) The act went on to create within the Department of Labor a sub-unit—the Wage and Hour Division—to be presided over by an Administrator to be "appointed by the President with the advice and consent of the Senate." Establishing a Standard (1938) The act was to become effective October 24, 1938, which allowed four months in which to establish an administrative structure, prepare interpretive materials, and be ready to enforce compliance with the new federal wage/hour standards—of which the EAP exemption was only one small portion. As Administrator, President Franklin Roosevelt selected Elmer F. Andrews, Industrial Commissioner for the state of New York. By mid-August of 1938, Andrews was on duty at the Department and had begun to assemble his staff. Creating a Structure and Process Beyond the statutory language (that bona fide executive, administrative and professional employees were to be exempt), Congress provided the new Administrator with little guidance. The concepts—bona fide executive, administrative and professional—were not defined. No reference was made, in the statute, to salaried as opposed to hourly paid workers; nor was any distinction made between manual and non-manual work. While Andrews could draw from the experience of the National Recovery Administration (1933-1935) in which more highly paid workers appear to have been excluded from wage and hour standards, he was under no obligation to do so. He was free to structure the exemption as he chose; but, given the numerous other tasks before him, he may not have been under any immediate pressure to deal with the EAP exemption. Defining Concepts During a presentation before the Southern States Industrial Council in Birmingham, Alabama, September 29, 1938, Andrews was asked if he had taken any action with respect to Section 13(a)(1), to which he responded: "No. I have had that in mind more than anything else, and we will have that for you within the next week or two." He discussed his experience with the issue in New York state—pointing out how some employers had attempted to circumvent the state law by too broadly defining their workforce as executive or administrative or professional. "... [I]t is very difficult to say ... where a worker leaves off and a professional or executive begins." During the fall of 1938, Andrews, with a draft in hand, "called a conference of representatives of industry and labor to ascertain their views" on the definition of the several terms. On October 19, 1938, five days before the act was to go into effect, the Department announced that the Administrator, "in consultation with the legal branch of the division," had reached a determination. The terms executive and administrative would have a single definition. Among other elements, they were to have the "primary duty" of "management of the establishment" and do "no substantial amount of work of the same nature as that performed by nonexempt employees of the employer." The concept of professional was to be characterized by work that was "predominantly intellectual and varied in character as opposed to routine mental, manual, mechanical or physical work" and was to involve "discretion and judgment both as to the manner and time of performance, as opposed to work subject to active direction and supervision." The education of a professional was to be based upon "a specially organized body of knowledge as distinguished from a general academic education and from an apprenticeship" or other routine training. He (or she) was not to do any "substantial amount of work of the same nature as that performed by non-exempt employees of the employer." The entire regulation, including introductory comments by Andrews, took up two columns in the Federal Register . But, much of the language, at least in skeletal form, would remain central to the EAP regulation and to the proposed rule of March 31, 2003. Whatever the understanding may have been, the concept of salaried was not specified—other than that an executive or administrator would need to earn "not less than $30" for a work week. No earnings threshold was set for a professional. In setting forth the Section 13(a)(1) regulations, Andrews had affirmed that the machinery, within the Department, was in place for contesting any aspect of the definitions that were deemed flawed, inviting citizen input. But, apparently protests were not forthcoming except, possibly, with respect to the concept of professional. Addressing the Associated Industries of New York meeting at Syracuse in late 1938, Rufus Poole, Assistant General Counsel for the Wage and Hour Division, asked: Have you ever tried to define a professional? That is hard enough, but engaged in a "bona fide professional capacity" is even harder. The dictionaries do not give us the answer. They indicate that sometimes the word "professional" is used to mean a person engaged in one of the learned professions—that is medicine, law and the ministry. Then, the dictionaries talk about education and skill and even about one who engages in sports for money. We had to define this term so that employers and employees could use it.... The concept of professional, he stated, was the "only one that has been seriously questioned to date" and, even here, DOL found that critics were not able to suggest "a better definition." Poole added: "There is a statutory duty on the Administrator to promulgate a definition. So we put out the best definition we could." Gradually, employers would voice concern with the Section 13(a)(1) structure: particularly with respect to "certain high-salaried employees." "As the statute now stands," Andrews stated, "these persons are covered unless they fall within the definition of employees engaged in an executive, administrative, or professional capacity." Some employers had argued, Andrews reported, "that certain employees who do not fall within these categories ... are, nevertheless, paid rather high salaries and are engaged steadily in work which is of a very responsible nature." But: "The number of such employees is not know[n] nor is the extent to which the provisions of Section 7 of the act may impose changes in the personnel policies and the administrative practices of business enterprises." Andrews concluded: "... any line of demarcation placing these high-salaried employees into a separate category for special treatment would have to be very carefully drawn...." Meanwhile, legislation was introduced that would variously have modified Section 13(a)(1) especially with respect to treatment of professionals or higher wage employees or both, though this does not appear to have been a high priority, neither with DOL nor with Congress. Andrews indicated his support for "certain clarifying amendments" to the FLSA but opposed the measure reported from the House Labor Committee (H.R. 5435 of the 76 th Congress) as "A Bill to Lower Wages and Establish Longer Hours of Work." The legislation was not adopted. Hearings and Administrative Review During the fall of 1939, Andrews left the Department and was succeeded as Administrator by Colonel Philip B. Fleming, formerly of the Army Corps of Engineers. Other changes in personnel of the Wage and Hour Division followed—as would shifts in administrative policy. In mid-March 1940 (when the regulation governing the EAP exemption, 29 CFR 541, was just under 18 months old), Fleming announced a hearing on proposed changes to the regulation. Apparently anticipating a relatively low-key review (since the EAP exemption appears to have sparked little controversy), the hearing was projected as a one-day affair (April 10) with the Division's Harold Stein designated to preside. In an accompanying press statement, the Division stated: Until recently the Wage and Hour Division had not received any formal application for such exemptions and hearing. The hearing now ordered is in response to the first petitions that were presented. They were granted promptly, which disposes of all pending petitions, and [were] the only ones which have been sent to the Division requesting amendment and hearing in connection with Section 13(a)(1) of the Act. The Division further advised that the hearing "is confined to the wholesale distributive trades because those are the only interests which have petitioned for amendments and hearing on the definitions in question." As Fleming would later observe, "the power to define is the power to exclude." The scope of the exemption (or of wage/hour protection) would rest on the manner in which the basic concepts surrounding the Section 13(a)(1) exemption were defined: not just the pivotal words executive, administrative or professional , but also the terms of the explanatory language associated with the regulation. When that reality was understood by the public, there was a move for more comprehensive hearings. Abraham Isserman, Counsel for the American Newspaper Guild, wrote to Fleming urging caution. From the way this hearing was announced, first impression was gained that persons employed in these categories in the newspaper industry would not be affected by this hearing. On reflection, however, it becomes apparent that if these categories are re-defined for the wholesale distributive trades, a precedent undoubtedly will be established which will have a tremendous weight in the other industries covered by the Fair Labor Standards Act of 1938. Isserman suggested that the hearing could result, whatever its intent, in "a fait accompli in the way of changed definitions in respect to which they would have had no opportunity for study and comment." He suggested a somewhat broader agenda than the announcement had stated and urged the Division to make clear to all interested parties the potential implications of the April 10 hearing. Fleming, in response, indicated that he had considered and rejected concerns such as those of Isserman prior to announcing the hearing. There is such a wide variation in the work and functions performed by executive, administrative and professional employees ... especially in the administrative and professional classes, that it appeared more practicable to hold separate industry hearings. It follows that a definition for one of these classifications in one industry is not necessarily to be treated as a precedent in others. Fleming invited Isserman and representatives of other worker interests to attend the hearing as observers or to submit oral or written comments. But, he also held out the possibility that hearings dealing with other industries might be conducted. Fleming extended the comment period with respect to the April 10 hearing and released the text of the changes proposed by the various industry groups. The hearing commenced as scheduled, but it extended intermittently through several months. "In addition to the oral testimony, approximately 180 briefs, written statements and memoranda were received." Some proposals were sweeping in concept. The Division estimated that "some 1,500,000 clerical or 'white collar' workers employed by all establishments in all industries" were covered by the act and could be rendered exempt (i.e., ineligible for minimum wage and overtime pay protection), depending upon the manner in which the basic concepts were defined. Some argued for a series of regional differentials or earnings/coverage thresholds based upon the population of the communities in which the firms operated. How should on-the-job training be treated for overtime pay purposes? Or, "the efforts of ambitious young men to improve their status by studying their employer's business after working hours?" Other issues were also raised, some of which would reappear frequently through the next several decades. In his review of the evidence, Stein took pains to distinguish between the terms "defined" and "delimited" as they appear in Section 13(a)(1). Thus the Administrator is charged, he suggests, with determining "which employees are entitled to the exemption," but also with "drawing the line beyond which the exemption is not applicable." He concluded: "The general rule in a statute of this nature, that coverage should be broadly interpreted and exemptions narrowly interpreted, is so well known as to need little elaboration here." A New Regulation Promulgated (1940) On October 14, 1940, Colonel Fleming made public a new regulation governing the EAP exemption. It would take effect on October 24, 1940, the second anniversary of implementation of the FLSA—and the date on which the standard work week, under the act, was to be phased down to 40 hours. Administrative Initiative In announcing the 1940 EAP regulation, DOL stated that the Administrator "has broad powers, not only to define but to delimit the extent of these exemptions under Section 13(a)(1)." It is important to recall that the act, itself, provided only that "sections 6 and 7 shall not apply with respect to (1) any employee employed in a bona fide executive, administrative, [or] professional ... capacity." Technical distinctions with respect to qualifications and tests for exemption were the constructs of the Wage and Hour Division in defining and delimiting the brief mandate from Congress. And, even then, it was the product of a young agency exploring its mandate and working with the benefit of relatively few precedents from which to draw guidance. The 1938 regulation set down by Administrator Andrews, however useful, was an administrative device—which Andrews, himself, recognized when inviting post facto comment. But, once in place, the 1938 regulation became the standard upon which future regulations would rest. Fleming had before him some 2,000 pages of testimony collected during the Stein hearings from representatives of employers and organized labor. But, those hearings had operated within the context (and under the assumptions) set down in the Andrews regulation. Thus, the Fleming regulation (1940), a modification of the Andrews regulation (1938), would begin some 60 years of parsing regulatory language leading to the proposed rule of March 31, 2003. The 1940 regulation, including covering statement, ran just over one page in the Federal Register : still a reasonably simple statement of policy. Where the 1938 regulation had combined executive and administrative as a single category, the 1940 regulation separated them into two classifications. An executive, the regulation stated, is one "whose primary duty" consists of management: that is, "who customarily and regularly directs the work of other employees," "who has the authority to hire or fire other employees," "who customarily and regularly exercises discretionary powers," and whose time spent engaged in work comparable to that of nonexempt employees does not exceed 20% of his (the executive's) work hours. The regulation added that the 20% restriction "shall not apply in the case of an employee who is in sole charge of an independent establishment or a physically separated branch establishment." An exempt executive must be paid a salary of at least $30 per week. An administrative employee "... is compensated for his services on a salary or fee basis at a rate of not less than $200 per month." He must "regularly and directly" assist another "bona fide executive or administrative" employee "where such assistance is nonmanual in nature and requires the exercise of discretion and independent judgment." Further, it provides, an administrative employee is one: ... who performs under only general supervision, responsible nonmanual office or field work, directly related to management policies or general business operations, along specialized or technical lines requiring special training, experience, or knowledge, and which requires the exercise of discretion and independent judgment; or ... whose work involves the execution under only general supervision of special nonmanual assignments and tasks directly related to management policies or general business operations involving the exercise of discretion and independent judgment. Administrative employees were more broadly defined in the new regulations "to include those whose duties, while important and associated with management, are functional rather than supervisory." A professional is one whose work is "predominantly intellectual and varied in character as opposed to routine mental, manual, mechanical, or physical work." It is work that requires "the consistent exercise of discretion and judgment," the output of which cannot "be standardized in relation to a given period of time," that does not exceed 20% of the type of work performed by nonexempt employees, that requires "knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study, as distinguished from a general academic education and from apprenticeship, and from training in the performance of routine mental, manual, or physical processes," and that is "predominantly original and creative in character." A professional employee must be paid not less than $200 per month (roughly $50 per week). A Foundation Established The 1940 regulation followed closely the pattern (and the language) of the 1938 regulation. With the former in place, a long-term foundation was established for implementation of the EAP exemption. Some accounts of the new regulation "were confusing," DOL acknowledged, and Colonel Fleming, in a letter to Joseph Curran, president, Greater New York Industrial Union Council, offered certain clarifications. He commenced by affirming the individual character of the EAP exemption. "Of course," he explained, "the exemption or non-exemption of any individual employee under these definitions is a question for individual factual determination ...." Thus, the Division would need to proceed on a case-by-case basis where any controversy existed. The pattern of requirements fell gradually into place. Some thought the $30 earnings threshold for exemption as an executive was "too high." Fleming, reflecting the authority of the Administrator, explained: "... it was my belief that there would be a basic error in describing as an 'executive' any person who is paid less than $30 a week." He added: "... heretofore the exemption was applicable to hourly paid employees if their hourly pay was sufficiently high to produce $30 a week. This proviso has been changed and no hourly paid employee can qualify for the exemption." Thus, the salary basis test was set in place. Similarly, other qualifying elements came to be established. The work of an administrative employee, for example, would need to be "non-manual." Limitation on the amount of time devoted to non-EAP duties must be no more than 20%. Technical or "routine work" would not qualify a worker for exemption. Further, professionals, to be exempt, would have to meet a series of tests which Fleming enunciated and which would remain, by and large, a part of the regulatory structure. Again, the regulatory language (the qualifying elements for Section 13(a)(1) exemption) was the creation of the various Wage and Hour Administrators. Increasingly, that language became precise and detailed. Once in place, it seemed to take on an authority and weight almost equivalent to the statutory language. Hearings and Regulatory Modification (1949) Through the next several years, various proposals surfaced that urged modification of the EAP regulation. However, given the exigencies of World War II, public policy concerns seem to have been deflected into other areas. In October 1947, the Division initiated a new round of hearings on 29 CFR 541 to commence on December 2, 1947. As in 1940, the hearings led to publication of a study of the executive, administrative and professional exemption. Prepared by Harry Weiss who presided at the hearings, it was published in June 1949. The hearings "continued for 22 separate days" and heard "more than 100" witnesses. In addition, briefs were filed "in lieu of personal appearances ... by more than 150 groups and individuals." The proposed regulatory revisions were published on September 10, 1949, and a new final rule was published on December 24, 1949, under authority of William R. McComb, the new Wage and Hour Administrator. Among the changes in the regulation was an increase in the earnings threshold: to be exempt, an executive was to be paid "on a salary basis at a rate of not less than $55 per week ($30 in Puerto Rico or the Virgin Islands)"; an administrator was to be paid "on a salary or fee basis at a rate of not less than $75 per week ($200 per month in Puerto Rico or the Virgin Islands)"; and a professional was to be paid "on a salary or fee basis at a rate of not less than $75 per week ($200 per month in Puerto Rico or the Virgin Islands)." In each category a worker paid not less than $100 per week—and meeting certain other specified duties requirements—would be deemed to qualify for exempt status. (See discussion of " Paid on A Salary Basis " below.) On December 28, 1949, the Division published in the Federal Register a lengthy interpretive bulletin explaining the regulation in detail and defining the terms used in the regulation. The interpretive material would be incorporated within 29 CFR 541 as Subpart B. A More Systematic Development of Policy (1950s) The Weiss Report would continue through a decade to provide a context for discussion of how executives, administrators, and professionals were to be treated under the FLSA. Gradually, a more detailed policy would evolve. Paid on A Salary Basis During the hearings of the late 1940s, one issue raised by the witnesses had been the concept of payment on a salary (or fee) basis. The Weiss Report explained: ... a number of proposals relating to the "salary basis" requirements in the regulations were made in the course of the hearing. One of these was that the requirement of payment "on a salary ... basis" be eliminated and that the "average compensation" be used instead; another, that employees be permitted to qualify for exemption even if paid an hourly wage. Some witnesses suggested that the term "salary basis" be defined to mean payment of a fixed or guaranteed sum. The evidence at the hearing showed clearly that bona fide executive, administrative, and professional employees are almost universally paid on a salary or fee basis. Compensation on a salary basis appears to have been almost universally recognized as the only method of payment consistent with the status implied by the term 'bona fide' executive. Similarly, pay on a salary (or fee) basis is one of the recognized attributes of administrative and professional employment. The proposals to eliminate the requirement and to apply an hourly rate or average earnings test may therefore be rejected as inconsistent with true executive, administrative or professional status. Although presented as a general requirement in Subpart A of the regulation (29 CFR 541), the concept was explained more fully in Subpart B. By the 1950s, speaking generally, several patterns were already discernable where the salary tests were concerned. First . The threshold was regarded as the best determinant of who might legitimately be classified as an executive, administrator or, in some contexts, a professional. Second . There was some interest in indexation of the thresholds, though it also drew opposition and seems to have been dismissed by the Division. Third . It was clear that, with inflation, there was some erosion of the value of the thresholds, but, if undesirable, this was not deemed intolerable. The Motion Picture Exemption By the early 1940s, the motion picture industry had argued that FLSA overtime requirements were especially burdensome, given the special nature of the work of production technicians. After a review, Harold Stein (1940) observed: "Although the hourly pay of most of these employees is extremely high in comparison with most other industries, that fact in itself does not and cannot qualify them for exemption as 'administrative employees.'" In May 1953, the Association of Motion Picture Producers, Inc., protested that many of its highly paid technical workers ought to have been exempt under Section 13(a)(1) of the FLSA except that they were paid on an hourly basis rather than on a salary basis. Administrator McComb explained that "[t]hose portions of the regulations which define and delimit the terms 'executive,' 'administrative,' and 'professional' include in each case the requirement that the employee must be compensated 'on a salary basis.'" The requirement had been written into the regulation in 1940 by Fleming—at his discretion. Now, at the urging of industry, McComb (exercising his discretionary authority) proposed a further change. Following a 30-day comment period (during which no comments were received), the Division published the following modification of the regulation: 541.5a Special provision for motion picture producing industry . The requirement ... that the employee be paid "on a salary basis" shall not apply to an employee in the motion picture producing industry who is compensated at a base rate of at least $200 a week (exclusive of board, lodging or other facilities). The special provision for the motion picture industry remains in the regulation; the earnings threshold would remain at $200 per week until 1975 when it was raised to $250 per week on an interim basis by Administrator Betty Southard Murphy. Salary Basis Applied More Broadly In the Federal Register of March 9, 1954, McComb proposed amendment to 541.118 of Subpart B: the segment dealing with payment on a salary basis. Among other changes in the wording of the section, he added language dealing with deductions from pay and the impact they could have for a worker's status as exempt. Following a comment period, McComb issued a final rule. The Division now disallowed deductions from salary as a penalty for disciplinary infractions. It did, however, agree to allow deductions from salary as a penalty for violations of safety rules "of major significance." (See discussion of " Pay Docking and Local Governmental Employees " below.) To Raise the Earnings Threshold Given inflationary pressures ("particularly the widespread increases in wage and salary levels"), Administrator Newell Brown proposed (late 1955) that the earnings thresholds for Section 13(a)(1) exemption be raised. He scheduled a December 12 hearing on the issue—leaving recommendations for the level of such increases to the witnesses. In January 1956, Brown noted that the base rates (for EAP exemption) had not been raised for Puerto Rico and the Virgin Islands since 1940 and called for a review of conditions in those areas. During hearings conducted by Assistant Administrator Harry Kantor, the salary issue was discussed at length. Some urged "that the salary tests be eliminated." It was argued that they were unnecessary and that exemption "should be based solely on the employee's duties." Kantor disagreed, dismissing the suggestions. The terms bona fide executive, administrative and professional imply a certain prestige, status and importance, and the employee's salary serves as one mark of his status in management or the professions. It is an index of the status that sets off the bona fide executive from the working squad-leader, and distinguishes the clerk or sub-professional from one who is performing administrative or professional work. Generally speaking, salary is a good indicator of the degree of importance attached to a particular employee's job. Maintaining the salary tests was discretionary with the Administrator; but there was a practical consideration. They "simplify enforcement" by "screening out the obviously nonexempt employees. Employees who do not meet the salary test," he stated, "are generally also found not to meet the other requirements...." Proposals varied. There was apparent consensus that an increase was warranted—but industry suggested a lower wage structure, whereas labor argued for a higher range. Kantor, in assessing the issue, may inadvertently have exposed what some may view as the arbitrary character of the process. The "primary objective of the salary test," he said, is drawing a line between groups of workers. That line, he stated, "... cannot be drawn with great precision, and can at best be only approximate," and "has been recognized in previous revisions of the regulations." He added: The salary tests have thus been set for the country as a whole ..., with appropriate consideration given to the fact that the same salary cannot operate with equal effect as a test in high-wage and low-wage industries and regions, and in metropolitan and rural areas, in an economy as complex and diversified as that of the United States. Having raised, obliquely, the issue of regional differentials, he did not pursue it. However, if the tests were to be used, Kantor opined, they should be set "at points near the lower end of the current range of salaries for each of the categories." Like Stein, Kantor had concerns about the entire process. "Available information indicates clearly that there is considerable overlapping between salaries paid non-exempt employees and the salaries currently paid employees for whom exemption may be claimed ...." And, again: "It has been the Divisions' experience that there is a tendency on the part of employers to misclassify employees, particularly in the administrative and professional categories, when the salary levels become outdated by a marked upward movement of wages and salaries." A proposed rule, raising the salary thresholds, was issued on April 5, 1958. Although some urged that any increase in the thresholds be deferred "because of unfavorable economic conditions," Administrator Clarence Lundquist resolved to proceed—and issued a final rule to take effect on February 2, 1959. The threshold for executives was to be "not less than $80 per week ($55 ... in Puerto Rico or the Virgin Islands)." For administrators, it would be "not less than $95 per week ($70 ... in Puerto Rico or the Virgin Islands)." And, for a professional, the rate would be "not less than $95 per week ($70 ... in Puerto Rico or the Virgin Islands)." In each case, an employee paid at not less than $125 per week, meeting other standards, would be deemed to meet the requirements for exempt status. Updating and Reconsideration (1960s) During the early 1960s, the Wage/Hour Division took up two aspects of the Section 13(a)(1) exemption. First , there was the continuing issue of adjustment of salary thresholds. Second , there was a broader concern about how exemption should be applied, especially in retail and service industries to which wage/hour protections had been extended under the 1961 FLSA amendments. Adjusting the Earnings Thresholds In January 1962, Administrator Lundquist noted the "widespread increases in wage and payroll levels which have taken place" since the various thresholds were last adjusted (1959) and convoked two hearings on the issue: March 26, 1962, in Washington, and April 9, 1962, in Santurce. As might have been expected, reaction to the EAP exemption was split. (a) Some employer representatives proposed elimination of the salary tests entirely. (b) Others argued for retention but "set on an industry, area, or regional basis." (c) Still others proposed that the tests "be set at the level of the lowest paid executive employees in the lowest wage and salary areas of the country." The dominant position among employers, DOL reported, was that the salary levels "should not be increased." Generally, employee representatives appeared to favor a threshold increase. It was also suggested that any increase in the salary thresholds be pegged to a percentage of the increase in the cost of living: a form of indexation. Ultimately (to be effective September 30, 1963), the thresholds were raised as follows: for executives, to "not less than $100 per week ($75 ... in Puerto Rico, the Virgin Islands, or American Samoa)"; for administrative workers, to "not less than $100 per week ($75 ... in Puerto Rico, the Virgin Islands or American Samoa)"; and for professionals, to "not less than $115 per week ($95 ... in Puerto Rico, the Virgin Islands or American Samoa)." In each case, where other qualifications had been met, a salary of $150 per week would be deemed sufficient "to meet all of the requirements of this section." Treatment of the Service and Retail Industries Initially, the Fair Labor Standards Act (FLSA) had applied primarily to workers and establishments in production work. Under the 1961 FLSA amendments, wage/hour protection was gradually extended to workers employed in the retail and service trades. That process would continue under the 1966 amendments to the FLSA and cause the Department to update its EAP coverage criteria. The basic employer position, during the 1963 Wage/Hour hearings, was "... that the present [29 CFR 541] regulations are not appropriate to the retail and service industry and should not be applied." It was concerned, inter alia , about problems of definition, of industry structure, and of the separation of exempt from non-exempt functions. The DOL summary states: "Employer representatives made it clear that the primary purpose of these [their alternative proposals] ... is to extend the minimum wage and overtime exemption to assistant managers and assistant buyers." Again: Employer representatives further state that it is necessary in retail establishments to delegate managerial authority and responsibility downward to the lowest possible echelons. With particular reference to assistant managers and assistant buyers in this regard, they contend that such employees are not "assistants to" the manager or buyer, but that they in fact have equal authority and responsibility with the manager or buyer in the managerial function. Some argued that the wage/salary structure in retail and service establishments (with commissions, bonuses, etc.) was different from other industries and that "the imposition of salary tests would require a complete revamping of their accounting practices." Lundquist was "not persuaded ... that the managerial functions of executive employees in retail and service establishments differ in any significant particular from those of bona fide executive employees in other industries or establishments." Further, the Administrator stated: ... without intending comment as to the merits of the proposed definition of management in retail and service establishments, I consider it both unnecessary and improper to include in the regulations a definition of the managerial function which would have exclusive application in any one industry. Lundquist argued for a lower "tolerance" for non-exempt work by otherwise exempt executive and administrative employees. He accepted the employer contention that the salary threshold for administrative employees should not be set higher than for executive employees. "Employer representatives contend, and the Division's experience under the regulations has demonstrated," he stated, "that there is frequently an overlapping in the work performed by executive and administrative employees, with attendant difficulty in distinguishing these categories." Threshold adjustment was allowed on an interim basis for newly covered workers in the retail and service industries: $80 per week for executive and administrative employees ($55 in the territories) and $95 for professionals ($75 in the territories). After September 1965, the rates were to equal those for otherwise covered employees. Section 13(a)(1) concerns then moved on to peripheral matters. Refining the Process (late 1960s and 1970s) In June 1969, Wage and Hour Administrator Robert D. Moran noted that "significant increases in wages and salary levels have taken place since the salary tests were last amended." Therefore, he proposed an across the board increase with a public hearing on the projected increase to be held on September 16, 1969. Adjusting the Earnings Thresholds Employers, generally, urged: (a) that the rates not be raised; (b) that the salary tests be eliminated; and (c) that differentials be established for geographical regions and for different industries. Some employers argued that increases should "be limited to the percentage increase in the Consumer Price Index"—in effect, a form of indexation. At the same time, Moran acknowledged, "[m]any organizations and individuals opposed our proposals on the basis that they would be inflationary." Labor spokespersons "all agreed that an increase in the salary requirements" was needed—but that the proposed increases were insufficient. "One union representative recommended an automatic salary review provision ... stating that such a provision would eliminate the lengthy periods which normally occur between revisions ... and would keep the salaries current and meaningful." By this point, a certain redundancy was apparent: perhaps among the witnesses, but certainly in the reaction of the Division. To an employer call for differentials (geographic and industrial), Moran responded that the current system had "been successfully applied for 30 years." As for elimination of salary tests, he stated: "... the validity of these tests has been fully explored;" arguments for their elimination "are not supported by the Divisions' experience." Annual review and/or indexation were relegated to the realm of "further study." Industry objection to higher thresholds, Moran argued, was faulty: the increases would simply be keeping up with past inflationary trends. With respect to the union appeal for substantially higher thresholds, he protested: "... a salary increase of the magnitude which they have proposed would in my judgment cause the loss of the exemption to a substantial number of employees who were intended by Congress to be exempted." New salary tests were set as follows: $125 per week for executive and administrative employees; $140 for professional employees. A rate of $200 was set for persons earning at a higher level under which "less emphasis is given" to a worker's duties and responsibilities. For those brought under FLSA wage and hour requirements by the 1966 amendments, Moran set a phased-in structure: executive and administrative employees, $115 per week until February 1, 1971, when the rate would go up to $125 per week; professionals, $130 per week to rise to $140 per week afer February 1, 1971. The test for those earning at higher levels would similarly be phased-up: $175 per week, to rise to $200 beginning February 1, 1971. Expansion and Tinkering With the basic update of the thresholds out of the way, Moran turned to broader (and, potentially, more contentious) issues. A notice in the Federal Register of September 10, 1970, cited several new areas that, ultimately, would become subjects of concern with respect to the Section 13(a)(1) exemption. Among them: First . The 1966 FLSA amendments made the act "applicable ... to employees in hospitals, nursing and rest homes, and other residential care establishments ... bringing within the Act various para-medical employees in occupations"—not then included with the 29 CFR 541 structure. Second . "Consideration is also being given to the status under the exemption of employees in occupations in the data processing field." Moran explained: "Employees are identified by a multitude of titles, including program operator, programer, systems analyst, and many others. They have varied experience and training," he explained, "and perform a variety of tasks which are difficult to measure in terms of their significance and importance to management." Third . While the concept of professional had applied to the learned and artistic professions, there were others to whom it might also be made to apply. Should it include, Moran asked, other occupations such as "highly skilled technicians in the electronics and aerospace industries" not, strictly speaking, in a field of science or learning but whose crafts "are learned primarily through extensive experience and on-the-job training rather than through a 'prolonged course of specialized intellectual instruction and study." The Division, faced with petitions from some industries, was beginning to rethink the scope of the EAP exemption and whether it might not be expanded to include certain workers presently covered under FLSA minimum wage and overtime pay standards. Among issues specified for discussion were: (a) to explore "a clearer definition of 'prolonged course of specialized intellectual instruction and study'"; (b) whether those possessed of such training "perform activities substantially different or more difficult than those having a lesser degree of training"; and (c) the extent to which workers trained in fields of science and learning "consistently exercise discretion and judgment of substantial importance, as opposed to engaging in merely routine or mechanical work or making analyses based on the results of standardized tests." An initial hearing was scheduled for December 1, 1970; but then, in the interim, the Administrator broadened the scope of the hearing. On November 13, 1970, he called for written testimony on a proposal to clarify "the interpretation of the 'primary duty' test" and to explore the manner in which the Division should deal with "employees who have responsibilities similar to those of the owner or manager." The hearing was moved back to February 2, 1971. In December 1971, a new Administrator, Horace E. Menasco, issued a new final rule which involved, primarily, interpretation. He added guidelines "to aid in determining exemption of paramedical employees." With respect to the status of computer services workers, Menasco was dubious. Although he offered clarification, he was unwilling to recognize the field as professional. He explained: The employer representatives contended that computer programmers and systems analysts should be considered professional employees. Some supporters of this position would include the position of junior programmer in this category. The testimony brought out, however, that a college degree is not a requirement for entry into the data processing field, that only a few colleges offer any courses in a field designated as computer science, and that there are presently no licensing, certification, or registration provided as a condition for employment in these occupations. Menasco stated that employee spokespersons had opposed a grant of professional status to computer services workers, arguing that it was "a relatively new occupation area" and is in "a state of flux and that job titles and duties are not regularized and overlap and intermix in a confusing manner." They also argued that "to expand the exemption [to the computer services field] was an invitation for employers to work such employees longer hours with no additional compensation." Menasco concurred that the field was not, then, "generally recognized by colleges and universities as a bona fide academic discipline." He added: To consider a period of technical training, on-the-job training, or years of experience as an alternative to a prolonged course of intellectual instruction and study would seriously weaken the professional exemption by allowing employers to claim the exemption for various kinds of paraprofessional and sub-professional groups. Thus, he declined to grant professional status for the industry but did make "certain additions and clarifications" in Subpart B. Treatment of "highly paid technicians" proved to be similarly vexing. Statements, pro and con, were received from "the electronic and aerospace industries; the funeral service industry; the news media; employment placement agencies; and technical artists and writers of the electronics industry." In a review of the submissions and testimony, Menasco found that salary levels for the targeted technicians "were not exceptionally high." Further, the workers in question feared a "loss of income" through the "loss of overtime pay." They expressed concern that the absence of an overtime pay requirement would result in assignment of longer hours of work and a parallel "increase in unemployment." Menasco declined "to change the definition of professional employee" with respect to technicians. Adding Equal Pay Protections As part of the "Education Amendments of 1972," Congress added to Section 13(a)(1) the language "(except section 6(d) in the case of paragraph (1) of this subsection)." Adding Section 6(d), which prohibits discrimination on the basis of sex in the payment of wages, to Section 13(a)(1) creates a situation in which an employer may be exempt from the minimum wage and overtime pay requirements of the FLSA but must comply with the act's equal pay requirements. In mid-March of 1973, Acting Wage and Hour Administrator Ben Robertson made the necessary technical adjustments to the Code of Federal Regulations and then arranged for publication of the equal pay provisions in the Federal Register . Readjusting the Earnings Thresholds On August 12, 1974, Wage and Hour Administrator Betty Southard Murphy signed a notice of proposed rulemaking dealing with the several salary thresholds under Section 13(a)(1) of the FLSA. The thresholds, she pointed out, had last been raised in March 1970 and she argued that they were increasingly out of date. Since the last round of increases, she stated, the Consumer Price Index had increased by 27.0 points. Further, Congress had raised the federal minimum wage by 40 cents an hour: from $1.60 to $2.00—with mandated step increases in the minimum wage to $2.30 by January 1976. To make the salary tests "realistic," Murphy proposed new thresholds and called for comment through a 30-day period. The response was substantial and the Administrator extended the comment period until October 29, 1974. A public hearing was also scheduled. The proposal sparked attention, but it was reported that comment was "predominantly negative" with the exception of trade union testimony. The proposed threshold increases would be "inflationary," it was argued. The National Association of Manufacturers (NAM) protested that it did not see "how it is possible to justify the increase." For the NAM, Michael Markowitz stated: Throughout industry, there are many supervisory positions, both in the plant and in the office, which pay less than $15,600 a year [the interim 'upset' test level proposed by Murphy]. To establish the upper limit at that level would create administrative chaos since, for a substantial percentage of employees with responsibilities that are genuinely executive or administrative, it would become necessary to document all the other tests to ensure compliance with the law. A similar concern, though from a different perspective, was voiced by Nathaniel Goldfinger of the AFL-CIO. He stated, It has been clear throughout the history of the FLSA that unless the salary tests were set high enough to separate nonexempt from exempt employees they would be useless and the other duty tests would have to be depended upon to make a correct separation between exempt and nonexempt employees. The interim character of the proposed threshold increases caused broad concern. It would set in motion two shifts in personnel policy: interim and long-term. And, there was concern that, whatever a survey by Bureau of Labor Statistics (BLS) might find, rolling back the interim threshold levels would be impractical. Other issues were raised: the desire for regional differentials (for the South and rural areas), small business viability, and alleged inflationary and employment impacts. Murphy did not call for indexation of the thresholds, per se, but she stated: "... it is believed that the widely accepted Consumer Price Index may be utilized as a guide for establishing these interim rates." Although the increases initially proposed had been deemed economically justified by DOL, Murphy opted for a more conservative approach. Thus, she stated, "in order to eliminate any inflationary impact, the interim rates hereinafter specified are set at a level slightly below the rates based on the CPI." Because she had adopted a conservative approach, Murphy decided that no further distinction should be made between the covered workforce at large and those brought under the act by the amendments of 1966 or by subsequent enactments. The new rates, to become effective in April 1975, were listed as follows: for executive and administrative employees, not less that $155 per week; for professionals, not less than $170. Special sub-minima were set at $130 per week for executive and administrative employees and at $150 per week for professionals in Puerto Rico, the Virgin Islands, and American Samoa. For workers paid at a higher rate (and whose duties may not be monitored as carefully for exemption purposes), the so-called "upset test" was set at $250, with a special rate of $200 for workers in Puerto Rico, the Virgin Islands, and American Samoa. The threshold applicable to the motion picture industry was set at $250 per week. Murphy regarded the threshold rates as an interim expedient. "The present rates have become obsolete and interim rates are required to protect the interests of all concerned, including employees and employers, and to enable the Wage and Hour Division to administer the Act in a proper and equitable manner." But, she admonished: "The use of interim rates is not ... to be considered a precedent." The Salary Thresholds Fall into Disuse A salary threshold as an indicator of executive or administrative status had been instituted under Andrews and, extended to professionals, expanded upon by his successors. Some may argue that the system was flawed: that the thresholds were too low or, conversely, too high. Some suggested that the thresholds be indexed in order to retain a fixed value; others urged that they be dispensed with altogether, classification for exemption resting upon the duties tests. Threshold elimination was never, formally, adopted as a policy goal: indeed, their retention and updating would be continuously espoused. But, in practice, they came to be dispensed with after 1975—and remain so, subject to resolution of the March 31, 2003, proposal. The Carter Administration Administrator Murphy had regarded the 1975 threshold levels as temporary, pending an economic study of the EAP exemption by BLS and its review by Wage/Hour. The study, prepared by Robert Turner, was published in 1977. In an April 7, 1978, statement, Wage and Hour Administrator Xavier M. Vela affirmed that "current salary tests ... no longer provide basic minimum safeguards and protection for the economic position of low paid executive, administrative, and professional employees...." Vela called for a hearing on May 8, 1978, to review the thresholds and "to determine the amount" by which they "should be increased." Taking into account changes in the CPI and a recently legislated increase in the federal minimum wage, Vela urged that the thresholds be raised. The May 1978 hearings spanned three days with 22 witnesses and 189 written statements. Comments, DOL noted, fell into two categories: concern about the methodology for determining threshold levels; and, assertions with respect to impact. DOL reported that some employers, "particularly those with fixed or declining revenues, stated that they would have no option but to lay off some of their employees, if the levels were raised." Employee witnesses anticipated little impact since, in many industries, "average hourly wages were significantly higher than the salary tests being proposed." Rudy Oswald of the AFL-CIO argued that the proposed tests "are not high enough to eliminate from the exemption employees whose status in management or the professions is questionable." Some may have found puzzling a split within the Carter Administration, pitting the Council on Wage and Price Stability (COWPS) against DOL. In a June 1978 submission to the Department, COWPS argued that "[n]o rationale for the exemptions" had been provided by Congress in 1938. Since "no rationale is given for the salary test," it stated, "no consistent reason for or method of changing it can be or is offered." COWPS faulted the methodology used by DOL, charging that it rested upon support documents that provide neither "cost data or evidence of a need for DOL action in this area." COWPS asserted that the proposed increase would be inflationary and raise labor costs to the disadvantage of employers: an impact that "could signal an insincerity on the part of this government in its anti-inflationary stance." It then presented its view of appropriate economic policy, urged that some form of indexation be instituted with respect to the thresholds (perhaps pegging, but apparently not reliance upon the Consumer Price Index), and concluded: In summary the Council urges DOL to withdraw its proposal on the grounds that this DOL action is unnecessary to protect workers, that it is not required by Congress, and that it unduly contributes to inflationary pressures. Moreover DOL's action ... is in direct contravention of clearly stated administration policy to restrain increases in prices and wages. The only benefit to which the Council would point was the "higher pay received by impacted workers." Both DOL and COWPS focused upon statistical analysis of the cost impact of a threshold change, and both (to a lesser extent, COWPS) tended to ignore fundamental policies inherent in the Section 13(a)(1) exemption. For 2 ½ years, the proposed rule remained dormant. Then, on January 9, 1981, Donald Elisburg, Assistant Secretary for Employment Standards, signed a final rule increasing the thresholds on a two-step basis: the first to take effect on February 13, 1981; the second, on February 13, 1983. But other events intervened. The Reagan and Bush Administrations On February 12, 1981, there appeared in the Federal Register a brief notice, signed by Henry T. White, Jr., Deputy Administrator, Wage and Hour Division, stating that the effective date of the rule dealing with the EAP exemption would be "stayed indefinitely ... to allow the Department to review the rule fully before it takes effect." The comment period on the rule was declared "reopened." Reconsidering the Threshold Issue The process remained open but did not reach fruition. On March 27, 1981, DOL sought comment as to whether the stay should be indefinite. Of early responders, "the overwhelming majority ... mostly restaurant[s] and hotels," were reportedly opposed to any increase in EAP thresholds—some opponents quoting COWPS criticism of the initiative. An announcement of April 30, 1982, stated that the rule had been "targeted for review by the President's Task Force on Regulatory Relief"—but a new rule did not appear. The process began anew with an advanced notice of proposed rulemaking published in the Federal Register of November 19, 1985. "The Department is interested in the views of the public with respect to all aspects of the regulations. Comments," it stated, "are invited concerning the current definitions of terms relating to the salary, duties, and responsibilities tests for such employees, as well as the interpretations of such definitions." The notice presented 20 specific areas of concern. On January 17, 1986, the comment period, originally set to close on January 21, was extended to March 22, 1986. No action on the broad issue would be taken through the next several years. Pay Docking and Local Governmental Employees When developing regulations for Section 13(a)(1), the Secretary had imposed numerous requirements that, once in place, had to be complied with. Among these was the requirement that workers be salaried—which had come to mean: ... that an employee will be considered to be paid 'on a salary basis' if the employee regularly receives each pay period a predetermined amount constituting all or part of the employee's compensation and the predetermined amount is not subject to reduction because of variations in the quality or quantity of work performed. Subject to specified exceptions, the employee must receive the full salary for any week in which any work is performed without regard to the number of days or hours worked.... Thus, for short periods (the language would be interpreted to mean less than one day), any deduction from an employee's pay for hours not worked would vitiate his or her status as salaried. With the passage of time (and amendment of the FLSA), state and local governmental employees were brought under the act. At the same time, state and local statutes, in some cases, forbade payment of workers for time not actually worked (even for short periods). And, so, a conflict developed. If deduction were not made, the employer would be in violation of state and local law. On July 11, 1990, the Court of Appeals for the 9 th Circuit ruled, in effect, that salaried employees, against whom a deduction was made for absences of less than a full day could no longer be regarded as exempt under Section 13(a)(1), and therefore would be eligible for overtime pay for hours worked in excess of 40 per week. State and local governments found themselves confronted with substantial back pay liability. As the liability debt mounted, some Members of Congress called upon DOL for clarification. "To date," chided Senator John Seymour (R-CA), "DOL has not issued final regulations; this has left the courts without clear guidance and, as evidence, they have rendered conflicting rulings." In early September 1991, the Department issued a new regulation: to provide immediate relief and to effect a longer term solution. However, in March 1992, the regulation (which had been implemented on an emergency basis) was invalidated by the U.S. District Court for Eastern California. Again, public sector employers voiced concern, as did some Members of Congress. On August 14, 1992, DOL issued a new final rule. It provided that an "employee of a public agency," otherwise qualified for EAP exempt status, "shall not be disqualified from exemption ... on the basis that such employee is paid according to a pay system established by statute, ordinance, or regulation" that, in effect, mandates docking of pay for short-term absences. The Clinton Administration For the Clinton Administration, updating the earnings thresholds remained a part of the regulatory agenda. A target date for rulemaking was initially set for September 1993. No action was taken, however. Although the issue remained on the agenda, no new timetable was immediately set. In a Federal Register notice for November 14, 1994, DOL recalled that the thresholds had not been updated since 1975 when they were set "on an interim basis." It noted further that the "salary level tests are outdated and offer little practical guidance in the application of the exemption." Numerous comments and petitions, it stated, had "been received in recent years from industry groups regarding the duties and responsibilities tests in the regulations" and "recent court rulings have caused confusion on what constitutes compliance with the regulation's 'salary basis' criteria in both the public and private sectors." The Department continued: Some 23 million employees are within the scope of these regulations. Legal developments in court cases are causing progressive loss of control of the guiding interpretations under this exemption and are creating law without considering a comprehensive analytical approach to current compensation concepts and workplace practices.... Clear and comprehensive regulations will once again provide for central, uniform control over application of these regulations and will eliminate this apprehension. Thus, DOL concluded "that a comprehensive review" was needed. It stated that it would re-open the comment period—continuing from the Reagan era initiatives of 1985. A proposed rule, it suggested, might be expected by April 1995. In May 1995, the issue was again deferred, as it would be through the remainder of the Clinton Administration. On April 24, 2000, the now routine notice in the Federal Register projected the target date for notice of proposed rulemaking as April 2001—after the Administration would have left office—and that date, in turn, was deferred until September 2001. SECTION II A New Initiative from the Bush Administration (2003-2004) Entering office early in 2001, the Bush Administration was confronted with the on-going issue of 29 CFR 541: the EAP regulation. It, too, noted that the regulation was outdated and pledged to engage in "outreach and consultation." The spring of 2002 saw yet one more deferral—with action targeted for early 2003. A New Rule Proposed On March 31, 2003, Wage and Hour Administrator Tammy McCutchen posted in the Federal Register a "proposed rule with request for comments." Administrator McCutchen proposed an extensive reworking of the EAP regulation. The proposal would somewhat condense the existing regulation and, further, would: Raise the salary test threshold for all EAP workers to $425 per week (annualized at $22,100 per year). Anyone earning less than the new threshold would automatically be eligible for overtime pay on the basis of low earnings. Those satisfying the salary test (earning more than $22,100 annually) would still have to meet a duties test. Create a new highly compensated threshold at $65,000 per year. Anyone earning in excess of $65,000 a year and performing any function associated with EAP status could be exempt. Redefine portions of the duties test for EAP exemption. Such definitions may include what the employee actually does, his or her relationship to the employer or the firm, the relative importance of the EAP duties as opposed to non-EAP work, matters of independence of judgment and initiative, the education required of a professional, and related matters. As had been the case during earlier Administrations, a review of 29 CFR 541 sparked intense interest. By the time the comment period closed on June 30, over 75,000 comments had been received by the Department and an intense debate had been triggered. In the early fall of 2003, DOL continued to evaluate testimony and to review policy options. Congressional Reaction The complications and controversies involving the Section 13(a)(1) exemption, had deep roots. Litigation concerning aspects of the problem had drawn the attention of workers and employers—and of Members of Congress. The problems were not new; that action was taken to rectify them may have been somewhat unexpected. An Early Alert? During the second Clinton Administration, the General Accounting Office began a review of the Section 13(a)(1) exemptions. It conferred widely and, thus, alerted each side of the debate to potential regulatory issues. In September 1999, GAO published a report, Fair Labor Standards Act: White-Collar Exemptions in the Modern Work Place . The report focused upon five issues. (1) How many employees are covered by the white-collar exemptions and how have the demographic characteristics of these employees changed in recent years? (2) How have the statutory and regulatory requirements changed since the enactment of the FLSA? (3) What are the major concerns of employers regarding the white-collar exemptions? (4) What are the major concerns of employees regarding the white-collar exemptions? (5) What are possible solutions to the issues of concern raised by employers and employees. GAO found (in 1998) between 19 and 26 million full-time workers classified as executive, administrative, or professional employees and, thus, exempt from FLSA minimum wage and overtime pay protections. A gradual shift from manufacturing to a service economy since 1938, GAO suggested, had resulted in an increase in the number of exempt workers. About 42% of exempt workers were women: exempt workers "were more than twice as likely as nonexempt workers to work overtime." Neither side appears to have been wholly satisfied with the EAP exemption as structured. Employers, GAO found, were concerned about potential liability where workers were mis-classified. They also argued that the existing regulation was "confusing" and led to "inconsistent results in classifications of similarly situated employees." Workers were concerned "about preserving work-hour limitations" and believed that the regulations "as applied ... were not sufficient" and did not "adequately restrict" classification of workers as exempt. The salary test, they stated, had been "severely eroded" by inflation and the duties test had been "oversimplified, leading to inadequate protection of low-income supervisory employees." The Appropriations Process On July 10, 2003, during House floor consideration of the Labor, Health and Human Services, and Education, and Related Agencies Appropriations bill ( H.R. 2660 ), an effort was made by Representative David Obey (D-WI) to block implementation of the proposed EAP rule. The Obey amendment was defeated in the House by a vote of 210 ayes to 213 nays. Through early September, similar action was debated in the Senate. On September 10, 2003, by a vote of 54 yeas to 45 nays, the Senate voted to approve an amendment to H.R. 2660 offered by Senator Tom Harkin (D-IA). It read: None of the funds provided under this Act shall be used to promulgate or implement any regulation that exempts from the requirements of Section 7 of the Fair Labor Standards Act of 1938 ... any employee who is not otherwise exempted pursuant to regulations under Section 13 of such Act (29 U.S.C. 213) that were in effect as of September 3, 2003. Thus, under the Harkin amendment, DOL would be able to proceed with its initiative to increase the earnings thresholds, since that would narrow the exemption rather than expand it, but would be restricted from making changes in the definitions of duties and of the concepts of executive, administrative, or professional which some perceived as potentially expanding the general exemption and certainly removing overtime pay coverage from individual workers currently protected. On October 2, 2003, the House took up appointment of conferees on H.R. 2660 . At that juncture, Representative Obey offered a motion to instruct the House conferees "to insist on Section 106 of the Senate amendment regarding overtime compensation under the Fair Labor Standards Act" (i.e., the Harkin amendment). Following debate, the Obey motion was approved by 221 ayes to 203 nays: the House conferees were instructed to support the Harkin amendment in conference. Thus, both the Senate and the House were on record with respect to the Harkin amendment and the proposed revision of the Section 13(a)(1) regulation. The Senate had spoken directly; the House, through instruction given to its conferees. In the background was the threat of a Presidential veto if the Harkin amendment (and/or certain other contentious provisions) remained part of the bill. As the first session of the 108 th Congress moved to a close, several appropriations bills (among them, the DOL funding measure) remained to be passed. Ultimately, the House developed an omnibus appropriations bill ( H.R. 2673 : the FY2004 Consolidated Appropriations bill). H.R. 2660 remained in conference, having been by-passed. The conference report on H.R. 2673 ( H.Rept. 108-401 ), filed November 25, 2003, provided: The conference agreement deletes without prejudice language proposed by the Senate that none of the funds appropriated in this Act shall be used to promulgate or implement any regulation that exempts employees from the Fair Labor Standards Act of 1938. If approved as reported, the conference report would leave the Department free to move forward with the proposed rule restructuring the Section 13(a)(1) exemption. House Consideration of the Conference Report The report was called up for debate in the House on December 8, 2003. Representative Louise Slaughter (D-NY) opened discussion of the issue by pointing out that, the instructions given to the conferees notwithstanding, the Harkin amendment has "mysteriously ... disappeared." Representative Rosa DeLauro (D-CT) picked up on the same theme. "... [I]n clear defiance of the will of both chambers of Congress ...," she stated, this bill "allows the Department of Labor to gut" the FLSA, "effectively repealing the 40-hour workweek" while it "opens the door to mandatory overtime...." And, Representative Obey affirmed: "Both Houses of the Congress voted to provide overtime protections for workers because the administration is trying to take those protections away...." Mr. Obey added: "This bill, without one minute of comment in the conference committee, arbitrarily at the instruction of the Republican leadership rips out those protections." The omnibus bill was complex with overtime pay but one of its components. Representative John Boehner (R-OH), chairman of the Committee on Education and the Workforce, stressed the benefits the bill would provide for education. House Majority Leader Tom DeLay (R-TX) lauded the fiscal aspects of H.R. 2673 . "This omnibus represents the values of discipline, innovation, and conviction we all treasure," and declared the bill full of "... sound, disciplined policies, funded at responsible, reasonable levels." And Representative C. W. Bill Young (R-FL), House Appropriations Committee Chairman, stressed fiscal responsibility, observing: "... is we are within the budget. There are a lot of good increases.... But we offset those increases with rescissions, so that we were able to stay within the budget." From the context of the debate on the conference report, other issues appear to have been of greater concern to the Majority than was overtime pay regulation. The House vote on the conference report was 242 yeas to 176 nays. Senate Consideration of the Conference Report It remained for the Senate to consider the conference report on the omnibus appropriations bill. That action was postponed until late January 2004—the start of the second session. A First Cloture Attempt On January 20, when the Senate reconvened, the Majority Leader, Senator Bill Frist (R-TN), announced that a cloture vote on consideration of the Consolidated Appropriations Act of 2004 would occur at 3 o'clock. He warned Members that failure to approve the measure could result in "a continuing resolution"and noted dire consequences such action could product. Minority Leader Tom Daschle (D-SD) responded that although the proposed legislation "was once a good bill," the Administration had "intervened at the eleventh hour and demanded changes, laid down an ultimatum, and even forced the conference to take positions in direct conflict with earlier positions taken on rollcall votes in both the House and the Senate." Certain provisions, he stated, now "made the bill unsupportable to many Senators" and urged the Senate to "take the time to fix the bill's problems because they affect millions of American families." The debate that followed was divided along partisan lines with Democratic Senators taking the lead on the overtime question. Two issues seemed paramount. First, there was substantive concern that the regulation proposed by DOL would adversely affect workers. Senator Joseph Biden (D-DE) stated that the regulation "... would make it easier—would actually create an incentive—for employers to classify workers who have little advanced education and little or no authority, to classify those workers as white collar workers" with the result that "... millions of workers could lose the right to overtime pay." A second concern was with process. Senator Jack Reed (D-RI) protested that the bill "contains elements that contradict the express votes of this body and the other body, bipartisan votes...." Senator Tim Johnson (D-SD) asserted that "[t]here "was no conference in a meaningful sense." When there was "no request for time" from the Majority, Senator Daschle pleaded for "... a few days to work with the administration and the House to fix the most egregious provisions in this bill, provisions that have already been rejected by both Houses of Congress and bipartisan majorities." In reply, Senator Frist recalled the costs of delay: "shortchanging our diligent efforts ... in the fight against terrorism," loss of funding for "food security," a negative impact upon "millions of veterans," adverse effect for "people who suffer from HIV/AIDS," "shortchanging the needs of schools." A vote on cloture failed: 48 yeas to 45 nays. Cloture and Approval of the Conference Report On January 22, 2004, the Senate again considered cloture. Anticipating that cloture would carry, Senator Daschle viewed what he stated was "the hijacking of the process that went on during the deliberations on the Omnibus appropriations bill." The Senator opined: ... I know why we will probably get cloture today. Nobody here wants to be accused of shutting the Government down. Everybody understands the commitment that this legislation reflects in its support for veterans and for so many other things that we care deeply about. Senators are put in a very difficult position. Turning again to the issue of process, Senator Daschle affirmed: "... I think it is an erosion of democracy in our Republic that is deplorable...." Throughout, both in the House and Senate, debate on the overtime pay issue was laced with expressions of concern about the legislative process. Senator Jon Corzine (D-NJ) sought unanimous consent to proceed with a concurrent resolution that would have restored the Harkin amendment to the omnibus measure, that is, barring the use of funds to be appropriated to DOL for implementation of the proposed overtime regulation. But, objection was heard. Moving from the overtime pay issue, Senator Kay Bailey Hutchison (R-TX) reminded the Members: "If we do not pass this bill—the alternative is a continuing resolution—it means that last year's priorities would prevail, and there would be some major losses in funding for the next nine months of this year." Like Senator Frist, Senator Hutchison reviewed the range of programs that could be negatively impacted were there resort to a continuing resolution. And, she concluded: We will pass this bill and give our children a chance, and our country a chance, to have the increases we need for our homeland security, and the education of our children and the research into cancer to find the cause and the cure. We must pass the omnibus bill to go forward in all of these aspects. From the Minority, however, it was suggested that the rationale for deleting language approved by both Houses had not been explained. "One would think if they were going to take these out," stated Senator Edward Kennedy (D-MA), "at least they would ... come down here and explain to the American people why." He continued: "Let's hear them defend the Labor Department's regulation...." Senator Hutchison responded, inter alia : "There has been a full vetting of the differences on this bill." She again cited the programs that would suffer were the omnibus bill not approved. Just prior to a second vote on cloture, Senator Frist again reviewed the programs that would be lost were the conference report not approved. He did not, then, address the substance of the overtime pay regulation or of other provisions in dispute. Cloture was agreed to by a vote of 61 yeas to 32 nays (7 not voting). Thereafter, the Senate approved the conference report by a vote of 65 yeas to 28 nays (7 not voting). The bill was signed by President on January 23, 2004 ( P.L. 108-199 ). Alternative Attempts at Accommodation Through 2003 and into 2004, several other initiatives with respect to overtime pay regulation (Section 13(a)(1)) had been under development. Freestanding Legislation On July 8, 2003, Representative Peter King (R-NY) introduced H.R. 2665 , legislation to restrict the Department from exempting workers from overtime pay protection through the proposed rule. A companion bill, S. 1485 , was introduced by Senator Kennedy on July 29, 2003. The bills were referred respectively to the House Committee on Education and the Workforce and to the Senate Committee on Health, Education, Labor, and Pensions. No action has been taken on either bill. A Hearing in the Senate: Round One On July 31, 2003, a hearing on the proposed overtime rule was conducted by the Labor, Health and Human Services, and Education Subcommittee on the Senate Appropriations Committee. Chaired by Senator Arlen Specter (R-PA), the Subcommittee searched for common ground for agreement between DOL and those critical of the proposed regulation. Much of the testimony focused upon what the proposed Section 13(a)(1) rule would do. Ross Eisenbrey, speaking for the labor-oriented Economic Policy Institute, argued that DOL had seriously underestimated the likely impact of the rule. He suggested that the Department had not been entirely open with respect to the assumptions and methodology upon which its estimates were based. So the Institute, he explained, conducted its own analysis and came to conclusions somewhat different from those of DOL. Eisenbrey was concerned about definitions embedded in the rule—which could, he suggested, result in a significant body of workers being moved out from under the wage/hour protection of the act. Wage/Hour Administrator Tammy McCutchen conceded that some workers would be reclassified to exempt status, but she argued that the impact would be slight. Quoted in the Daily Labor Report , she affirmed: "We have no intention of expanding the exemptions." The hearing established a context for debate; it did not appear to achieve common ground. The Study Commission Proposal During the summer, critics of the proposed rule continued to voice concern with respect to the particular workers who could be adversely affected and, more broadly, with respect to the implications of the regulatory change for the general structure of federal wage/hour regulation. On September 9, 2003, in an effort to avoid any "disruption which would be occasioned ... by the [proposed DOL] regulations going into effect" and, hopefully, to effect a reasonable accommodation, Senator Specter introduced S. 1611 . The bill proposed a commission of eleven members with representatives from business, the public sector, and organized labor. The commission would seem to bring clarity with respect to existing overtime pay regulations and the possible impact of the proposed rule. Under the proposed legislation, the commission would "conduct of a thorough study of, and develop recommendations on, issues relating to the modernization of the overtime provisions" of the FLSA. Among specific mandates, the commission would: (a) review the categories of exemptions, the numbers of workers involved, and the impacts of changes in overtime pay regulation (i.e., establish a more solid statistical base); (b) examine the regulation currently under consideration to determine whether it "is sufficiently clear to be easily understood by employers and workers;" (c) assess "the paperwork burden" associated with the regulation as proposed and the impact for enforcement and compliance by DOL; and (d) "study other issues determined appropriate by the Commission." While the commission would proceed with its work, the pending Section 13(a)(1) regulation would be held in abeyance. Under S. 1611 , no modification to the overtime pay requirements of the FLSA would be made until at least 60 days after the commission's report is submitted. Creation of a commission would assure, in effect, that the Secretary would not be able to proceed until Congress had an opportunity to evaluate any proposed regulatory change with respect to overtime pay. The bill was referred to the Committee on Health, Education, Labor, and Pensions. A Hearing in the Senate: Round Two The proposed revision of the Section 13(a)(1) regulation produced a divided response: labor/workers, generally, in opposition to the proposal; the employer community generally in support of the change. On January 20, 2004, as the Senate returned from recess and took up consideration of the conference report on H.R. 2673 (discussed above), Senator Specter convened a hearing on the proposed rule before the Appropriations Subcommittee on Labor, Health and Human Services, and Education. Secretary of Labor Elaine Chao, the lead witness, opened the hearing by reminding Congress that, when adopting the FLSA, it has chosen "not to provide definitions for many of the terms used" but, rather, had left to the Secretary "the authority and responsibility to 'define and delimit' these terms 'from time to time by regulations.'" The "primary goal" of the proposed rule, she stated, "is to have better rules in place that will benefit more workers"—especially "low-wage workers." Its intent, she affirmed, is "to restore overtime protections, especially to low-wage, vulnerable workers who have little bargaining power with employers." She pointed to the need to clarify existing law: to free the parties from "costly class action lawsuits" and allow employers to "use litigation costs to grow and expand their businesses and create new jobs." Ms. Chao added: "Clear, concise and updated rules will better protect workers and strengthen the Department's ability to enforce the law." The Department, she stated, "... has 'zero tolerance' for employers who try to play games with the overtime laws." There seemed little disagreement among the witnesses that the existing regulations (29 CFR 541) were ambiguous and that the salary thresholds for exemption needed to be updated. There was significant disagreement, however, about both the intent and the likely impact of the proposed rule. AFL-CIO Secretary-Treasurer Richard Trumka charged that the proposed rule "would redefine 8 million workers as ineligible for federal overtime protection" and "thousands more workers every year would be stripped of their overtime rights." The proposal, he asserted, "would effectively gut the 40-hour workweek through administrative regulation." The issue before Congress, Trumka argued, "is ... whether the Bush Administration should be allowed to strip workers of their overtime rights." The proposed rule, he concluded, was "designed for the benefit of employers, not workers." Economist Jared Bernstein of the Economic Policy Institute questioned the statistical foundation for DOL assertions. The difference between the Department's impact assessments and those of the Institute "is large enough to totally change the way one views" the proposed regulation. And he argued that the proposed rule would be deleterious to the interests of workers. Management attorney David Fortney, a former Deputy (and Acting) Solicitor of Labor in the first Bush Administration, praised Secretary Chao for undertaking "the long neglected task" of updating the Section 13(a)(1) regulations. While he declared the rulemaking process to be "fair and orderly," Fortney pointed out that those who might disagree with the outcome could always sue. The final regulations, he concluded, "will undoubtedly be the subject of challenges in the courts." To avoid unnecessary litigation, however, was an issue of Subcommittee concern. If one acknowledges an absence of clarity under the existing regulations, would the proposed rule be an improvement? The Daily Labor Report observed: Senator Arlen Specter (R-Pa.), who chairs the Labor-HHS subcommittee, said several times at the hearing that the proposed rule does not clarify definitions of "professional" and "administrative" employees who would be exempt from overtime protections. For example, he said, the proposed rule says a professional should be performing work "of substantial importance.... How do you define substantial importance?" Secretary Chao acknowledged that both the current regulation and the proposed rule were "very complicated." A Continuing Focus of Dispute Neither passage of the omnibus legislation nor the hearings by the Senate Appropriations Subcommittee resolved the dispute over the Administration's Section 13(a)(1) proposal. Consideration of the issue would continue in a variety of venues. Exempting Veterans? Central to the new regulation proposed by DOL is the issue of definition. For example, how would a bona fide "professional" be defined for Section 13(a)(1) purposes? Under current regulation, a professional is not simply a highly skilled worker. Rather, DOL has anchored the concept to an academic credential: normally (through not in all cases), a college degree plus appropriate professional training. The proposed rule would alter that—and, in the process, the exemption of professionals from FLSA wage/hour protection could be significantly expanded, some argue. Compare the language of the current and proposed regulations with respect to the requirements for professional status. The proposed rule, some argue, is more flexible and/or ambiguous than the language that it would replace: moving from a documentable professional degree to a series of alternative sources and levels of knowledge that, in turn, would presumably need to be defined and measured. What meaning is conveyed to an employer or employee in Seattle or El Paso by the terms substantially the same knowledge level or the degreed employees or other intellectual instruction ? How much work experience (with other instruction) would be required for equivalency with the current concept of bona fide professional? The phrase "training in the armed forces" sparked a vigorous immediate reaction. During a hearing sponsored by the Senate Democratic Policy Committee in early November 2003, John Garrity, a civilian electronics technician from Philadelphia, expressed concern that "... the new rules will eliminate overtime pay for military veterans who gained their technical training in the military." Garrity argued that veterans, recipients of military training (however measured) who return to work in the civilian labor force, could be deemed to be professional for Section 13(a)(1) purposes and exempted from FLSA wage/hour protection. Concern about the veterans status issue built slowly, gradually being picked up by the media. During a hearing on January 20, 2004, Senator Patty Murray (D-WA) asked Secretary Chao about DOL's "attempts to lower the educational requirements" for the professional exemption and observed that "... there is no guidance on how to make the determination on whether or not a veteran's training in the military is equivalent to a four-year degree." Secretary Chao, perhaps misunderstanding the question, replied that "the military is not covered by these regulations." Ms. Chao's response did not quiet concerns. Trumka of the AFL-CIO, a later witness, branded as "particularly reprehensible" the action of the Administration (the proposed rule) in "stripping overtime rights from veterans who have received technical training in the military." Trumka stated that if "an employer determines" training received in the military is equivalent to professional training, "that employer will now be allowed to deny those veterans overtime eligibility and refuse to pay them anything for overtime work." Later that afternoon, Senator Kennedy asserted that "our veterans and our men and women serving so bravely now in Iraq and across the world ... return to civilian life only to find that the training they earned in the military is cruelly used to deny them their right to overtime pay." He added Under current regulations, workers can be denied overtime protection if they fall within the category of what they call professional employees, workers with a 4-year degree in a professional field. It is changed this year under the Bush administration. The plan would do away with the standard and allow equivalent training in the Armed Forces. You go and serve in Iraq and get the training to serve in Iraq, and come back here and you are ineligible, under these regulations, for overtime pay. Discussion continued over several days with Senator Kennedy (and others) repeatedly raising the issue of training received in the armed forces and exemption from FLSA wage/hour protections. Some major companies, the Senator suggested, find that "most skilled technical workers received a significant portion of their knowledge and training outside the university classroom, typically in a branch of the military service." So, Senator Kennedy stated, the Administration added the military training provision "banning them from receiving overtime." A Dialogue with the Department of Labor A Departmental response was not immediate, but a DOL spokesperson later stated that "no veterans will be affected unless they are professionals." To critics, however, the affirmation may have begged the question since at issue was how the concept of professional would be defined and how it would be applied to veterans once they were discharged and reentered the civilian labor force. Later, under date of January 27, 2004, Secretary Chao addressed a letter to Speaker Dennis Hastert (R-IL) in which she affirmed that the "'white collar exemptions' do not apply to the military. They cover only the civilian workforce." She added that "nothing in the current or proposed regulation makes any mention of veteran status" and the proposed rule "will not strip any veteran of overtime eligibility." Ms. Chao argued that "military personnel and veterans are not affected by these proposed rules by virtue of their military duties or training." And she charged that critics of the proposed rule were trying "to confuse and frighten workers." Similarly, Assistant Secretary Victoria Lipnic reportedly asserted: "This is a new low in the disinformation campaign against the Department of Labor's proposal to strengthen overtime pay protection for workers." "No one is claiming that the rule affects the military force," countered Senator Kennedy. "The issue is [that] the veterans who leave the military to work in the civilian workforce would lose overtime protections because they have had training in the Armed Forces." The provision expanding the definition of learned professional to persons who have received "training in the armed forces," the Senator stated, "is new language. It is not in the current regulations. The only purpose is to take away overtime for veterans." The proposed regulation is not concerned about "people who are in the military" but, rather: "It is after they get out that they are going to be subject to this." On February 12, 2004, during a hearing before the House Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies, Representative Steny Hoyer (D-MD) questioned Secretary Chao on the veterans' issue. The expanded definition of a learned professional is "new language in your regulation" and has caused "fear ... by some veterans groups and by others" that training received in the military will be regarded as "professional training which will then be used to exempt people from overtime eligibility." Secretary Chao responded that "... there is a great deal of malicious disinformation on this rule." The Hoyer/Chao dialogue continued: CHAO: ... These regulations are very, very hard now to enforce. Our own investigators are sometimes at a quandary as to how to fully enforce these rules. And what's happening is that the courts themselves are very confused.... Veterans, I don't know how—the people who spread the rumors that veterans would lose all overtime ought to be ashamed of themselves because they are, again, potentially endangering veterans. They are frightening them for no good purpose. And as I mentioned, there is no such provision in the proposed rule affecting veterans. Our final rule has not even come out yet.... HOYER: But you didn't reference as to why the language was added. CHAO: I don't think it was added at all. It was not added. There is no impact at all on veterans. There was some aspect about the military training. This is a white-collar regulation, so that's why it does not affect workers such as construction workers, because it's blue collar. First responders, it doesn't—it's only white-collar workers. Second issue was about—and this rule only applies to civilian workforce. it does not apply to the military workforce. HOYER: ... Veterans are for the most part civilians. CHAO: Well, this—that is not the case. Veteran status has got nothing to do with qualifying for the professional exemption. Military training does not, in and of itself, qualify someone for the professional exemption. So that is not true. The Secretary then responded more generally. "The current regulations are very, very complex and the outdated nature of the regulations have made it even more ambiguous and difficult to interpret ... very, very confusing." On March 4, 2004, the venue had changed (a hearing before the House Committee on Ways and Means concerning the Fiscal Year 2005 Budget) but the issue remained largely the same. Representative Earl Pomeroy (D-ND) again raised the question of overtime pay with Secretary Chao, citing reports that the Department had provided "guidance" to employers—"advisory points that appear to be advising employers in terms of how to avoid paying overtime." The Secretary replied: "Any employer trying to evade the overtime rules will feel the full wrath of the United States government. We will brook no evasion of the law." But Representative Pomeroy posed the question differently. POMEROY. ... It appears to me that you have allowed employers to avoid paying overtime by changing the overtime rules. I understand you enforce the rules, but you have changed the rules for the benefit of employers at the expense of their employees.... CHAO. Sir, I take great offense at your tone. I do not need to be lectured about a tremendous disinformation campaign that is waged by people who are deliberately—deliberately taking action that could potentially hurt workers. Ms. Chao went on to explain that the advisory points had been written into the regulatory proposal. "It was required by the regs." Amending the JOBS Act (S. 1637): Phase I Defeat of the Harkin amendment to the omnibus appropriations bill (FY2004) may have had less to do with the overtime pay issue than with the need to conclude the appropriations process. If so, it would be reasonable to expect a Harkin-type amendment to reemerge in another context. Debate Recommences in the Senate On March 3, 2004, the "Jumpstart Our Business Strength (JOBS) Act" ( S. 1637 ) was called up in the Senate. Early in the process, it would be linked to the Section 13(a)(1) overtime pay issue. Almost immediately, Senator Harkin announced that he would "offer an amendment ... that will stop the administration from implementing its proposed new rules to eliminate overtime pay protection for millions of American workers." The Administration, he stated, "has zero credibility on this issue [overtime pay]"; the proposed regulation is "a frontal attack on the 40-hour workweek." He averred that "the new criteria for excluding employees from overtime are deliberately vague and elastic so as to stretch across vast swaths of the workforce." Senator Harkin again raised the veterans' training issue. "According to the proposed rules, employers can consider specialized training and knowledge gained in the military as equivalent to what is learned in professional schools. This will allow employers to reclassify veterans as ineligible for overtime." Senator Harkin concluded broadly: "The truth is, we cannot build a sustainable recovery by exporting jobs, by driving down wages, and by making Americans work longer hours without compensation." Support for the Administration's proposal was voiced by Senator Mike Enzi (R-WY). Senator Enzi recalled discussions with "small businessmen" in Wyoming who "are being killed by the [current] ... regulations and, in some cases, by trial attorneys." Turning to the putative Harkin amendment (not then introduced), Senator Enzi asserted that it would "prohibit the Secretary of Labor from updating the rules exempting white-collar employees" from the wage/hour protections of the act and would be "an attempt to reject the new, turn back the clock, and look to yesterday for the answer to tomorrow's problems." Senator Enzi stated: "Through the course of the debate on overtime over the next several days, we will hear a lot of numbers. Some of them are statistics and we know how statistics work." With that caveat, he read into the record the statistical projections of possible impact presented by DOL in support of the proposed rule. Senator Enzi turned to the issue of the possible impact of the proposed rule for veterans. "Supporters of this amendment claim that military personnel and veterans will lose their overtime pay under the proposed rules. However, military personnel and veterans are not affected by the proposed rules by virtue of their military status or training," he said. Ignoring the issues raised by Senator Kennedy and others, he observed: "Nothing in the current or proposed regulation makes any mention of veteran status." Senator Enzi described the current regulation as "antiquated and confusing," adding: "Ambiguities and outdated terms have generated significant confusion regarding which employees are exempt from the overtime requirement. The confusion has generated significant litigation and overtime pay awards for highly paid white-collar employees." The proposed regulation, he stated, would "update and clarify" the treatment of workers under Section 13(a)(1). Discussion of the overtime pay issue continued intermittently as part of the general debate on S. 1637 . On March 4, Senator Reid appealed for a vote on the Harkin amendment to limit the authority of DOL to proceed with the proposed rule. "We have not been able to have a vote on that," he stated, "because of parliamentary barriers thrown up by the majority." Senator Harkin agreed: "It is obvious that the Republican side of the aisle does not want to vote on the overtime bill." Prelude to Cloture For the most part, comment originated with the Minority, the Majority remaining focused on other aspects of S. 1637 —issues that, of course, also concerned the Minority. After the discussion of March 4, the Senate moved on to other matters, resuming consideration of S. 1637 on March 22. Again, Senator Harkin stressed "how urgently necessary it is" to deal with the proposed overtime rule. Pointing to the essential trust of the bill (serious issues of trade and international economy), he urged: "Let's have a good debate. I am willing to have a time agreement, if the other side would like to have a time agreement." Referring to the paucity of opposition comment, he stated: I want to hear from the other side why we should let these proposed regulations go into effect. Let's have the debate so the American people can understand what is at stake, and let's have an up-or-down vote .... Let's have an up-or-down vote on whether the Senate would agree with the administration that these proposed rules ... should go into effect.... He suggested that the Department might "go back to the drawing board, work with Congress, do it in an open, aboveboard manner." Senator Charles Grassley (R-IA) proposed that a series of amendments to S. 1637 —including the Harkin amendment—be in order. Senator Reid, joining the Senator from Iowa in a call for "an up-or-down vote," expressed concern that the Majority still might invoke cloture, which would be viewed as counterproductive, in an effort to block the Harkin amendment. Senator Reid added: "... I think it would be extremely doubtful, without an up-or-down vote on overtime, that he [the majority leader] would be able to get cloture on this bill." When the Grassley amendment had been agreed to, Senator Harkin called up amendment No. 2881, the overtime amendment, and sought its immediate consideration. Senator Harkin reaffirmed: "... all we want is debate and a vote on the overtime issue ... probably tomorrow—not tonight but tomorrow." Like Senator Reid, he had procedural concerns. "I have heard some talk around that the other side, the Republican side, will now file a cloture motion. Obviously, if that cloture motion wins, then my amendment fails...." Senator Grassley acknowledged the possibility that cloture would be sought, although he indicated that he would be opposed to doing so. "That, of course, is a leadership decision." Were cloture to be called for, Senator Grassley expressed the "hope that [it] will not poison the waters." He noted that the cloture process takes 48 hours and suggested that the intervening period be used to reach agreement so that "the cloture motion could be vitiated." The Senator then turned to the tax and trade issues of S. 1637 . Thereafter, Senator Mitch McConnell (R-KY) submitted a motion for cloture. The motion for cloture, some suggested, would serve as a gauntlet. The Minority, said Senator Reid, "believe we are entitled to an up-or-down vote regarding ... overtime." He explained: "We know there is an effort not to have a vote, the reason being this amendment will pass.... The majority doesn't want to vote on this because it is embarrassing to the President who has no support from the American people on this overtime issue." While it was not the purpose of the Minority, he stated, "to amend this bill to death," still a cloture vote could result in bringing down S. 1637 which, he averred, "is not good for the country." Cloture Denied, the Senate Moves On Senator Max Baucus (D-MT) opened the session of March 23 with an explanation of the parliamentary situation. The Harkin amendment was then pending. "The effect of this cloture motion," he said, "would be to block a vote on the Harkin Amendment." The motion for cloture, he concluded, "has brought the Senate to something of an impasse." Senator Harkin stated that the motion for cloture would delay a vote until March 24 and even then "[t]hey will not get cloture." There seemed a general agreement that the primary bill was important. The World Trade Organization, Senator Grassley explained, had found that "our pretax policy is an illegal export subsidy, and consequently ... has authorized Europe to do up to $4 billion a year in sanction against U.S. exports." Senator Harkin stated that he had heard "rumors the leadership on the Republican side will ... pull the bill and somehow blame Democrats ... for not getting this bill through." While he affirmed that he "would like to get this bill through," Senator Harkin averred: The other side, though, simply because they do not want a vote on overtime, is saying they are going to go ahead and pay these tariffs. It seems to me what they are saying is they would rather pay tariffs to Europe than overtime to workers. Again: "The administration may want to take away overtime pay ... But at least we ought to have the right to vote on whether we ought to uphold that decision." Senator Jon Kyl (R-AZ) rose in opposition to the Harkin amendment and to critique the views of opponents of the DOL initiative. He sought "to clarify the situation so American workers are not frightened of these proposed rules"—which, he said, had been subject to "mischaracterization by certain people." He suggested that some comments about the rule might be "inaccurate, misleading, and therefore ... frightening." Senator Kyl then reaffirmed the case for the rule that had been presented by Secretary Chao, affirming: It [the proposed rule] does not take away people: it adds to the number of people who would qualify for overtime.... It will actually ensure that the lowest 20 percent of all salaried workers get pay of time and a half for overtime work. Further, he stated, by redefining the concepts included in the Section 13(a)(1) exemption, the DOL initiative would "eliminate all of [the] ... cost and all of the wasted energy in litigation and paying a lot of trial lawyers by clarifying who is covered and who is not covered." In general, Senator Jeff Sessions (R-AL) concurred with the Senator from Arizona. He protested "how frustrating it is to see a very carefully constructed proposal by the Secretary of Labor, Elaine Chao, being mischaracterized, therefore placing fear in the American people through the misrepresentation of the nature of these regulations." Of the alleged negative impact of the proposed rule, Senator Sessions affirmed: "That is not true. It is false. In fact, it is going to guarantee a lot of people overtime who are not receiving it today." And, he continued: "There is no plot here to try to undermine the right of working Americans to receive overtime. That is a completely bogus and political argument...." Senator Sessions voiced concern about the "confusing and outdated regulations" currently in place. Suggesting at least one of the reasons some employers have endorsed the Department's initiative, he stated: Many employers worry about incurring large unexpected litigation costs due to their inability to properly interpret these confusing rules. Even lawyers and Department of Labor investigators can have difficulty deciphering the line between exempt and nonexempt employees. Senator Sessions added: "If we make it clearer so that it is indisputable what overtime is and what it is not, we will see less confusion." On the motion for cloture, March 24, the vote was largely along party lines (51 yeas to 47 nays: Republicans in favor of cloture, Democrats opposed)—short of the 60 votes needed to end debate. The Senate then moved on to other business. A Second Cloture Attempt Various bills, in some respects interrelated, would occupy the attention of the Senate during late March and early April. Among them was H.R. 4 , welfare reform reauthorization, consideration of which commenced on March 29. As an adjunct to the effort to move people from welfare to work, Senators Barbara Boxer (D-CA) and Kennedy proposed an amendment to raise the federal minimum wage from its current level of $5.15 and hour, in steps, to $7.00 an hour. On March 30, Senator Frist called for invocation of cloture; and, on April 1, 2004, the motion for cloture failed (51 yeas to 47 nays)—and again, setting aside a major piece of legislation, the Senate moved on to other issues. Debate in the Senate through this period shifted easily from minimum wage to overtime pay (with other labor-related concerns) often linked both in substance and procedure. On both sides of the debate, there were some who appeared to view these issues as part of a general initiative, though their perspectives differed. Senator Frist, as the vote for cloture on H.R. 4 neared, observed: "If cloture is not invoked, it will be clear that this legislation will be gridlocked by these unrelated matters and therefore will be difficult to finish." Senator Dashle denied that there was a partisan purpose in resisting cloture. "It isn't our unwillingness to have a good debate; it is our unwillingness to be locked out of the process." Again, Senator Daschle stated: "People on the other side of the aisle, for whatever reason, have refused to allow us an opportunity to have an up-or-down vote on protecting worker's overtime, on minimum wage, and on unemployment compensation." With the failure of cloture on H.R. 4 , the focus shifted back to overtime pay and S. 1637 . Off the floor, discussion proceeded between the Majority and Minority with respect to compromise. On the floor, debate continued. On Monday, April 5, Senator Frist announced that the Senate would try again to complete consideration of S. 1637 . "We continue to have discussions on how to finish this legislation ... Given the importance of this bill and the timeliness of it," he stated, "it is imperative we find a way to complete the measure as quickly as possible...." Later that afternoon, Senator Frist filed a second cloture motion on S. 1637 . He announced that a vote on cloture would occur on Wednesday, April 7. Debate and negotiation continued. Senator Harkin rose to discuss the economy: outsourcing of jobs, an increase in the minimum wage, and the DOL overtime pay initiative. Tying the issues together, he asserted that revision of the Section 13(a)(1) regulation was "all but guaranteed to hurt job creation." He chided that the Majority "would rather sacrifice the underlying bills [ S. 1637 and H.R. 4 ] ... than allow a vote on these issues so crucial to working Americans." Conversely, Senator Grassley stressed the importance of the tax and trade provisions of S. 1637 . "I want Americans to understand that Senators on my side of the aisle are ready, willing, and able to provide a real shot in the arm to America's manufacturing sector." He said: "We are blocked from providing the relief that American manufacturing deserves and needs." Senator Gregg charged the Minority with "shooting the programs which would create jobs"and termed the Minority position "cynicism ... rather extreme." Senator Grassley added: "A vote against stopping debate is a vote against tax relief for America's beleaguered manufacturing sector...." On April 7, the Senate conducted a second cloture vote with respect to S. 1637 . Again, it failed: 50 yeas to 47 nays. Later, Senator Frist stated that the negotiators were "making real progress" and that they were attempting to pare down likely amendments through agreement by both sides. At day's end, he still expressed hope that the Senate would continue to work with S. 1637 . As the session commenced on April 8, Senator Frist announced that the Senate "will resume consideration" of S. 1637 . "We have been working with the Democratic leadership to lock in a final list of amendments to the bill. We will be continuing that effort over the course of this morning." Further consideration, however, would not be immediate. The bill was again set aside but Senator Frist sought unanimous consent "that when the Senate returns to the bill, Senator Harkin or his designee be recognized in order to offer his amendment relating to overtime." He affirmed that S. 1637 was a bill "that we absolutely must address and we will continue to address." As he laid out the program for April 19 (following the Easter recess), the Majority Leader announced that an agreement had been reached with respect to limitation of amendments on S. 1637 . But, still ahead was actual floor consideration of S. 1637 and of the Harkin amendment—and accommodation of any differences with the House of Representatives. SECTION III Promulgation of the Final Rule: April 23, 2004 The final rule governing Section 13(a)(1) was published on April 23, 2004. The 152-page document was divided into two parts. Section one summarizes comments received by DOL, together with the Department's reaction and policy justification for the final rule. The second section constitutes the rule per se. Both segments are essential to an understanding of DOL's intent and to the interpretation of its policy. The final rule quickly sparked hearings and floor debate. Substance or Illusion? The final rule appears to differ from the proposed rule in some details but not in broad approach. The lower salary threshold below which workers cannot be classified as exempt ($22,100 in the proposed rule) was raised to $23,660. The proposed rule had set $65,000 and over as the salary test for highly compensated employees. That upper threshold, under the final rule, was increased to $100,000. Above that level, workers who perform some executive, administrative and/or professional functions, can be classified as exempt. Thus, there are three categories of salaried workers under the final rule: (a) those earning less than $23,660 who are minimum wage and overtime pay protected; (b) those earning between $23,660 and $100,000, who, depending upon their duties, may be exempt; and (c) those earning more than $100,000 who likely are exempt. The new threshold levels of the final rule have received considerable attention. How significant these changes are may not be clear. Most bona fide executive, administrative, or professional workers can be expected to earn in excess of $23,660. Above that level, exemption rests, largely, upon the duties test. While DOL argues that the duties test under the final rule will be clearer and easier to apply, critics suggest that it could prove to be more complex and more likely to provoke litigation. Professional exemption, based upon knowledge acquired in the armed forces, had produced strongly negative public comment. It was argued (incorrectly, according to DOL) that returning veterans could find themselves unexpectedly exempt because they had received training in or through the military: for example, in such fields as nursing, electronics, and space related work. While the old rule had emphasized knowledge acquired on the basis of college plus technical/professional training, the proposed rule had opened professional status and exempt status to workers: ... who have substantially the same knowledge level as the degreed employees, but who attained such knowledge through a combination of work experience, training in the armed forces , attending a technical school, attending a community college or other intellectual instruction. (Emphasis added.) In the final rule, DOL dropped the phrase "training in the armed forces" (and other wording) and restructured subsection 541.301(d) to read in pertinent part as follows: ... who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction. DOL explained that it "never intended to allow the professional exemption for any employee based on veteran's status. The final rule," it stated, "has been modified to avoid any such misinterpretations." Arguably, exemption under the proposed rule would not have been "based on veteran's status" but, rather, upon knowledge acquired through one's employment—which, under each version of the rule, might include military employment. Thus, the revised language may not satisfy critics. Building the Case for Reform? Certain business interests have long sought FLSA modification. In late 1994, the Labor Policy Association (LPA), a Washington-based "non-profit association of corporate employee relations executives," published a report, Reinventing the Fair Labor Standards Act To Support the Reengineered Workplace . It pointed to "dramatic changes in workplace demographics and work structures" since enactment of the FLSA in 1938. With time, it argued, "... the FLSA's coverage rules have become so encrusted with meaningless distinctions that no employer can be completely confident which types of employees come within the Act's ambit." The LPA report, focusing heavily on Section 13(a)(1), argued that the FLSA was aged, out-of-date, and in need of reform—and, among federal labor laws, "holds a position nearly comparable to that of the Dead Sea Scrolls." Both in the final rule and the flurry of DOL comment associated with its release, several themes were emphasized that would be picked up, initially, by the media, and repeated by supporters of the DOL initiative. DOL argued, in building the case for reform, that the existing regulation was "confusing, complex and outdated"—so much so "that employment lawyers, and even Wage and Hour Division investigators, have difficulty determining whether employees qualify for exemption"—"very difficult for the average worker or small business owner to understand." The FLSA is based, Secretary Chao stated, upon the "workplace of a half-century ago." DOL had "listened very carefully," Chao observed (and others reiterated), implying that the Department had been responsive to commenters and had adjusted the final rule accordingly. Critics may disagree as to whether DOL's changes in the proposed rule were corrective or merely non-substantive adjustments of language. "The primary goal" in crafting the rule, DOL emphasized, was "to protect low-wage workers." Ms. Chao said: "Overtime pay is important to American workers and their families, and this updated rule represents a great benefit to them." Whatever the reality may be (it is a subject of dispute), DOL declared that the final rule "strengthens and clarifies" overtime protection. The new regulations, McCutchen stated, "are clear, straightforward and fair." There was also a negative element in DOL's defense of the final rule. Some critics of the initiative, the Secretary seemed to suggest, lacked integrity. On Capitol Hill to brief Republicans on the final rule, Ms. Chao asserted: "There has been a massive misinformation about this rule." On that theme, Karen Kerrigan of the Small Business Survival Committee would assert: "The campaign of disinformation to discredit the rule update has been shameful." Similarly, the "O. T. Coalition," an business-oriented group, stated: "Throughout the entire rulemaking process, opponents have engaged in a campaign of blatant misinformation about the proposed regulation." When the labor-oriented Economic Policy Institute issued a report in July 2004, critical of the final rule, DOL spokesperson Ed Frank termed it "a last-ditch effort to re-start the misinformation campaign...." A Mixed Reaction The final rule sparked a prompt and sharply divided reaction. Each side seemed to question the intentions of the other. While critics tended to focus upon detail, definition, and potential administrative complications, proponents seemed to prefer more generalized statements about the need for reform and the benefits that, they asserted, would flow from the new rule. "The Department is very proud of the final rule," Secretary Chao stated. From the beginning, she observed, DOL "has been consistent in what it wanted to achieve with this update. The primary goal," she urged, "remains to protect low-wage workers." DOL would frequently reiterate its determination to protect the right of low-wage non-professional and non-managerial workers to overtime pay. When technical questions were raised, DOL spokespersons tended to cite or read a provision of the rule, letting the rule speak for itself. "We are pleased to see people recognize the significant gains to workers under our final rule," Ms. Chao stated: "... there can be no doubt that workers win." "America's workers," added Deputy Administrator Robinson, "... now have a strengthened overtime standard that will serve them well for the 21 st Century." And, Majority Leader DeLay reportedly "said he is 'very excited at the fact that the administration took on a politically sensitive issue'" and "'showed leadership and understanding.'" Others offered different perspectives. "When you start to read the fine print," said Representative George Miller, Ranking Minority Member of the Committee on Education and the Workforce, "you see that overtime pay for potentially millions of employees ... is at risk." Senator Harkin viewed the rule as "anti-employee," "anti ... overtime" pay, and "designed to strip many workers of their right to fair compensation." He averred that it was a "frontal attack on the 40-hour workweek." Some from industry seemed less than enthusiastic. R. Bruce Josten of the U.S. Chamber of Commerce, though he found the final rule a "much needed improvement over the plainly unacceptable status quo," allowed that "[n]o one disputes that there are some controversies raised by the Department's regulation[s]" and stated that they "do not address all of the concerns of the Chamber." The industry journal, Nation ' s Restaurant News , reported that the final rules will be "more complicated and costly for restaurant operators to implement than those first proposed," but there seemed to be agreement that the rule was "an improvement" over the current regulation. The Labor Policy Association termed the rule a "first step." Promulgation of the final rule did little to mollify critics of the initiative. Some questioned whether the rule would "reduce needless and costly litigation" as McCutchen had promised." Deputy Administrator Robinson noted that the current rule had been "streamlined" and shortened by some 15,000 words. But each deletion and change of language, others contended, could provoke interpretive issues and spark new litigation. DOL, observed Ross Eisenbrey of the Economic Policy Institute, has chosen "to adopt new definitions that are unclear and new tests for exemption that require a case-by-case analysis that will be almost impossible for Wage and Hour's enforcement staff." He characterized that approach as "a guaranteed recipe for litigation." Would the final rule be protective of workers, whatever their duties and wage level? Was it sufficiently clear to eliminate needless and costly litigation? Could it be enforced, reasonably, by DOL's Wage and Hour Division? There were wide interpretive differences. Oversight and Legislation Beginning during the last week of April 2004, as Members and staff attempted to digest the lengthy and complex text of the final rule, hearings would be held before three congressional separate committees. Further, the final rule would repeatedly be the focus of floor debate, both in the Senate and in the House of Representatives. Hearing: Education and the Workforce, April 28, 2004 On April 28, 2004, five days after release of the final rule, an oversight hearing was conducted by the full House Committee on Education and the Workforce. Setting the Tone for Debate? Current regulations, Chairman Boehner noted in an opening statement, are "outdated," "complex, confusing and often" incite "needless litigation," and are "next to impossible" to apply. The American people, he said, had been "subjected to a campaign of misinformation based on fear, distortions and untruths." He added that the final rule would protect "the overtime rights of blue-collar workers, union workers, nurses, veterans, firefighters, policemen and similar public safety workers," and adversely affect "few, if any workers, making less than $100,000 per year." Further, he predicted, "[c]lear rules will reduce the cost of litigation, encourage employers to hire more workers and strengthen current ... overtime protections." It is, he concluded, "good for American workers ... for American employers ... and for the American economy." Conversely, Representative Miller stated that the proposed rule would have threatened "the overtime protections" of millions of workers and asserted: "... in the time available to read and analyze the 530 pages of these artfully crafted new regulations," it seems clear that the policy continues to be "... to cut the overtime protection for millions of workers...." He enumerated groups of workers he deemed vulnerable: those "working in financial services, chefs, computer programmers, route drivers, assistant retail managers, preschool teachers, team leaders, working foremen and many other categories that are created in these regulations either in reactions to lawsuits" or in response to special constituencies who "have been seeking these changes for a number of years." The Department Weighs In Secretary Chao, the lead witness, accompanied by Administrator McCutchen, pointed first to the "ambiguity and the outdated nature" of the current regulations: "frozen in time" and "difficult and sometimes nearly impossible to interpret or enforce in the modern workplace." Then, turning to the DOL response, she affirmed: "... we have listened very carefully ... and we have produced a final rule that puts workers' overtime protections first...." Without delving into technical issues, Secretary Chao listed groups of workers that she said would now be protected. "The final regulations preserve overtime protections for veterans, cooks. They were never, never taken away." "We have also included union members and made sure that the final regulations preserve overtime protections for union members whose overtime pay is secured under a collective bargaining agreement." She added: "... all blue-collar and manual laborers are entitled to overtime." "The new rules either preserve existing definitions of executive, professional and administrative duties or make them stronger and clearer to protect workers based on current federal case law or statutes ...," and further: With these new rules workers will clearly know their rights to overtime pay, employers will know what their legal obligations are and this administration, which has set new records for aggressive wage and hour enforcement, will have updated and strengthened standards with which to vigorously enforce the rule to protect workers' pay. Turning to the alleged campaign of misinformation, the Secretary stated that "... unfortunately, a great deal of misinformation and distortions harmful to workers has been spread about the impact of these rules." She urged people "to not be misled by misinformation that is being spread." Mildly chiding critics of the final rule, she asserted: "... I am deeply concerned about the campaign of misinformation about these new rules. The confusion it is designed to create will only harm workers by denying them good information about their overtime pay rights." Interpreting the Rules Assertions of clarity notwithstanding, the final rule is lengthy and complicated—replete with new terms and concepts that, some charge, will need to be litigated. Perhaps most notable among these is the new subsection 541.301(d) which expands the criteria for professional exemption from a primarily degree-based orientation (normally, college plus technical/professional education) to a broader and, arguably, more ambiguous standard: ... employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction . (Italics added.) Directly or implicitly, Subsection 541.301(d) was central to much of the questioning during the hearing before the House Committee on Education and the Workforce and the other hearings that would immediately follow. The questions suggested by subsection 541.301(d) were numerous, inter alia : What is meant by substantially the same ? How will the employer, the employee, and the Department assess the substantial sameness of an employee's knowledge and work? How much work experience or intellectual instruction does it take to reach equivalency to the "prolonged course of specialized intellectual instruction" under the existing rule? And pressed, how would one define intellectual instruction in the context of the Section 13(a)(1) exemption? In practical terms, would the option be loosely applied (broadening the Section 13(a)(1) exemption and extending it to a wide range of currently protected workers) or would its application be narrow? Registered Nurses and LPNs With publication of the proposed rule, Chairman Boehner recalled, concern was voiced "both [by] registered nurses and licensed practical nurses, about threats to their overtime." He asked Secretary Chao: "Can you explain to the committee exactly how the final regulations treat registered nurses and licensed practical nurses, and about nurses whose overtime is guaranteed under a collective bargaining agreement?" CHAO: The new overtime rules actually strengthen overtime for licensed practical nurses. For the very first time LPN's are specifically listed as being guaranteed overtime. Registered nurses' status remains unchanged. It is what the current rule says. Furthermore, registered nurses who are receiving overtime under collective bargaining agreements will continue to receive overtime. And if registered nurses are continuing to receive overtime, they will continue to receive overtime. How the concept of "substantially the same" might apply with respect to nurses and LPNs was not addressed, nor were issues relating to the potential for adjustment of hourly and salaried pay status for nurses and related workers. Chefs and Cooks The final rule states that "executive chefs and sous chefs" (concepts not defined in the rule) who "have attained a four-year specialized academic degree in a culinary arts program, generally meet the duties requirements for the learned professional exemption ." (Italics added.) "The learned professional exemption is not available to cooks who perform predominantly routine mental, manual, mechanical or physical work." And, "to the extent a chef has a primary duty of work requiring invention, imagination, originality or talent" (concepts not defined in the rule), "... such a chef may be considered an exempt creative professional ." (Italics added.) Here, too, the alternative standard, "substantially the same," could come into play. Representative Miller raised the issue with Secretary Chao. "We say that those chefs that have four-year degrees are exempt and we describe the duties that will make them exempted and, yet," he continued, "we know that there are hundreds of thousands of chefs in this country that have two-year degrees that do those exact same duties...." Ms. Chao affirmed that "[o]vertime rights are expressly guaranteed" in the final rule and protested that "there has been disinformation going on and a lot of workers have been scared." She then turned for a technical response to McCutchen, who explained that "... only chefs who have advanced four-year college degrees in the culinary arts can be denied overtime pay. And we clarified," she stated, "that ordinary cooks and any other type of cook or chef who does not have a four-year post high school degree cannot be denied overtime pay." Later in the hearing, the issue was revived by Representative Robert Andrews (D-NJ) who asked if a chef, in the "creative professional category,"could lose his or her overtime protection. ANDREWS: But there are chefs that have less than this minimum academic standard who could lose their overtime under the new rule, correct? McCUTCHEN: Only if they're creating unique new dishes, like they're creating recipes themselves. ANDREWS: Every chef claims that he or she does that, right? For 12 years, Karen Delaney Smith, now a consultant and part of a second panel, had been an investigator with DOL's Wage and Hour Division. Of chefs and sous chefs, Ms. Smith stated: "This is not a white-collar job; it is manual; much of it is repetitive; it is not a field of science or learning." Again: The regulation makes clear that chefs who have a four year degree are exempt. To the extent that chefs have creative ability, they can be exempt [creative] professionals. That means potentially every chef can be exempt.... Furthermore, having declared the culinary arts a learned profession, the Department creates the possibility of attaining professional status not just through a four-year college degree but also through work experience. How will the Department determine that a non-degreed employee has 'substantially the same knowledge' as a degreed sous-chef? Ms. Smith inquired rhetorically, "How will the Department even tell a cook from a sous chef? After all, the dictionary definition of 'chef' is 'cook'...." The restaurant industry, Smith said, has been identified by DOL "as a low-wage industry" and she added that "it's very common in this industry to work 50 or 60 hours a week." Status of Union Workers The final rule provides, inter alia , that employers and employees "are not precluded" from negotiating "a higher overtime premium ... than provided by the Act." Again: "... nothing in the Act or the regulations in this part relieves employers from their contractual obligations under collective bargaining agreements." Secretary Chao assured the Committee: "We have ... made sure that the final regulations preserve overtime protections for union members whose overtime pay is secured under a collective bargaining agreement." During questioning, Representative Dale Kildee (D-MI) suggested that union workers had concerns about the final rule. Secretary Chao quickly responded that "... union members covered by collective bargaining agreements are not impacted at all by this rule" and that such concerns were the result of "misinformation that was being circulated." The Secretary added: Because we wanted to combat some of this misinformation, we expressly put [in] overtime guarantees for union members who are under collective bargaining agreements. Because union members under collective bargaining agreements will abide by the collective bargaining agreement, and when they get overtime that will, of course, remain the same. Representative Kildee acknowledged that nothing in the regulation "relieves employers from their contractual obligations under collective bargaining agreements." But, he added: "If the union contracts simply refer to applicable law for overtime eligibility, a union worker will be directly and immediately affected by these regulations when they take effect. Isn't that true?" The Secretary asked that the question be repeated. KILDEE: If union contracts simply refer to applicable law for overtime eligibility, a union worker will be directly and immediately affected by the applicable law then. In other words, if the ... CHAO: If a worker is under a collective bargaining agreement, they're covered by the collective bargaining agreement, and it does not impacted [sic] by these white-collar regulations. KILDEE: But if the contract refers only to the Wage and Hour Act, as it says, in effect, the overtime shall be in accordance with the Wage and Hour Act then it would be affected by your changes in the Wage and Hour Act. CHAO: I don't think so, and I will give you another example. Just because... At that point, Representative Kildee broke in to affirm: "Well, but it would be." A brief discussion followed, at the close of which Ms. Chao again affirmed: "... union members under collective bargaining agreements are not impacted." Then, she turned to McCutchen "... perhaps to clarify it even further." McCutchen explained: ... for a union member, if you're paid by the hour, you're entitled to overtime. That's what these rules say.... If you perform blue-collar and manual labor, 541.3 clearly states that you're entitled to overtime. So these rules strengthen protections for union workers no matter what's in their collective bargaining agreement. Representative Kildee protested: "You have still not answered my question." Related Issues After a short break, discussion resumed with a second panel. Among issues discussed was the status of inside and outside sales people, treatment of nursery school teachers, how team leaders (a new concept in the final rule) and working foremen (or assistant managers or working supervisors) were to be treated, coverage of computer services employees and of those employed in the financial services industry. Each of these types of work involved technical issues. Some had been a subject of congressional hearings and/or of litigation. Their status for Section 13(a)(1) purposes appeared, some argued, neither obvious nor clear. As the hearing closed, Chairman Boehner declared that "trying to determine exempt or non-exempt status is not an exact science." As for the final rule, he stated, "Is it going to be perfect? No. Is it a lot better than it was? Absolutely." Hearing: Senate Appropriations Subcommittee, May 4, 2004 Senator Specter had early focused attention on DOL's new overtime pay policy. His Appropriations Subcommittee on Labor, Health and Human Services, and Education, had conducted oversight hearings on the issue on July 31, 2003, and again on January 20, 2004. (See discussion above.) In each case, DOL had argued that the new rule would benefit both employers and employees; but it had, some believed, been less forthcoming about the actual provisions of the rule (then only proposed) and how it could be implemented. Some Subcommittee members questioned whether the rule, if finalized, would reduce the need for litigation—or, conversely, would render increased litigation inevitable. At the January 20 hearing, Ms. Chao had affirmed: "Clear, concise and updated rules will better protect workers and strengthen the Department's ability to enforce the law." Meanwhile, DOL spokesperson Ed Frank would speak of "needless litigation" and "outdated" FLSA rules. Reiterating the views of Ms. Chao, Frank stated: "Clearer up-to-date rules will also better protect workers' overtime rights." Views from the Department of Labor The Appropriations Subcommittee, on May 4, 2004, conducted a third hearing on the overtime pay rule—now in its final form. "Overtime pay is important to American workers and their families," began Administrator McCutchen, "and this updated rule represents a great benefit to them." The rule, she affirmed, will "strengthen overtime rights" for various categories of workers, "end much of the confusion about these exemptions," and return "clarity and common sense" to the Section 13(a)(1) regulations: it will "help workers better understand their overtime rights, make it easier for employers to comply with the law, and strengthen the Labor Department's enforcement of overtime protections." DOL's "primary goal," she said, "remains to protect low-wage workers"—and, further, to reduce "wasteful litigation." She declared: "We simply cannot allow this legal morass to continue unabated." McCutchen assured the Subcommittee that DOL had "listened to thousands of comments" and had "designed new regulations that are clear, straightforward and fair." She also lamented that "recent press coverage and public debate over this rule has been misleading and inaccurate" and decried the "tremendous amount of misinformation about the likely impact of the Department's new rule on employees such as blue-collar workers...." McCutchen explained: The Department never had any intention of taking overtime rights away from such employees, and the final rule makes this clear beyond a shadow of a doubt. ... the final rule provides that manual laborers or other 'blue collar' workers are not exempt under the regulations and are entitled to overtime pay no matter how highly paid they might be. This includes, for example, non-management production-line employees and non-management employees in maintenance, construction and similar occupations.... McCutchen continued: "... the Department never intended to allow the professional exemption for any employee based on veteran status." And: "... those working under union contracts are protected" under Section 541.4, she affirmed, adding: "The final rule will not affect union workers covered by collective bargaining agreements." In closing, she charged once more that "a great deal of misinformation has surrounded" the regulations. "They have been unfairly characterized as taking away overtime pay from millions of Americans when the exact opposite is true." She affirmed: "... workers win under this final rule." A Voice in Support of the Final Rule In defense of the final rule, David S. Fortney, Deputy and Acting Solicitor at DOL during the first Bush Administration, characterized the existing regulation in starkly negative terms: "dramatically outdated," imposing "significant confusion and uncertainty," "frustrate[s] compliance efforts," "vague regulations result in unintentional noncompliance and resulting liabilities," and "vague and ambiguous ... difficult to apply." His comments were positive with respect to the final rule: "employers clearly benefit from having an unambiguous rule that helps facilitate compliance," "introduce[s] clarity and common sense," "add[s] much needed clarity," "more concise, easier to understand, clearer in scope...." He stated: "There also has been a significant amount of confusion resulting from inaccurate information and news stories...." To provide clarity, Fortney addressed the matter of the professional exemption and training received in the armed forces. He assured the Subcommittee, quoting from the preface to the final rule, that DOL "'... never intended to allow the professional exemption based on veterans' status.'" He added, again quoting the final rule: "'Thus, a veteran who is not performing work in a recognized professional field will not be exempt, regardless of any training received in the armed forces.'" The language of the final rule, he explained, "was amended to clarify that veteran status alone will not be sufficient, but that a combination of work and experience may allow the employee to qualify for exemption, determined on a case-by-case basis." Fortney praised the "primary duty" test. Under current regulation, he said, "there were drawn out disputes requiring expensive time-motion studies or similar efforts in order to determine whether the employee was properly engaged in exempt work." The new test "will avoid the need for such expensive and time consuming analyses and promote greater compliance." He also stated: "Unionized employees will continue to receive overtime as provided by their collective bargaining agreements, and a specific provision has been added to the regulations specifying that 'blue collar' workers are not exempt from overtime." He urged "employers, employees and government enforcement agencies alike" to embrace the final rule. Overall, he ventured little beyond the final rule, per se. Technical administrative questions, raised by critics, remained to be addressed. Doubts and Concerns Where supporters of the final rule tended to speak in general terms and to emphasize what they viewed as its positive aspects, critics looked to nuts-and-bolts issues (i.e., to definitional questions), to practical aspects of administering the rule, and to its more specific workforce implications. Team Leaders Subsection 541.203(c) of the final rule introduced the concept of the exempt team leader. It states: An employee who leads a team of other employees assigned to complete major projects for the employer ( such as purchasing, selling or closing all or part of the business, negotiating a real estate transaction or a collective bargaining agreement, or designing and implementing productivity improvements) generally meets the duties requirements for the administrative exemption, even if the employee does not have direct supervisory responsibility over the other employees on the team . (Italics added.) The AFL-CIO quickly took note of this provision, declaring that it was "an enormous new loophole that will allow management to disqualify workers from overtime simply by appointing them 'team leaders.'" Responding to AFL-CIO concern, DOL declared in flat and unqualified terms: "The final rules ensure overtime protection for 'blue collar' team leaders and are more protective of overtime pay for 'white collar' team leaders than the current regulations." (Bolding in original.) The issue had been raised during the April 28 hearing before the House Committee on Education and the Workforce. Representative Donald Payne (D-NJ) questioned Secretary Chao about the team leader provision. CHAO: ... I'll be more than glad to answer the issue about team leaders because that is also an area of confusion. In fact, our final rule strengthens overtime protection for workers because we tighten up on the language and we clarify language and narrowed its scope.... Ms. Chao then turned to Administrator McCutchen, who read into the record the phasing of the final rule and affirmed "that only the leaders of these major project teams can be exempt...." McCutchen added: "... we've defined what it means to carry out a major assignment and limited it to only those very significant assignments that happen in a corporation." The Administrator concluded: "So it's very much tightened and more protective than the current regulatory language." Representative Payne suggested there seemed to be a certain "subjectivity" rather than clarity. "You know, what is significant to one person may not be significant to someone else." Former Wage/Hour investigator Karen Dulaney Smith raised similar concerns. "That word [team leader] is not in the current regulation. We don't know what that's going to mean. Team leaders," Smith stated, "would have been non-exempt when I was an investigator unless they had supervisory duties and management responsibilities." During her testimony a week later at the Senate Appropriations Subcommittee, McCutchen was silent on the team leader matter. But the issue was promptly raised by AFL-CIO Associate General Counsel Craig Becker. "This is a broad new category of exempt employees," he stated. "Given the increasing organization of work into teams and the incentive this provision will give employers to so organize work, it potentially sweeps large numbers of employees in numerous industries outside the protections of the Act." Ross Eisenbrey of the Economic Policy Institute shared a similar view. ... a bizarre and poorly explained new exemption for 'team leaders' creates the potential for hundreds of thousands of currently [non-]exempt non-supervisory workers to lose their overtime rights. The use of self-managed teams of non-managerial, non-supervisory, front-line employees is widespread in American industry, and millions of employees are routinely involved in them. Eisenbrey concluded: "The regulations provide no definition of 'team leader,' it has never been defined in FLSA case law, and the Department's assertion that it is clarifying current law is patently false." "Blue-Collar" Worker Protection? Before the Committee on Education and the Workforce, Secretary Chao had affirmed: "The new rules are very clear ... all blue-collar and manual laborers are entitled to overtime." And, again: "The new rule exempts only 'white-collar' jobs from overtime protection." Blue-collar workers "will not be affected by the new regulation." The final rule, Subsection 541.3(a), however, states in pertinent part: "The section 13(a)(1) exemptions and the regulations in this part do not apply to manual laborers or other 'blue collar' workers who perform work involving repetitive operations with their hands, physical skill and energy." And, later: Thus, for example, non-management production-line employees and non-management employees in maintenance, construction and similar occupations ... are entitled to minimum wage and overtime premium pay under the Fair Labor Standards Act, and are not exempt under the regulations in this part no matter how highly paid they might be. (Italics added.) What if a blue-collar worker, engaged in line or production work, also had duties that could be classified as executive or administrative? The final rule sets no standard with respect to the proportion of a worker's time that must be devoted to exempt work in order to be classified as exempt. If, upon whatever basis, a worker's primary duty ("the principal, main, major or most important duty that the employee performs"—likely prioritized by the employer) can be said to be an executive or administrative function, would that blue-collar worker still be non-exempt? It was a technical question (among many) that the Secretary and the Administrator did not explore: but Eisenbrey expressed concern about definitional issues involved. He suggested that despite claims "that blue-collar workers are entitled to overtime, the rule limits overtime rights to ' non-management blue-collar employees,' begging the question of who gets classified as a management blue-collar worker, a seemingly new class of exempt workers that will grow significantly under these new rules." He observed: "It appears that the management of a team would transform a manual laborer or other blue-collar employee into a 'management blue-collar employee,' leading to exemption and loss of overtime pay." Financial Services Employees For the past decade, certain interests have sought to have inside sales staff declared exempt from FLSA overtime pay protection. Congress has not acceded; inside sales staff remain non-exempt. The final rule, however, moves toward exempting at least certain inside sales staff from wage/hour protection. Section 541.203(b) reads as follows: Employees in the financial services industry generally meet the duties requirements for the administrative exemption if their duties include work such as collecting and analyzing information regarding the customer's income, assets, investments or debts; determining which financial products best meet the customer's needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing or promoting the employer's financial products. However, an employee whose primary duty is selling financial products does not qualify for the administrative exemption . (Italics added.) While the specified duties might "include work such as" those listed, it need not include all of them: others, not listed among the examples set forth in the rule, could also satisfy the requirement. As in other areas, the determinative factor would seem to be one's definition of "primary duty." Since the final rule eliminates a percentage factor with respect to performance of exempt duties (amount of time spent), a single exempt function might be sufficient to trigger exempt status. What the definition of financial services industry encompasses may also be of concern for some. For example, although it likely includes banks, what about brokerage firms? The insurance industry? Tax assistance? The interpretation given to marketing, servicing or promoting the employer's financial products may be more troublesome. How are those concepts to be differentiated from selling? The issue of definition was raised during the April 28 hearing before the Committee on Education and the Workforce. With Chao and McCutchen at the witness table, Representative Miller reviewed the requirements of the final rule under 541.203(b) and observed that "... if you call a Citicorp or you call a Wells Fargo, you find out that there's one person on the other end of the line that does all of those things." For the employer, Representative Miller said, "a little flag" goes up. 'Make sure you don't designate these people as primarily selling the products.'" Administrator McCutchen responded that the financial services section of the final rule "reflects" the current regulation "and also adopts the current case law." She added: What we did was we took that current case law, we read what it said and we adopted it and put it in the regulations so that employees and employers don't have to hire a lawyer to go find the case law that's not reflected in the current regulations because, as the secretary said, this 50 years of federal court case law is not reflected in the current litigation. Later, Representative Judy Biggert (R-IL) caused DOL to revisit the issue. "As you know, we've heard in detail about a lot of misinformation spread around about these regulations," Ms. Biggert stated. "Can you specifically tell me how the final rules apply to workers in the financial services industry...." The Administrator replied: McCUTCHEN: What we did ... is to adopt the existing federal court case law, and we did not just list their title. We took the case law and we said, for example, financial services employees who collect and analyze financial information, who provide advice and consulting to a customer, about which financial products are appropriate, are entitled to overtime consistent with the federal regulation. Ms. Biggert asked: "... why did the department specify these segments in particular?" Ms. McCutchen responded, in part: "Because these were segments in particular that in recent years have generated a lot of confusion and a lot of litigation." With the second panel seated, Representative Miller raised the issue with former Wage/Hour investigator Karen Dulaney Smith. Ms. Smith explained how an inside customer services representative could become exempt, under the final rule—so long as the employer did not designate sales as the worker's primary duty. At the least, she suggested, the provision would "be a confusion to employers and could encourage more litigation." She termed the provision a "loophole" that removed the distinction between inside sales (non-exempt) and outside sales (traditionally exempt). "The administration said repeatedly that they'd like to have a clearer law, one that lets employers know what its obligations are. This is not it." When Administrator McCutchen appeared before the Senate Appropriations Subcommittee a week later, her prepared statement made no reference to the financial services issue. Craig Becker of the AFL-CIO, however, before the same Subcommittee, did raise the question. The financial services provision, he stated, "exempts a vast range of employees with the only exception being those 'whose primary duty is selling financial products.'" Becker argued that a blanket exemption for an industry was "a radical departure from prior practice" which had relied upon the actual duties performed. Turning to DOL's reliance on case law, he stated that "case law is not as uniform as the Department suggests." Chairman Specter and Ranking Member Harkin had expressed strong interest in the overtime pay issue and the hearing presented an opportunity for an explanation of the final rule. According to the Daily Labor Report , each now reacted to DOL testimony "with varying degrees of skepticism." Senator Specter reportedly suggested that the new rules "require a lot of interpretation" and will spawn "lots of litigation, lots of class actions." Senator Harkin was quoted characterizing the final rule as "anti-employee" and an "attack on the 40-hour workweek." Amending the JOBS Act (S. 1637): Phase II In early May 2004, the Senate resumed consideration of S. 1637 . At issue was the Harkin amendment to deny DOL the authority to reduce overtime pay protection through implementation of the final rule. (See discussion above.) Gregg Amendment Presented On May 4, 2004, Senator Gregg rose to decry the "fairly Byzantine and complex set of regulations" governing overtime pay and to applaud DOL for its "conscientious job" with respect to the final rule. He spoke of the "hyperbole and attack" to which the rule had been subjected and the "totally spurious and inappropriate analysis" prepared by people "who either did not understand the rules or decided to pervert the rules" and which, in turn, led to "a lot of misrepresentation." Arguments of critics he termed "so bogus and so inaccurate that it is important to understand how misleading it was as it represents sort of a theme of inaccuracy relative to the initial proposed regulations." Senator Gregg expressed regret about the "morass" in which "everything is getting litigated." Turning to the final rule, he stated: "The first goal of this regulation as proposed is to make sure people earning not a significant amount of money are going to get overtime." What the rule does "is try to put certainty and definition into the law." Senator Gregg characterized the Harkin amendment as an effort "to stall" the final rule and suggested that adoption of the Harkin amendment would put at risk the overtime protection of 6.7 million people. The amendment, he stated, provides "no attempt to address the overall issue in a comprehensive and systematic way." Thereupon, Senator Gregg proposed his own amendment to be "juxtaposed to the Harkin amendment." He noted that about 55 groups have expressed concern about their overtime pay status under the final rule. "We don't think most of them are [at risk] because we think the regulation is pretty clear.... But just so there can be no question about it, this amendment specifically names every one of those groups and says they have the right ... to their present overtime situation." The Gregg Amendment provides: (1) The Secretary shall not promulgate any rule under subsection [13] (a)(1) that exempts from the overtime pay provisions of section 7 any employee who earns less than $23,660 per year. (2) The Secretary shall not promulgate any rule under subsection [13] (a)(1) concerning the right to overtime pay that is not protective, or more protective, of the overtime pay rights of employees in the occupations or job classifications described in paragraph (3) as the protections provided for such employees under the regulations in effect under such subsection on March 31, 2003. (3) The occupations or job classifications described in this paragraph are as follows:.... The list of potentially impacted "occupations or job classifications" was included in the Gregg amendment. Among them were the following: any worker paid on an hourly basis any blue collar worker any worker provided overtime under a collective bargaining agreement team leaders registered nurses licensed practical nurses technicians refinery workers chefs cooks police officers firefighters craftsmen funeral directors outside sales employees inside sales employees assistant retail managers financial services industry workers A fourth paragraph reads: "Any portion of a rule promulgated under subsection (a)(1) after March 31, 2003, that modifies the overtime pay provisions of section 7 in a manner that is inconsistent with paragraphs (2) and (3) shall have no force or effect as it relates to the occupation or job classification involved." Senator Gregg affirmed: "... this amendment goes to getting clarity, clarity in the law...." Senator Harkin challenged Senator Gregg's amendment as "a real acknowledgment, that there is a long list of occupations and people who are in danger of losing their overtime" pay. Senator Harkin suggested that one problem was definitional. For example, the Gregg amendment puts in team leaders, but we do not know what a team leader is because it has never been defined. What is a team leader? The Gregg amendment puts in refinery workers. Does that mean oil refinery or does that cover ethanol plants in Iowa? That is a refinery. Who is covered by that? We do not know. Technicians, what is a technician? There is no definition of a technician. The Gregg amendment covers funeral directors, but how about embalmers? We don't know. He suggested that he could support the Gregg amendment to "move the process along," but his objections to it were numerous. Debate Resumes Reconciling the Gregg amendment with the final rule was then explored. Senator Kennedy urged support for the Gregg amendment but argued that it would not produce clarification. "To the contrary, it will provide additional litigation because the test in the ... [final rule] refers to the duties and not to the professional names that are being used." The Harkin amendment, he said, "... is the right way to go and I hope the Senate will follow his lead." Conversely, Senator Mike Enzi (R-WY) charged that the Harkin amendment was a "trial lawyers' dream." Senator Enzi spoke in defense of the final rule. The reference to training in the Armed Forces has been deleted and clarifies that veteran status does not affect overtime. The veterans will get their overtime regardless of the training received in the armed services. The final rule states first responders such as police, firefighters, paramedics and emergency medical technicians are eligible for overtime pay. No question; no gray area, it clears it up. The final rule also states licensed practical nurses do not qualify as exempt learned professionals and are therefore eligible for overtime pay. The final rule clarifies [that] the contractual obligation under collective bargaining agreements is not affected. ... the new rule will guarantee overtime protection for blue collar team leaders and is more protective of overtime pay for white collar team leaders. Furthermore, there is no change to current law regarding the overtime status of computer employees, financial services employees, journalists, insurance claims directors, funeral directors, athletic trainers, nursery school-teachers, or chefs. Senator Enzi further affirmed: "We need to keep it simple and understandable. The rule does that.... No lawsuits necessary, it is very clear. That is what the Department intends." After lamenting the "antiquated and confusing" current regulation with its "windfall for trial lawyers," he endorsed the Gregg amendment which he said would "provide clearer and fairer overtime rights for workers." The final rule, however, did not dispel interpretive disagreements. Senator Herb Kohl (D-WI), speaking immediately after Senator Enzi, found it "unlikely to clarify anything for small business.... We have not simplified anything." He noted "troubling exemptions of entire jobs and industries" and observed that the rule "exempts from overtime 'team leaders,' even though these employees may have no supervisory role...." He further stated: Certain industries have worked for years to get out of paying overtime to their workers—and the rule's list of exemptions reads like a roll call of those that succeeded. For reasons unclear, even after 500 pages of explanation, journalists, personal trainers, financial services workers, and computer industry workers—to name just a few classes—are summarily ineligible for overtime. Senator Kohl concluded: "Any weakening of the overtime rules is a step down on the ladder of economic progress." While supporters of the final rule repeatedly affirmed that DOL had listened and had revised the rule to render it more acceptable, some disagreed. Senator Russell Feingold (D-WI) alluded to "largely cosmetic changes that the administration grudgingly made at the eleventh hour" that "did not change the rule's result...." At highest risk are "those workers whose salaries fall between $23,660 and $100,000" who "are not guaranteed overtime" pay and who, through "the new duties test," could be stripped of their wage and hour protections. "The administration's public relations campaign...," he asserted, "does not reflect the reality of this rule." As debate progressed, Senator Specter called attention to that morning's hearing before his Subcommittee. "This is a very complicated regulation," he began. The Senator agreed that clarity, with avoidance of unnecessary litigation, was "a very important objective." However, on the basis of "an extended hearing this morning" with Administrator McCutchen and witnesses for and against the final rule, he concluded that "there is no indication that this new regulation is going to clarify anything at all." He turned to the issue of "team leader." ... this term 'team leader,' I think, is going to provide additional complexity, so that a proposed final regulation here, instead of simplifying and directing and being an effective instrumentality to eliminate litigation, appears to me to be no advance over the current regulation, and when you come down to the injection of a new concept of team leader, it creates additional complications. Senator Specter declared that, "[o]n the current state of the record, I am opposed to the proposed regulation." And, he affirmed his support for the Harkin amendment. Division seemed wide. "Does anybody believe this administration's Department of Labor is trying to expand overtime pay?," asked Senator Christopher Dodd (D-CT). "That is not why the business community is supporting this rule change, because they want to expand overtime pay," he stated. "The administration clearly wants to restrict it and redefine job categories that will allow them to do so." Proceeding to a Vote On May 4, the Senate voted on the Harkin amendment and the Gregg amendment as well. Two parallel roll calls were conducted. On the Gregg amendment, the vote was 99 yeas with one Senator not voting. On the Harkin amendment, the vote was 52 yeas to 47 nays—very largely along party lines. Thus, both amendments were approved. Action in this area, as discussed below, would now move on to the House. The Miller Motions to Instruct: May 2004 During fall 2003, Congress considered and sent to conference H.R. 2660 , a bill to provide appropriations for FY2004 for the Departments of Labor, Health and Human Services, and Education, and Related Agencies. (See discussion above.) Ultimately, an appropriation for these agencies was arranged through an omnibus appropriations bill ( H.R. 2673 , P.L. 108-199 ). However, the original bill ( H.R. 2660 ) remained, technically, in conference. Motion of May 12, 2004 Representative George Miller, on May 12, 2004, moved to instruct the conferees on H.R. 2660 to insist on reporting an amendment supportive of overtime pay protections. The Miller motion was of two parts. First, it would prevent DOL from expending funds to diminish overtime protection accorded under Section 13(a)(1) of the FLSA as it stood prior to the recent DOL initiative. Second, it would allow DOL to increase the salary thresholds required to exempt workers from overtime pay protections under Section 13(a)(1). Representative DeLay immediately moved to table the Miller motion. If concurred in, the DeLay motion would have prevented discussion of the substance of the Miller motion: that is, the impact of DOL's final rule. Mr. Miller demanded a recorded vote, the result of which was 222 ayes (in favor of the DeLay motion) and 205 nays (favoring consideration of the Miller motion). The vote was largely along party lines, two Republicans voting with the Democrats. Secretary Chao applauded the DeLay motion as "a victory for the millions of American workers who will benefit from stronger overtime protection." Motion of May 18, 2004 Again on May 18, 2004, Representative Miller moved to instruct the conferees on H.R. 2660 to insist on reporting an amendment to block funding for implementation of DOL's final rule—except that DOL would be permitted to proceed with adjustment of the salary thresholds for exemption under Section 13(a)(1). As before, Representative DeLay moved to table the Miller motion. Mr. Miller called for a recorded vote on the DeLay motion to table, the result was ayes 216 (to support the DeLay motion) and 199 nays (further to consider the Miller motion). The vote was largely along party lines. Hearing: House Small Business Subcommittee, May 20, 2004 Through the year between release of the proposed rule on March 31, 2003, and release of the final rule on April 23, 2004, areas of controversy with respect to the new regulations had been clearly (and, relatively early) identified. DOL stressed that it had conscientiously reviewed issues raised through the comment process, and had modified the rule to meet the various objections. Still, release of the 152-page final rule (as published in the Federal Register ), cross-referenced to the current rule and to case law, may have left some non-specialists initially ill-prepared to raise issues during early hearings. By the May 20 hearing before the House Small Business Subcommittee on Workforce, Empowerment and Government Programs, however, there ought to have been few surprises. Testimony from the Department of Labor Alfred B. Robinson, Deputy Administrator for Policy, Wage and Hour Division, was the lead DOL witness for the May 20 hearing. He began by affirming: "The Department is very proud of the final rule. Overtime pay is important to American workers ... and this updated rule represents a great benefit to them." He proceeded to list the groups of workers who, DOL held, would benefit from the "strengthened overtime protections." He noted the alleged deficiencies of the current regulations, stating that small business owners "can ill afford large and potentially devastating legal fees to decipher and litigate the old rule's maze of vague and complicated overtime standards." And, he praised the final rule as "clear, straightforward and fair." Robinson assured the Subcommittee that DOL had "listened to thousands of comments—from workers and employers" and from Congress "whose comments have been a tremendous benefit to the Department." Then he added: "Unfortunately, much of the press coverage and public debate over this rule has been misleading and inaccurate." Robinson affirmed that DOL's "primary goal was to protect low-wage workers." Even lawyers, he said, "have found it difficult to determine who is entitled to overtime pay under the old rules, and very few employees understood their rights." Arguing for "clearer rules that reflect the workplace of the 21 st Century," he concluded: "We simply cannot allow this legal morass to continue unabated." Setting aside concerns about diminished coverage and increased litigation, Robinson accentuated the positive. DOL "... is pleased to report that estimated first-year costs of the final rule—which decrease significantly in subsequent years—are not likely to have a substantial impact on small businesses." He estimated that "... only 107,000 employees who earn at least $100,000 per year, and perform office or nonmanual work, and 'customarily and regularly' perform exempt duties could be classified as exempt. However, the Department believes even this result is unlikely...." (Italics in the original.) Robinson added that "few if any workers" earning between the $23,660 and $100,000 thresholds "are likely to lose the right to overtime pay." In closing, Robinson again asserted that "a great deal of misinformation has surrounded" the final rule but stated: "We at the Department of Labor are very proud of the updated rule." Although DOL did not initially address issues raised in prior hearings, they soon surfaced. Representative Linda Sanchez (D-CA) raised the issue of "team leaders." Robinson responded that the final rule is "more protective" of such workers than current regulation. When he stressed that "team leaders" would be engaged in "major projects," Ms. Sanchez pointed to those who might be involved in "quality teams," suggesting that the concept could be subject to litigation. Ms. Sanchez also raised the issue of overtime protection for workers covered by a collective bargaining agreement. Robinson replied that "[t]hese regulations do not apply to people in unions." He explained: "Union employees are protected by their collective bargaining agreements." Ms. Sanchez rephrased the question, explaining that some collective bargaining agreements defer to applicable federal law on overtime issues and, if the law (or, here, the regulation) were changed, it could impact workers—even those under a collective bargaining agreement. The query was expanded upon by Subcommittee Chairman W. Todd Akin (R-MO), but the issue was not resolved. Comment from Other Witnesses Also appearing before the Small Business Subcommittee were two witnesses of industry orientation and one of a labor perspective. "A loan officer for a mortgage broker," said Neill Fendly of the National Association of Mortgage Brokers, "must make certain judgments when assisting consumers in financing the most important purchase of their lives." This requires "a high degree of skill and judgment," he affirmed, and therefore the mortgage industry "has long held that loan officers are exempt from the government's overtime pay requirements." Under the financial services section of the final rule, Fendly noted, loan officers might be exempt administrative employees. "Although the final rule does not include specific language regarding loan officers," he stated, "we believe the department's decision to frame the rule in the context of existing law is positive for the industry and a significant benefit to small business mortgage brokers with little or no access to expensive labor attorneys." "Based on their licensing requirements and primary duties," suggested John Fitch, representing the National Funeral Directors Association, the "NFDA has long believed that licensed funeral directors and embalmers should be exempt from the overtime requirements of the FLSA." (The industry had sought exemption of such workers as professionals—a position that DOL had consistently rejected until promulgation of the final rule.) "The Department concluded in the early 1970's," Fitch explained, "that licensed funeral directors and embalmers do not satisfy the current duties test for learned professionals." Fitch argued that funeral directors "continually exercise discretion and judgment," cannot "adhere to a rigid schedule" because death is "unpredictable," and are employed by "mostly small, family-owned businesses"—and should not receive overtime pay when called upon to work more than 40 hours a week. Under the final rule, he concluded, DOL "recognized, for the first time, licensed funeral directors and embalmers as professionals." Ross Eisenbrey of the Economic Policy Institute was more pessimistic. The rule, he protested, "is far more likely to provoke additional litigation than to prevent it." (Italics in original.) He stated: ... I believe the rule is so ambiguous and internally inconsistent that businesses will find themselves unable to understand or explain it, and workers will be much more likely to sue when employers take advantage of the rule to reclassify their employees and cut costs. The rule both eliminates key objective tests that provide clarity in the current regulations and introduces a host of ambiguous new terms and provisions that will be the source of litigation for many years to come. Eisenbrey projected a "lawsuit-by-lawsuit" interpretation of the final rule. With questions and comments, he walked the Subcommittee through the rule. ... why aren't sous chefs, who spend all but a few minutes of the day working with their hands, 'blue collar'? ... it is only ' non-management production line employees and non-management employees in maintenance, construction, and similar occupations' who are entitled to overtime premium pay. The rule gives no clue about how to distinguish a management production line employee from a non-management production line employee, or a management maintenance employee from a non-management maintenance employee. (Bolding in original.) This [the concept of team leaders] is a broad new exemption that could apply to as many as 2.3 million currently non-exempt team leaders throughout American industry. The only limitation on this exemption is that the team's project must be 'major.' No definition of 'major' is provided in the rule.... This new 'learned professional' exemption allows employers to deny overtime pay to employees who ... 'have substantially the same knowledge level and perform substantially the same work as the degreed employees.' What does 'substantially the same' mean? It doesn't mean equal knowledge; could it mean less? How much less could a non-degreed employee know and still be considered a professional? The DOL has gone to great lengths to deny that knowledge employees gain from service in the armed forces can be used to establish this exemption [the learned professional]. But how will employers ... prove that none of the knowledge a veteran has that gives him 'substantially the same knowledge' as degreed professionals, was gained in the armed services? Eisenbrey raised a number of other questions dealing, for example, with: the definition of "customarily and regularly" as applied to exempt highly compensated employees; the distinction, for exemption purposes, between "marketing, servicing or promoting the employer's financial products" and "selling financial products" [the former are exempt, the latter are not]; the issue of working supervisors; and the concept of concurrent duties. Summer and Fall of 2004 As time for implementation of the new rule came closer, the options of critics seemed to fade. Congress could intervene directly with amendment of the FLSA; but that would seem unlikely, given the position of the Administration. Congress might have taken up the Specter proposal for a study commission; but given the position of the Administration, that, too, may have seemed an unlikely solution. Two bills remained before Congress that could have affected the Department's rulemaking. First . There was the JOBS Act, S. 1637 (with its counterpart in the House, H.R. 4520 ), having already been passed by the Senate with the Harkin and Gregg amendments included. Second . There was the FY2005 appropriations bill for the Department of Labor that might have been amended to include language to eliminate (or restrict) funding for all or part of DOL's contentious rulemaking process. Amending the JOBS Act (S. 1637, H.R. 4520): Phase III On June 4, 2004, Representative William Thomas (R-CA) introduced H.R. 4520 , the American Jobs Creation Act of 2004, the House counterpart of S. 1637 The two bills were somewhat different: the House bill did not contain the Harkin and/or Gregg language. Following consideration by the Committees on Ways and Means and Agriculture, the bill was called up in the House on June 17 and passed by the House (yeas 251 and nays 178). Referred to the Senate, the bill was placed on the Senate's Legislative Calendar (Calendar No. 591). On July 14, 2004, Senate Majority Leader Frist sought unanimous consent for consideration of H.R. 4520 . He proposed that the bill be called up, and that S. 1637 be offered as a substitute for the language of the House bill. This would have meant that the Senate bill (now in the guise of the House bill) would have contained the Harkin and Gregg amendments. He further proposed that a conference be requested with the House—and that Senate conferees be appointed. Senator Frist observed that "[m]uch work remains to be done on this bill" and stated: "There are significant differences with the House bill, so this is likely going to be a challenging process. I want to make sure that all Senators know that it is unrealistic to expect that the House will agree with all our provisions and that we will likely have to make changes to S. 1637 ." The following day, on July 15, 2004, H.R. 4520 was called up in the Senate. As discussion drew to a close, Senator Barbara Mikulski (D-MD) spoke in behalf of the Harkin overtime pay amendment and urged "the conferees on this bill to make sure the Harkin amendment stays in the final version." This was seconded by Senator Kennedy: "It would be unconscionable if this bill comes out of conference without those protections." As amended to include the language of S. 1637 (including the Harkin and Gregg amendments), H.R. 4520 was passed by a voice vote. Senate conferees were immediately appointed, but some time would pass prior to appointment of conferees by the House. On September 29, 2004, when the House moved to appoint conferees on H.R. 4520 , DOL's new overtime provisions had already been in place for nearly a month. Reversing an act of the Department—in effect and to which industry had already committed itself—would seem to have been more difficult than in preventing its initial implementation. James McGovern (D-MS), commenting upon the conference report to be considered by the House, October 7, 2004, conceded that "these misguided regulations" continue to stay in effect—since the Harkin/Gregg amendments had been stripped from the bill in conference. The House moved forward with the legislation as reported. On a roll call vote (280 yeas to 141 noes), the House concurred in the report of the conferees. The Senate moved quickly with final passage of the legislation. On October 11, the conference report was called up. Senator Olympia Snowe (R-ME) observed that the bill "is silent on an issue of great importance to working Americans": the Department of Labor's new overtime regulations. Senator Snowe noted that in May, she "was one of 52 Senators who voted in support of the Harkin amendment" and, after reviewing the negative implications of the rule, stated that she "was disappointed that the Harkin amendment was not included." Senator Reed of Rhode Island reviewed the number of times the Senate had voted in favor of the Harkin (and Gregg) amendments, observing: "I am amazed that the majority has again stripped this provision which has overwhelmingly passed" both houses and, in the Senate, now five times. Senator Dodd concurred: "... it is now out, despite the fact we insisted it be part of this legislation." On October 11, the Senate voted to accept the conference report on H.R. 4520 (yeas 69 to 17 noes). On October 21, 2004, the "JOBS" bill was signed into law. Appropriations for the Department of Labor: FY2005 On July 14, 2004, the House Appropriations Committee approved legislation (with no bill number then assigned, but soon to be H.R. 5006 ) to provide funding for the Department of Labor for FY2005. During consideration of the measure, Representative David Obey (the Committee's Ranking Democrat from Wisconsin) proposed language restraining the Department from moving forward with implementation of the final rule governing the Section 13(a)(1) exemptions. As with prior restrictive initiatives, the Obey amendment would not have blocked the adjustment of the lower thresholds under the final rule (the earnings thresholds) but would have dealt with the duties tests. As on prior occasions, those supporting the Administration objected. Representative Ralph Regula (R-OH), chair of the Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies, argued that the Obey amendment, were it approved, would "prevent any federal enforcement of the law" insofar as Section 13(a)(1) was concerned. Conversely, Representative Obey reportedly characterized his proposed amendment, aside from its substantive features, as "an attempt to bring the Labor Department back to the table" on the overtime pay issue. Outside of Congress, the battle continued. Ross Eisenbrey of the Economic Policy Institute released a study decrying the Department's action and forecasting seriously negative results were it implemented. Meanwhile, Ed Frank, DOL's spokesperson, called the report "a last-ditch effort to re-start the misinformation campaign that has failed to cover up the fact that millions of workers will benefit from the Department's strong new overtime guarantees." The Obey amendment was defeated in the full Committee by a party-line vote of 31 nays to 29 yeas. According to the Daily Labor Report , Representative Obey "expects to offer" a similar amendment when the appropriations measure is called up in the House—perhaps early in fall 2004. Floor Fight in the House (September 2004): H.R. 5006 On September 7, 2004, report was made to the full House on H.R. 5006 with discussion of the report to begin the following day. The next morning, while introducing the rule for consideration of H.R. 5006 , Representative Louise Slaughter (D-NY) opined that, among those workers who worry about having their jobs "shipped off to Mexico or China," are some "6 million workers who stand to lose access to overtime pay under the new rules" set forth by the Department of Labor. Immediately, Representative Marsha Blackburn (R-TN) took the floor to charge that there is "a campaign of disinformation that is being waged against the overtime pay reforms" and to declare that the new rule, already in place, was "worker-friendly" and "fair." Thereafter, the rule ( H.Res. 754 ) was adopted (209 yeas to 190 nays), and the House proceeded. Thus, the stage was set for confrontation when, late on September 8, Representative Obey took the floor. "I had planned at this point to offer an amendment with the gentleman from California (Mr. George Miller) which would block most of the sections" of the new Departmental rule. "But now I have been told that if I intend to offer that amendment tonight, the majority will shut down the House for the evening." Obey termed the action "outrageous" but, ultimately, did not introduce the amendment. On September 9, however, Representative Obey did propose his amendment to H.R. 5006 . Immediately, Representative Boehner called for a point of order against the amendment—but his point of order was overruled by the chair. As debate continued, two perspectives seem to have appeared. On the one hand, the Obey (Miller) amendment might have left the Department in limbo, unable to enforce the new rules but unable, absent a lengthy proceeding, to provide an alternative. "Under the Obey amendment," Boehner stated, "the Secretary of Labor is prohibited from protecting workers overtime as required by her current regulations, and she will be forced to start the regulatory process over in order to develop new regulations to ensure those protections." Representative Regula affirmed: "... the allegation is that we would go back to the old regulations, but the truth of the matter is, they are gone." Conversely, Representative Obey read into the record a review "of applicable principles of administrative procedure and pertinent judicial precedents" that indicated that "the Department of Labor would have the authority to immediately reimplement overtime compensation regulations in effect prior to August 23, 2004, upon passage of the proposed Obey-Miller rider." He added: "That means that they can on their own volition reinstitute those rules within 1 day." As the debate drew to a close, Representative Regula noted that "most of our speakers have been from the Committee on Education and Workforce" and "illustrates the fact that this is a legislative issue that ought to be debated and dealt with there." But, "in reality, it is before us." On passage of the Obey/Miller amendment, the vote was 223 yeas to 193 nays—the critics of the Department of Labor's rule having won, at least, a momentary victory. A New Proposal in the Senate: S. 2810 In the Senate, the appropriations subcommittee dealing with the Department of Labor and related agencies was under the chairmanship of Senator Specter. Through several hearings during consideration of the 2004 appropriations measure, the Senator had expressed some discomfort with the new overtime pay rules. On September 15, 2004, Senator Specter introduced new legislation providing for the 2005 appropriation for the Department of Labor. The Harkin language was not in the original bill—the Senator from Pennsylvania choosing to allow the full Committee on Appropriations to work its will. When the bill was considered, the vote was 16 yeas to 13 nays, Senators Specter and Ben Nighthorse Campbell (R-CO) in support of the Harkin provision. As reported, the bill ( S. 2810 ) charged that "none of the funds provided in this Act may be used by the Department of Labor to implement or administer any changes to regulations regarding overtime compensation" except those changes "specifying the amount of salary required to qualify as an exempt employee." In deference to the floor debates in the House, it would seem, a further provision was added: "This provision requires the immediate re-instatement and enforcement of the old overtime regulations in effect on July 14, 2004"—except for those provisions relating to salary. In short, the duties test was overturned; the earnings test was sustained. And, in each house, the substance of the Harkin amendment has been accepted. The Move to an Omnibus Bill: H.R. 4818 On September 9, 2004, following the vote in the House on the Obey/Miller amendment, a spokesperson for Speaker J. Dennis Hastert (R-IL) reportedly affirmed "that the amendment would likely be stripped from the funding bill in a conference committee and expressed little concern that the amendment would reach the president's desk." Gradually, the ground began to shift away from critics of the overtime pay rule. A few days after the vote, House Appropriations Chairman C. W. Young (R-FL) was asked his opinion on the issue. "'I won't have strong feelings either way,'" he responded; but he expressed some frustration. "'That held us up for weeks and weeks last year. That one amendment,'" he said. A few days later, the DLR , citing Senate Appropriations Committee Chairman Ted Stevens (R-AL), reported that the "Labor-HHS bill will be rolled into an end-of-session omnibus spending bill." Further, the Daily Labor Report noted: "Despite the majority votes in both houses to rescind parts of the overtime rule on the Labor-HHS bill, Republican leaders have said they expect the overtime amendment to be stripped from the omnibus bill in the face of the administration's threat." Again, in mid-November, quoting a senior Senate GOP aide, it was reported confidently that an overtime pay provision "will be stripped from an omnibus appropriations bill." The article continued: "'We're heading toward most policy pieces being taken out of the omnibus,' the aide said. 'They're controversial. They're time consuming, and the president won't sign most of them.'" On November 20, 2004, the House and Senate took up the conference report on H.R. 4810 , the omnibus bill funding the Department of Labor and several other agencies during FY2005. Several Members, during the debate, made reference to the overtime pay issue; but, at large, the measure seemed to have slipped from view. Representative Obey stated that "the Republicans have taken out several provisions that were supported by the majority of this body and should have been retained" and they have "stripped out the language which would have protected 6 million workers from being chiseled on their overtime rights." The White House, stated Senator Byrd, "issued veto threats" to block elimination of "the administration's overtime regulation." "Pure and simple," charged Senator Kennedy, "denying overtime is a thinly veiled cut in workers' pay and boost employers' profits." He concluded: "Denying the will of Congress and the American people in this Omnibus bill doesn't settle the issue. This battle," he said, "is far from over. The fight will continue until workers' overtime rights are restored." In the House on November 20, 2004, the final vote was 344 yeas to 51 nays; in the Senate, 65 yeas to 30 nays. The measure was signed into law as P.L. 108-447 . SECTION IV A Mixed Reaction On October 15, 2004, with only two months of experience behind them, the Department of Labor's Solicitor Howard Radzely reportedly proclaimed a certain amount of satisfaction with the result of the overtime pay regulation. "The predictions were not accurate," Radzely said, referring to critics of the plan. "Almost without exception, the reports indicate people are gaining overtime protection." But, the reports were anecdotal and fragmentary. Others agreed. In early November, Thomas Sullivan, Chief Counsel for Advocacy at the Small Business Administration, asserted that the new rule "has produced the greatest cost savings for small businesses since the administration began attempting to streamline its regulatory system." Todd McCracken, National Small Business Association President, "concurred with Sullivan's assessment that the DOL overtime rule had produced the single biggest cost savings to the small business community." Tammy McCutchen, the author of the new rule (and now with the law firm of Dickstein Shapiro Morin & Oshinsky), asserted that the rule was "still alive, despite "'an AFL-CIO misinformation campaign, misleading media reports, and eight congressional votes to revoke the changes.'" She reported that "a substantial number of cases involving incorrect classifications ... of overtime is 'on the horizon.'" Mostly, she said, the cases involve calculation of the "'regular rate'" of pay. But, McCutchen suggested, the overtime reform was only the beginning of changes needed in FLSA administration. In a speech in Naples, Florida, in early April 2005, DOL's Radzely affirmed that the final rule has "clarified and significantly strengthened" the law. "We have not seen a single incident—let alone the predicted 6 million incidents—of an employee who has lost pay as a result of the regulations." He described the rule as "more user friendly" for both attorneys and human resources personnel and "at least as protective as the old" where workers were concerned. He observed: "[o]nce we got past the extreme rhetoric ... there have been surprisingly few issues" in contention. But, some problems still existed and, Radzely affirmed: "When employees are 'on-the-line,' in terms of exempt/nonexempt status, you can change their job duties, so that they will become clearly exempt again...." New Initiatives of the 109th Congress Early in the 109 th Congress, Senator Harkin rose to address "an issue that my colleagues have heard me speak about on numerous occasions during the course of the past two years." Once more, he invoked the matter of overtime protection for America's workers. Senator Harkin reviewed the history of the Fair Labor Standards Act and of its importance to workers, especially to those at the margins of the economy. "Overtime pay rewards work, and it reduces exploitation." The 40-hour workweek, he suggested, "creates jobs. Requiring time-and-a-half pay for overtime work encourages employers to hire more workers, rather than requiring additional hours of work from existing employees." To compensate such workers, who are engaged through extended periods, he stated, is "simple fairness." At this point, Senator Harkin proposed a new bill, S. 223 of the 109 th Congress, that addressed the current FLSA regulations in two ways. First . It set aside the existing regulations (those in effect since August 2004), allowing all workers to be covered under the act on the basis of the regulations in effect on March 31, 2003. The proposal states: "that portion of such regulations (as in effect on March 31, 2003) that would prevent such employee from being exempt shall be reinstated." Second . It provided for indexation of the coverage formula under a new rule: that all persons earning less than $591 per week would be exempt from the rule, that is, covered by the standard wage and hour provisions of the act. It then provided that, not later than December 31 of each calendar year, "the Secretary shall increase the minimum salary level for exemption under Subsection (a)(1) by an amount equal to the increase in the Employment Cost Index for executive, administrative, and managerial occupations for the year involved." Indexation of the exemption, Harkin affirmed, would "avoid future loss of overtime protections due to inflation." Senator Kennedy, a co-sponsor of the bill, stated: "This change will bring it to the level it would be if we'd made annual adjustments for wage inflation over the last 30 years." The bill was referred to the Committee on Health, Education, Labor, and Pensions. On April 19, 2005, Senator Richard Durban (D-IL) introduced S. 846 , a bill to protect the overtime rights of workers employed as executive, administrative, or professional employees. Like the Harkin bill, it would set aside existing regulations (those in effect since August 2004) and index the formula under which exemption under Section 13(a)(1) would be allowable. The bill was read a second time and placed on the Senate Legislative Calendar under General Orders, Calendar No. 80. The various measures, in so far as they addressed the overtime pay issue, died at the close of the 109 th Congress. If overtime pay remained on the agenda for the Members of Congress, it did not otherwise reappear, nor was it an issue in the 110 th Congress when minimum wage legislation was considered and adopted. In Summary On April 23, 2004, DOL promulgated its final rule on overtime pay under Section 13(a)(1). The target date for its implementation was August 23, 2004. With the new rule in effect, any administrative or legislative change of the regulatory structure would be difficult to achieve. Thus, the last week of August was regarded, in practical terms, as a deadline of sorts—not absolute, but with change, thereafter, more difficult to effect. Those who opposed the final rule attempted a number of strategies designed to block its promulgation in final form and, ultimately, its implementation—notably, with the FY2005 DOL appropriations measure. None of these were successful. Critics of the new rule confronted a serious disadvantage. Congress, long ago, had given to the Secretary the authority to modify the regulation governing executive, administrative and professional—and to define precisely what those terms meant.

Section 13(a)(1) of the Fair Labor Standards Act permits exemption of employers of bona fide executive, administrative and professional employees from the minimum wage and overtime pay requirements of the act; that is, from the basic wage and hour provisions of the statute. What constitutes a bona fide executive, administrative, or professional employee has been left by Congress for the Secretary of Labor to define and delimit. That process, begun in 1938, lapsed after 1975 and was renewed by the Bush Administration in 2003 (see 29 CFR 541). The first Section 13(a)(1) regulation appeared in 1938. Inter alia, it imposed two classification tests. First. To qualify as bona fide, a worker had to be paid at a rate befitting an executive or administrator. Second. The worker had to perform the actual work (duties) of an executive or administrator. A salary threshold was set at $30 a week. Initially, professionals were subject only to a duties test. In 1940, an earnings threshold ($50 a week) was set for professionals. Definitions were modified periodically (both the earnings and duties tests) so that they could serve, credibly, as indicators of who might be deemed an executive, administrator or professional for Section 13(a)(1) purposes. Updates were always contentious. With lower thresholds, greater numbers of workers would find themselves unprotected by the terms of the FLSA. Thus, it was in the interests of employers to keep the thresholds low—and the duties tests as broad as possible. Workers, in turn, sought a higher threshold and a narrow definition of duties. The last general revision occurred in 1975, but the effort encountered significant objections from employers. In 1978, a further update was proposed; but, in 1981, it was withdrawn by the new Reagan Administration. It never reappeared. The thresholds remain at 1975 levels: $155 per week for executives and administrators and $170 for professionals—with slightly lower levels for Puerto Rico, the Virgin Islands and American Samoa. The duties tests have evolved, slowly, since 1938 but remain heavily anchored in regulations from the act's early history. On March 31, 2003, Wage/Hour Administrator Tammy McCutchen published in the Federal Register a proposed update of the Section 13(a)(1) regulation. The proposal sparked an intense public and legislative debate. (See, inter alia, H.R. 2660, H.R. 2673, H.R. 2665, H.R. 4520, S. 1485, S. 1611, and S. 1637 of the 108th Congress.) On April 23, 2004, DOL issued the rule in final form (Federal Register, April 23, 2004, pp. 22122-22274) to take effect the last week of August 2004. The new provisions have now been placed in effect. It seems unlikely that any further revisions can be expected to take place for the foreseeable future. This report sketches the evolution of the Section 13(a)(1) regulation and explores the arguments, pro and con, that it has encountered.

Introduction The length of time a congressional staff member spends employed in Congress, or job tenure, is a source of recurring interest among Members of Congress, congressional staff, those who study staffing in the House and Senate, and the public. There may be interest in congressional tenure information from multiple perspectives, including assessment of how a congressional office might oversee human resources issues, how staff might approach a congressional career, and guidance for how frequently staffing changes may occur in various positions. Others might be interested in how staff are deployed, and could see staff tenure as an indication of the effectiveness or well-being of Congress as an institution. This report provides tenure data for 18 staff position titles that are typically used in Senators' offices, and information for using those data for different purposes. The positions include the following: Administrative Director Casework Supervisor Caseworker Chief Counsel Chief of Staff Communications Director Counsel Executive Assistant Field Representative Legislative Assistant Legislative Correspondent Legislative Director Office Manager Press Secretary Regional Representative Scheduler Staff Assistant State Director Data Source and Concerns Publicly available information sources do not provide aggregated congressional staff tenure data in a readily retrievable or analyzable form. The most recent publicly available Senate staff compensation report, which provided some insight into the duration which congressional staff worked in a number of positions, was issued in 2006, and relied on anonymous, self-reported survey data. Data in this report are instead based on official Senate pay reports, from which tenure information arguably may be most reliably derived, and which afford the opportunity to use complete, consistently collected data. Tenure information provided in this report is based on the Senate's Report of the Secretary of the Senate , published semiannually, as collated by LegiStorm, a private entity that provides some congressional data by subscription. Senators' staff tenure data were calculated for each year between 2006 and 2016. Annual data allow for observations about the nature of staff tenure in Senators' offices over time. For each year, all staff with at least one week's service on March 31 were included. All employment pay dates from October 2, 2000, to March 24 of each reported year are included in the data. Utilizing official salary expenditure data from the Senate may provide more complete, robust findings than other methods of determining staff tenure, such as surveys; the data presented here, however, are subject to some challenges that could affect the interpretation of the information presented. Tenure information provided in this report may understate the actual time staff spend in particular positons, due in part to several features of the data. Overall, the time frame studied may lead to some underrepresentation in tenure duration. Figure 1 provides potential examples of congressional staff, identified as Jobholders A-D, in a given position. Since tenure data are not captured before October 2, 2000, some individuals, represented as Jobholder A, may have an unknown length of service prior to that date that is not captured. This feature of the data only affects a small number of employees within this dataset, since many tenure periods completely begin and end within the observed period of time, as represented by Jobholders B and C. The data last capture those who were employed in Senators' personal offices as of March 31, 2016, represented as Jobholder D, and some of those individuals likely continued to work in the same roles after that date. Data provided in this report represent an individual's consecutive time spent working in a particular position in a Senator's personal office. They do not necessarily capture the overall time worked in a Senate office or across a congressional career. If a person's job title changes, for example, from staff assistant to caseworker, the time that individual spent as a staff assistant is recorded separately from the time that individual spent as a caseworker. If a person stops working for the Senate for some time, that individual's tenure in his or her preceding position ends, although he or she may return to work in Congress at some point. No aggregate measure of individual congressional career length is provided in this report. Other data concerns arise from the variation across offices, lack of other demographic information about staff, and lack of information about where congressional staff work. Potential differences might exist in the job duties of positions with the same or similar title, and there is wide variation among the job titles used for various positions in congressional offices. The Appendix provides the number of related titles included for each job title for which tenure data are provided. Aggregation of tenure by job title rests on the assumption that staff with the same or similar title carry out the same or similar tasks. Given the wide discretion congressional employing authorities have in setting the terms and conditions of employment, there may be differences in the duties of similarly titled staff that could have effects on the interpretation of their time in a particular position. Acknowledging the imprecision inherent in congressional job titles, an older edition of the Senate Handbook states, "Throughout the Senate, individuals with the same job title perform vastly different duties." As presented here, tenure data provide no insight into the education, age, work experience, pay, full- or part-time status of staff, or other potential data that might inform explanations of why a congressional staff member might stay in a particular position. Staff could be based in Washington, DC, state offices, or both. It is unknown whether, or to what extent, the location of congressional employment might affect the duration of that employment. Presentation of Tenure Data Tables in this section provide tenure data for selected positions in Senators' personal offices and detailed data and visualizations for each position. Table 1 provides a summary of staff tenure for selected positions since 2006. The data include job titles, average and median years of service, and grouped years of service for each positon. The "Trend" column provides information on whether the time staff stayed in a position increased, was unchanged, or decreased between 2006 and 2016. Table 2 - Table 19 provide information on individual job titles over the same period. In all of the data tables, the average and the median length of tenure columns provide two different measures of central tendency, and each may be useful for some purposes and less suitable for others. The average represents the sum of the observed years of tenure, divided by the number of staff in that position. It is a common measure that can be understood as a representation of how long an individual remains, on average, in a job position. The average can be affected disproportionately by unusually low or high observations. A few individuals who remain for many years in a position, for example, may draw the average tenure length up for that position. A number of staff who stay in a position for only a brief period may depress the average length of tenure. Another common measure of central tendency, the median, represents the middle value when all the observations are arranged by order of magnitude. The median can be understood as a representation of a center point at which half of the observations fall below, and half above. Extremely high or low observations may have less of an impact on the median. Assessing Tenure Data Generalizations about staff tenure are limited in at least three potentially significant ways, including: the relatively brief period of time for which reliable, largely inclusive data are available in a readily analyzable form; how the unique nature of congressional work settings might affect staff tenure; and the lack of demographic information about staff for which tenure data are available. Considering tenure in isolation from demographic characteristics of the congressional workforce might limit the extent to which tenure information can be assessed. Additional data on congressional staff regarding age, education, and other elements would be needed for this type of analysis, and are not readily available at the position level. Finally, since each Senator's office serves as its own hiring authority, variations from office to office, which for each position may include differences in job duties, work schedules, office emphases, and other factors, may limit the extent to which aggregated data provided here might match tenure in a particular office. Despite these caveats, a few broad observations can be made about staff in Senators' offices. Between 2006 and 2016, staff tenure, based on the trend of the median number of years in the position, appears to have increased by six months or more for staff in 10 position titles in Senate offices. The median tenure was unchanged for eight positions. This may be consistent with overall workforce trends in the United States. Although pay is not the only factor that might affect an individual's decision to remain in or leave a particular job, staff in positions that generally pay less typically remained in those roles for shorter periods of time than those in higher-paying positions. Some of these lower-paying positions may also be considered entry-level positions in some Senators' offices; if so, Senate office employees in those roles appear to follow national trends for others in entry-level types of jobs, remaining in the role for a relatively short period of time. Similarly, those in more senior positions, which often require a particular level of congressional or other professional experience, typically remained in those roles comparatively longer, similar to those in more senior positions in the general workforce. Appendix. Job Title Categories There is wide variation among the job titles used for various positions in congressional offices. Between October 2000 and March 2016, House and Senate pay data provided 13,271 unique titles under which staff received pay. Of those, 1,884 were extracted and categorized into one of 33 job titles used in CRS Reports about Member or committee offices. Office type was sometimes related to the job titles used. Some titles were specific to Member (e.g., District Director, State Director, and Field Representative) or committee (positions that are identified by majority, minority, or party standing, and Chief Clerk) offices, while others were identified in each setting (Counsel, Scheduler, Staff Assistant, and Legislative Assistant). Other job titles variations reflect factors specific to particular offices, since each office functions as its own hiring authority. Some of the titles may distinguish between roles and duties carried out in the office (e.g., chief of staff, legislative assistant, etc.). Some offices may use job titles to indicate degrees of seniority. Others might represent arguably inconsequential variations in title between two staff members who might be carrying out essentially similar activities. Examples include: Seemingly related job titles, such as Administrative Director and Administrative Manager, or Caseworker and Constituent Advocate Job titles modified by location, such as Washington, DC, State, or District Chief of Staff Job titles modified by policy or subject area, such as Domestic Policy Counsel, Energy Counsel, or Counsel for Constituent Services Committee job titles modified by party or committee subdivision. This could include a party-related distinction, such as a Majority, Minority, Democratic, or Republican Professional Staff Member. It could also denote Full Committee Staff Member, Subcommittee Staff Member, or work on behalf of an individual committee leader, like the chair or ranking member. The titles used in this report were used by most Senators' offices, but a number of apparently related variations are included to ensure inclusion of additional offices and staff. Table A-1 provides the number of related titles included for each position used in this report or related CRS Reports on staff tenure. A list of all titles included by category is available to congressional offices upon request.

The length of time a congressional staff member spends employed in a particular position in Congress—or congressional staff tenure—is a source of recurring interest to Members, staff, and the public. A congressional office, for example, may seek this information to assess its human resources capabilities, or for guidance in how frequently staffing changes might be expected for various positions. Congressional staff may seek this type of information to evaluate and approach their own individual career trajectories. This report presents a number of statistical measures regarding the length of time Senate office staff stay in particular job positions. It is designed to facilitate the consideration of tenure from a number of perspectives. This report provides tenure data for a selection of 18 staff position titles that are typically used in Senators' offices, and information on how to use those data for different purposes. The positions include Administrative Director, Casework Supervisor, Caseworker, Chief Counsel, Chief of Staff, Communications Director, Counsel, Executive Assistant, Field Representative, Legislative Assistant, Legislative Correspondent, Legislative Director, Office Manager, Press Secretary, Regional Representative, Scheduler, Staff Assistant, and State Director. Senators' staff tenure data were calculated as of March 31, for each year between 2006 and 2016, for all staff in each position. An overview table provides staff tenure for selected positions for 2016, including summary statistics and information on whether the time staff stayed in a position increased, was unchanged, or decreased between 2006 and 2016. Other tables provide detailed tenure data and visualizations for each position title. Between 2006 and 2016, staff tenure appears to have increased by six months or more for staff in 10 position titles in Senators' offices, based on the trend of the median number of years in the position. For eight positions, the median tenure trend was unchanged. These findings may be consistent with overall workforce trends in the United States. Pay may be one of many factors that affect an individual's decision to remain in or leave a particular job. Senate office staff holding positions that are generally lower-paid typically remained in those roles for shorter periods of time than those in generally higher-paying positions. Lower-paying positions may also be considered entry-level roles; if so, tenure for Senators' office employees in these roles appears to follow national trends for other entry-level jobs, which individuals hold for a relatively short period of time. Those in more senior positions, where a particular level of congressional or other professional experience is often required, typically remained in those roles comparatively longer, similar to those in more senior positions in the general workforce. Generalizations about staff tenure are limited in some ways, because each Senator's office serves as its own hiring authority. Variations from office to office, which might include differences in job duties, work schedules, office emphases, and other factors, may limit the extent to which data provided here might match tenure in another office. Direct comparisons of congressional employment to the general labor market may have similar limitations. An employing Senator's retirement or electoral loss, for example, may cause staff tenure periods to end abruptly and unexpectedly. This report is one of a number of CRS products on congressional staff. Others include CRS Report R43946, Senate Staff Levels in Member, Committee, Leadership, and Other Offices, 1977-2016, and CRS Report R44324, Staff Pay Levels for Selected Positions in Senators' Offices, FY2001-FY2014.

Introduction Presidential libraries serve not only as repositories of official papers, but also as museums and monuments to the nation's leaders. In response to these varied missions, two sources provide funds to construct and maintain presidential libraries. First, private funds raised by non-profit foundations typically cover library construction and programming costs. Second, funds appropriated to the National Archives and Records Administration (NARA) cover the cost of archiving and managing presidential papers housed at the libraries. Through agreements negotiated by the Archives and foundations affiliated with each facility, NARA eventually takes control of most presidential libraries. The NARA system currently includes the libraries of 12 former Presidents: (1) George H. W. Bush (College Station, Texas); (2) Jimmy Carter (Atlanta, Georgia); (3) William J. Clinton (Little Rock, Arkansas); (4) Dwight D. Eisenhower (Abilene, Kansas); (5) Gerald R. Ford (Ann Arbor, Michigan); (6) Herbert Hoover (West Branch, Iowa); (7) Lyndon B. Johnson (Austin, Texas); (8) John F. Kennedy (Boston, Massachusetts); (9) Richard M. Nixon (Yorba Linda, California); (10) Ronald Reagan (Simi Valley, California); (11) Franklin D. Roosevelt (Hyde Park, New York); and (12) Harry S. Truman (Independence, Missouri). Foundations affiliated with these libraries typically continue operations to support library programming, exhibits, or other events sustaining a President's legacy. Private fundraising supporting library foundations has emerged as a matter of concern in recent Congresses largely because private fundraising is not subject to public disclosure. Some Members of Congress have expressed concern that the lack of public disclosure—or private fundraising altogether—invites potential conflicts of interest from those wishing to influence sitting or former Presidents through library contributions. Contributions from foreign sources have also been a concern, including during Senate consideration of Hillary Clinton's nomination as Secretary of State. In December 2008, the William J. Clinton Foundation agreed to voluntarily disclose names and donation ranges of its contributors, but this practice would not necessarily extend to other presidential-library foundations. Apparently unrelated to the Clinton nomination, the House passed H.R. 36 (Towns) early in the 111 th Congress. That bill would have required library fundraising organizations to publicly disclose contributions of at least $200, along with the names and occupations of donors. In February 2011, in the 112 th Congress, Representative Duncan introduced a similar bill, H.R. 775 (discussed later in this report). This report provides an overview of recent legislation regarding presidential library fundraising. It also discusses policy issues and options. Requiring additional disclosure surrounding library fundraising could increase transparency and potentially discourage conflicts of interest. Disclosure alone, however, is unlikely to change fundraising practices. Amounts and sources of library fundraising would continue to be unlimited. How Presidential Libraries are Funded Presidential libraries are funded through a combination of public and private sources. In general, funds for archiving and management of a President's papers are appropriated to NARA, while funds raised by foundations associated with the library support facility construction, programming, and other activities related to a President's legacy. The first step in funding presidential libraries typically occurs when a President's supporters or family members establish a 501(c)(3) foundation to raise money for acquiring land (if necessary) and constructing the library. After the library is constructed and per agreements negotiated between NARA and the foundation, the Archives typically takes control of the facility, land, and the foundation's operating endowment. As the House Committee on Government Operations noted in 1985, endowment income "is intended to offset ... building operations costs and reduce ... the amount of appropriations required for building operations." Even after NARA takes control of a library, the foundation may continue to operate to support specific programming or exhibits. Private fundraising has generated greater legislative concern than has public funding. The public nature of appropriated funds, and accompanying congressional oversight, ensures transparency about where federal funds originate and how they are spent. Appropriated funds, therefore, have not been the subject of substantial legislative activity in recent Congresses. By contrast, and as discussed below, public information about private fundraising is limited. Library foundations are not required to publicly disclose detailed information about their fundraising activities. In addition to funding "official" presidential libraries, Congress has occasionally provided specific funding for private facilities honoring former presidents. For example, Congress appropriated $1 million in 1996 for the Calvin Coolidge Memorial Foundation, $500,000 in 1997 for the Rutherford B. Hayes home, $3 million in 1999 for the Abraham Lincoln library, and $365,000 in 2000 for the Ulysses S. Grant boyhood home. Such funds have been used to support construction, maintenance, or other projects. Recent Fundraising Policy Issues Disclosure The major current policy issue surrounding library fundraising is whether private contributions are sufficiently transparent. Library foundations typically do not publicize identifying information about their contributions, nor are they required to do so under federal law. Library foundations are typically established as tax-exempt organizations under section 501(c)(3) of the Internal Revenue Code (IRC). Although those organizations must report certain information to the Internal Revenue Service (IRS), they are not required to publicly disclose identifying information about their donors. Contributions to libraries are also not subject to disclosure requirements or limitations contained in the Federal Election Campaign Act (FECA), which governs campaign financing. In recent Congresses, some Members have expressed concern about the lack of information surrounding private fundraising for library foundations. These Members, and some media organizations and interest groups, argue that additional disclosure could help make transparent and reduce potential conflicts of interest from donors who may wish to curry favor with current or former Presidents, their administrations or the U.S. government generally. In response to these and related concerns, the 110 th Congress placed additional reporting requirements on library contributions from lobbyists and lobbying organizations. Under the Honest Leadership and Open Government Act of 2007 (HLOGA), registered lobbyists who contribute $200 or more to library foundations (in the aggregate and over six-month reporting periods) must disclose the contributions in reports filed with the Clerk of the House or Secretary of the Senate. These requirements also apply to organizations employing registered lobbyists and political action committees (PACs) maintained or controlled by lobbyists. Overall, HLOGA requires that lobbyists' contributions to library foundations be publicly reported, but the act does not address contributions from non-lobbyists. Financial Viability A second, but currently less prominent, policy issue surrounding library fundraising concerns costs to the federal government. Congress requires library organizations to demonstrate financial viability before NARA takes over the facility. Amid size and maintenance-cost concerns (particularly during the 1980s), Congress established architectural and design requirements in the Presidential Libraries Act of 1986. The act also established an endowment requirement for libraries deeded over to NARA. Before taking possession of a library facility, the Archivist of the United States must determine that the endowment is sufficient to cover at least 40% of the cost of constructing or acquiring the facility. President Barack Obama's library would be the first that must adhere to the 40% requirement, which applies only to Presidents taking office for the first time after July 1, 2002. Library Fundraising: Legislation in the 112th Congress On February 17, 2011, Representative Duncan introduced H.R. 775 , a bill to require additional fundraising disclosure surrounding presidential libraries and related organizations. Like H.R. 36 from the 111 th Congress, H.R. 775 would require additional disclosure of all contributions aggregating $200 or more to library fundraising organizations. Also like its predecessor, the Duncan bill would require disclosure to NARA, the House Committee on Oversight and Government Reform, and the Senate Committee on Homeland Security and Governmental Affairs. However, H.R. 775 would require annual rather than quarterly reporting. The bill applies to fundraising activities by library organizations affiliated with current presidents rather than all such facilities. Proposed disclosure requirements would also apply to facilities not administered by NARA or for which NARA has entered into an agreement to take over the facility. These provisions suggest that H.R. 775 's primary emphasis is on documenting library fundraising for current presidents or, perhaps, those who have recently left office but for whom agreements with NARA have not yet been finalized. It is possible, however, that the bill is also intended to apply to any fundraising organization that has not entered into an agreement with NARA, such as private facilities that NARA has chosen not to administer (the fundraising arms of presidential homes, for example) or that have chosen not to seek NARA administration. If necessary, the language could be clarified through amendments or rulemakings. Library Fundraising: Legislation in the 111th Congress In one of its first acts of legislative business, and with minimal debate, the House passed the Presidential Library Donation Act of 2009 ( H.R. 36 ; Towns) on January 7, 2009. The measure passed under suspension of the rules by a 388-31 vote. The bill was referred to the Senate Committee on Homeland Security and Governmental Affairs. As the House vote suggests, H.R. 36 generally received broad, bipartisan support. Generally similar to H.R. 775 introduced in the 112 th Congress, H.R. 36 would have required library fundraising organizations to file quarterly reports itemizing contributions totaling at least $200. Under the bill, the reports would have been filed with NARA, the House Committee on Oversight and Government Reform, and the Senate Committee on Homeland Security and Governmental Affairs. The bill would have required continued filing until the later of (1) the Archivist of the United States took control of the library facility or entered into an agreement to do so; or (2) the President, whose archive is in question, had been out of office for at least four years. Despite generally broad support for the bill, one provision generated some controversy during House floor debate. Civil and criminal penalties specified in H.R. 36 could have applied to those filing false disclosure reports. While voicing overall support for the bill, Representative Gohmert expressed concern that the criminal-penalty provisions had not been considered by the Judiciary Committee and could be used to imprison those who had made simple reporting mistakes. Representative Towns expressed willingness to reexamine parts of the legislation, although the bill was not amended before passage. Library Fundraising: Legislation in the 110th Congress H.R. 36 in the 111 th Congress was virtually identical to the version of H.R. 1254 (Waxman) passed by the House during the 110 th Congress. The Senate Committee on Homeland Security and Governmental Affairs (HSGAC) favorably reported an amended version of H.R. 1254 , but the measure did not receive floor consideration. Under the version of H.R. 1254 reported by HSGAC, reporting thresholds would have varied depending on whether NARA had already taken control of (or agreed to take control of) the library. For those facilities that were not yet under NARA control, the reporting threshold would have been $200, compared with $1,250 for those already under NARA control. Unlike the version of the bill passed by the House, the HSGAC-reported version of H.R. 1254 also would have required reporting to continue throughout the President's lifetime. Analysis and Concluding Comments The debate over library fundraising suggests tension between the relatively narrow policy goal of making presidential papers publicly accessible on one hand, and in constructing what can be elaborate research centers and museums to house those papers on the other. Appropriated funds typically address the former goal, while private funds cover the latter. As presidential libraries grow in number, scope, and size, interest in funding sources and alternatives is likely to continue. In the past, debate over those issues has centered around disclosure and financial viability. Currently, disclosure appears to be the major policy concern. If Congress determines that fundraising for presidential libraries should remain essentially a private matter, it might choose not to enact legislation requiring additional disclosure and, in so doing, maintain the status quo. Under this option, private fundraising for presidential libraries would presumably continue unchanged. Additional information about funding sources and amounts would continue to be publicly unavailable, unless fundraising organizations chose to voluntarily disclose the information. This outcome could be objectionable to those who believe that public disclosure could enhance transparency or discourage conflicts of interest. On the other hand, those who believe that additional disclosure could be burdensome, could discourage private contributions, or who otherwise object to additional reporting may prefer to maintain the status quo. If Congress favors additional disclosure, it could choose to enact measures requiring additional detail about contributions or fundraising practices. The disclosure provisions in H.R. 775 could ensure that additional information about contributions to library foundations is publicly available. Accordingly, although additional information about private funding sources would be required, the bill would not place new restrictions on how funds are raised, from whom, and in what amounts. The bill also would not require contributions from foreign sources to be specifically identified—a source of some controversy in recent debates surrounding library fundraising. Nonetheless, additional disclosure about contributions (regardless of source) could provide more public access to basic information about funding than is currently available. If flagging particular sources of contributions were important to Congress, additional reporting requirements could be placed on filers. Certain contribution sources could also be restricted or banned outright. If Congress wishes to pursue broader regulation of library fundraising, aspects of federal campaign finance policy may be a useful model, although certainly not the only model. As noted previously, library contributions are not treated as campaign contributions, but some goals embodied in campaign finance regulation appear to be similar to those behind calls for additional library-fundraising disclosure. H.R. 775 already adopts certain aspects of campaign-finance disclosure found in FECA (e.g., reporting a contributor's name, address, and occupation; the $200 reporting threshold; and certain penalties). The bill does not, however, adopt FECA's restrictions on amounts and sources of contributions. In short, although H.R. 775 would require additional information about contributions, the bill would not affect the contributions themselves or, necessarily, fundraising practices. Additional restrictions on amounts or sources of library contributions might be attractive to those who believe that disclosure alone will be insufficient to thwart potential conflicts of interest arising from private fundraising. Restricting contributions, however, suggest broader policy goals than are apparent in H.R. 775 . As the debate over campaign finance suggests, regulating voluntary contributions can be far more contentious than the comparatively limited requirement of disclosure.

In recent Congresses, some Members have expressed concern about the lack of information surrounding private fundraising for presidential libraries. Those calling for additional regulation argue that more transparency could reduce potential conflicts of interest surrounding library contributions. Contributions from foreign sources have also been the subject of debate. Federal law and regulation are largely silent on contributions to presidential libraries. Contributions to library fundraising organizations may be unlimited and can come from any otherwise lawful source. In addition, although certain aspects of library contributions are similar to campaign contributions, library contributions are not considered to be campaign contributions and are not subject to limits on amounts and funding sources specified in the Federal Election Campaign Act (FECA). In one of the few relatively recent regulatory changes affecting library contributions, the Honest Leadership and Open Government Act (HLOGA), enacted in the 110th Congress, requires registered lobbyists to report their contributions to presidential libraries. However, non-lobbyists are not required to report their library contributions. Library fundraising organizations must report certain information to the Internal Revenue Service, but those organizations are not required to publicize information about individual donors. Library-fundraising issues emerged during Senate consideration of Hillary Clinton's nomination as Secretary of State, amid concerns about fundraising for former President Clinton's library and other initiatives. Calls for additional disclosure, however, are not new. During the 110th Congress, the House passed H.R. 1254 (Waxman), which would have required library fundraising organizations to file quarterly reports itemizing contributions of at least $200 and identifying donors. The Senate Committee on Homeland Security and Governmental Affairs reported an amended version of the bill, but the measure did not receive Senate floor consideration. In the 111th Congress, the House passed H.R. 36 (Towns) in January 2009; that measure was virtually identical to the House-passed version of H.R. 1254 from the 110th Congress. It did not advance in the Senate. An additional disclosure measure, H.R. 775 (Duncan), which would also require reporting of donations of at least $200, was introduced in the 112th Congress, in February 2011. If Congress wishes to pursue broader regulation of library fundraising, aspects of campaign finance policy may be a useful model. However, certain aspects of a campaign-finance disclosure model may invite controversy. This report provides an overview of recent policy issues and legislation surrounding library fundraising. It will be updated in the event of significant legislative activity.

Background Public alarm about the spate of product recalls during 2007, particularly of toys and other products used by children, has focused attention on the Consumer Product Safety Commission (CPSC). P.L. 110-314 , 122 Stat. 3016 (2008), the Consumer Product Safety Improvement Act of 2008 (CPSIA), was enacted as a result of Congress's consideration of major reform legislation to address organizational and systemic deficiencies, as well as specific consumer product defects and hazards. This report provides an overview of the prior authority of the CPSC to establish consumer product safety standards and to inspect, recall, and restrict importation of unsafe consumer products, and summarizes changes made by the CPSIA to reform the CPSC and strengthen enforcement of consumer product safety standards. The Consumer Product Safety Act (CPSA, 15 U.S.C. §§2051 et seq.) established and authorized the CPSC in 1972 in response to growing concerns about protecting the public from unsafe, defective consumer products. However, in the years since its establishment, the staff and resources of the CPSC have been considerably reduced to the detriment of its ability to fulfill its mission effectively. Aside from the issue of adequacy of resources, the highly publicized recalls of children's toys in 2007 focused attention on alleged weaknesses in the CPSA and the authority of the CPSC to establish consumer product safety standards and to inspect, recall domestically, and block imports of unsafe consumer products. The CPSC is the central, federal authority for the promotion and enforcement of consumer product safety. The system is designed to be a collaborative effort among the CPSC, the industries producing the broad range of consumer products, and the consuming public. The CPSC researches and promotes best practices for the industries, producing guidelines for manufacturers, importers, distributors and retailers. Although the CPSA authorizes the CPSC to promulgate mandatory consumer product safety standards, it mandates reliance upon voluntary standards whenever compliance with voluntary standards would eliminate or adequately reduce the risk of injury and substantial compliance with voluntary standards is likely. Besides the CPSA, the CPSC also administers several other statutes whose authorities and functions were transferred to the CPSC upon its creation. The Federal Hazardous Substances Act (FHSA, 15 U.S.C. §§1261 et seq.) provides for warning/informational labeling of hazardous substances and for the banning of certain hazardous substances for which labeling would not provide adequate protection for the public against the potential hazards posed by the substances. The Flammable Fabrics Act (FFA, 15 U.S.C. §§1191 et seq.) provides for the establishment of safety standards regarding fabric flammability. It also prohibits the manufacture, sale, importation, transportation, or delivery in commerce of a product, fabric, or related material or of a product made of a fabric or related material that does not comply with the standards and deems that such practices constitute unfair methods of competition and unfair and deceptive acts or practices under the Federal Trade Commission Act. The Poison Prevention Packaging Act (PPPA, 15 U.S.C. §§1471 et seq.) authorizes the CPSC to establish special packaging standards for a household substance if such standards are required to protect children from serious injury or illness from using, handling or ingesting such substance, with exceptions for noncomplying packages for elderly/handicapped persons and packaging at the direction of a licensed medical practitioner. The Refrigerator Safety Act (RSA,15 U.S.C. §§1211) prohibits the introduction into interstate commerce of any household refrigerator that does not conform with certain safety standards. Prior to amendment by the CPSIA, some of these statutes provided for powers that were similar but not identical to those established under the CPSA. Therefore, the regulatory procedures and other actions which the CPSC is authorized to carry out with regard to the products regulated under these other statutes differed (and may still differ in some respects) from those authorized under the CPSA. Before the CPSIA, the CPSC could choose to regulate under the CPSA a consumer product that could be regulated sufficiently under these other statutes only if the CPSC determined that it was in the public interest to do so. The differences among the different statutory standards and procedures and enforcement authority arguably led to inconsistency in the enforcement of different product standards. For example, injunctive enforcement authority for states attorneys general is expressly provided by the FHSA and the FFA, but was not expressly provided by the CPSA before amendment by the CPSIA. The apparent ambiguity of the CPSA on this point led to amendments in the CPSIA to provide express authority. The CPSC has the authority to establish consumer product safety standards for consumer products generally, defined as "any article or component part thereof, produced or distributed (i) for sale to a consumer for use in or around a permanent or temporary household or residence, a school, in recreation, or otherwise, or (ii) for the personal use, consumption or enjoyment of a consumer in or around a permanent or temporary household or residence, a school, in recreation, or otherwise." There are express exemptions for products covered under other statutes, including tobacco and tobacco products, motor vehicles and motor vehicle equipment, pesticides, firearms/antique firearms and ammunition/supplies (except for fireworks), aircraft and components, boats and other marine vessels, drugs, medical devices, cosmetics, food, or any article which is not customarily produced or distributed for sale to, or use or consumption by, or enjoyment of, a consumer. The CPSC also has jurisdiction over amusement rides that are not permanently fixed to a site but rather are part of a travelling carnival or show, but does not have jurisdiction over rides that are permanently fixed to a particular site. Furthermore, the CPSC has no jurisdiction to regulate a particular consumer product if the risk of injury associated with that product could be eliminated or sufficiently reduced by actions taken under the Occupational Safety and Health Act of 1970 (Occupational Safety and Health Administration), under the Atomic Energy Act of 1954 (the Energy Research and Development Administration [now Department of Energy] and the Nuclear Regulatory Commission), or under the Clean Air Act (the Environmental Protection Agency). The CPSC has no authority to regulate any risk of injury associated with electronic product radiation emitted from an electronic product if such risk may be regulated under the Public Health Act (the Food and Drug Administration). Manufacturers, distributors, retailers, and importers are obligated to report consumer product safety problems to the CPSC, which may order a recall or import ban. The CPSA provides the general authority of the CPSC over inspections, recalls and import bans for consumer products generally, with the exceptions noted above, unless other statutes provide other agencies with authority over specific products. Although some of the other statutes enforced by the CPSC contain provisions specifically addressing notice/recall, import bans, and other remedies similar to those contained in the CPSA, not all do. The CPSC is authorized to inspect domestic facilities where a consumer product is manufactured and the conveyances by which it is transported and which may be relevant to the safety of such product. It is unlawful for a person to fail or refuse to permit inspection as required under the CPSA. For purposes of the CPSA, including inspection and testing, the CPSC may purchase any consumer product and it may require any manufacturer, distributor, or retailer of a consumer product to sell the product to the CPSC at cost. The CPSC is authorized to establish and maintain a permanent product surveillance program, in cooperation with other appropriate Federal agencies, for the purpose of carrying out the CPSC's responsibilities under the CPSA and the other Acts it administers and preventing the entry of unsafe consumer products into the United States. The U.S. Customs and Border Protection (CBP) is authorized to obtain and deliver samples of consumer products being offered for importation to the CPSC, upon its request, for the purpose of inspecting such samples for compliance with the CPSA. Similarly, under FHSA § 14 (15 U.S.C. § 1273), the CBP is authorized to obtain and deliver samples of hazardous substances being imported or offered for importation to the CPSC, upon its request, for the purpose of inspecting such samples for compliance with the FHSA. Under CPSA §19, it has been unlawful, among other things, to manufacture, sell, distribute in commerce, or import into the United States any consumer product which does not comply with an applicable consumer product safety standard or which has been declared a banned hazardous product by a rule under the CPSA. Other consumer-product-related statutes contain similar provisions concerning prohibited or unlawful acts. The CPSIA has expanded the scope of prohibited acts. Under CPSA §15, every manufacturer (defined to include importers), distributor, or retailer of a consumer product distributed in commerce who obtains information reasonably supporting the conclusion that such product (1) fails to comply with an applicable consumer product safety rule or with a voluntary consumer product safety standard; (2) contains a defect which could create a substantial product hazard; or (3) creates an unreasonable risk of serious injury or death, shall immediately inform the CPSC, unless such manufacturer, distributor, or retailer has actual knowledge that the CPSC has been adequately informed of such defect, failure to comply, or risk. If the CPSC determines after a hearing that a product presents a substantial product hazard and that notification is required in order to adequately protect the public from such substantial product hazard, the CPSC may order the manufacturer or any distributor or retailer of the product to take any one or more of the following actions: (1) to give public notice of the defect or failure to comply; (2) to mail notice to each person who is a manufacturer, distributor, or retailer of such product; or (3) to mail notice to every person to whom the person required to give notice knows such product was delivered or sold. The CPSIA expanded the scope of these provisions to cover noncompliance with rules under all acts under CPSC jurisdiction and to provide additional means of providing public notice. Prior to the CPSIA, if the CPSC determined after a hearing that a product presented a substantial product hazard and that action under that provision was in the public interest, it could order the manufacturer or any distributor or retailer of such product to take whichever of the following actions it elected to take: (1) to bring the product into compliance with the applicable product safety rule or repair the defect; (2) to replace the product with an equivalent product that does comply or is not defective; or (3) to refund the purchase price. The CPSIA removed the ability of the manufacturer, distributor or retailer to choose the remedial action to be taken and provides for the CPSC to determine which action should be taken. In addition to its authority with regard to a substantial product hazard, under CPSA §12, the CPSC may bring an action in federal district court to have a product declared an imminent hazard, defined as a consumer product which presents imminent and unreasonable risks of death, serious illness, or severe personal injury, and to seize the product. If the court determines that a product constitutes an imminent hazard, it may grant any relief necessary to protect the public, including an order requiring public notification, recall, and remedies including repair, replacement, or refund of such product. Under the FHSA §15, the CPSC may order a manufacturer, distributor, or dealer to take remedial action with respect to a banned hazardous substance similar to remedies under the CPSA, including (1) giving public notice that an article or substance is a banned hazardous substance; (2) mailing notice to each person who is a manufacturer, distributor, or dealer of such article or substance; and (3) mailing such notice to every person to whom the person giving the notice knows such article or substance was delivered or sold. The CPSC may also order the repair of such article or substance, replacement with an equivalent compliant article or substance, or refund. Similar notification and remedial actions may be ordered with respect to any toy or other article intended for use by children that is not a banned hazardous substance but that contains a defect which creates a substantial risk of injury to children. The CPSC does not pay for the costs of a notice of product hazard or defect or any ordered repair, replacement, or refund; costs are born by the manufacturer, distributor, or retailer. An order issued under CPSA §15 with respect to a product may require any person who is a manufacturer, distributor, or retailer of the product to reimburse any other person who is a manufacturer, distributor, or retailer of such product for such other person's expenses in connection with carrying out the order, if the CPSC determines such reimbursement to be in the public interest. Also, no charge shall be made to any person (other than a manufacturer, distributor, or retailer) who avails himself of any remedy provided under an order concerning repair, replacement, or refund, and the person subject to the order shall reimburse each person (other than a manufacturer, distributor, or retailer) who is entitled to such a remedy for any reasonable and foreseeable expenses incurred by such person in availing himself of such remedy. FHSA §14(d) contains reimbursement provisions similar to CPSA §15. Any person who is a manufacturer, distributor, or dealer of a noncompliant toy, article, or substance may be ordered to reimburse any other person who is a manufacturer, distributor, or dealer of such toy, article, or substance for such other person's expenses in connection with carrying out a remedial or notification order, if the CPSC determines such reimbursement to be in the public interest. Also, no charge shall be made to any person (other than a manufacturer, distributor, or dealer) who avails himself of any remedy provided under a remedial order and the person subject to the order shall reimburse each person (other than a manufacturer, distributor, or dealer) who is entitled to a remedy for any reasonable and foreseeable expenses incurred in seeking such remedy. CPSC has the authority to establish import standards and policy with regard to statutes and products under its jurisdiction. Under the CPSA, importers are made subject to the same responsibilities as domestic manufacturers in protecting American consumers from unreasonably hazardous products. This is explicitly stated in the definition of "manufacturer" as any person who manufactures or imports a consumer product. Like the CPSA, the FHSA and the FFA assign responsibilities to importers comparable to those of domestic manufacturers and distributors. Various statutory provisions authorize the CPSC to ban noncompliant imports. If the CPSC determines after a hearing that a product presents a substantial product hazard and that action under that provision is in the public interest, it may issue an order prohibiting the importation into the United States of that product. An imported consumer product may be refused admission to the United States if it does not comply with an applicable consumer product safety rule; does not comply with labeling and certification requirements relating to applicable product safety standards; is an imminently hazardous product; or has a product defect which constitutes a substantial product hazard. The CPSC may then inform the CBP that an imported consumer product fails to comply with an applicable consumer product safety rule and/or has a product defect which constitutes a substantial product hazard and may request the CBP to refuse admission to any such consumer product. As discussed in this report, the CPSIA has expanded grounds for refusing admission to a product. Under FHSA § 14, a misbranded hazardous substance or banned hazardous substance being imported or offered for import shall be refused importation. Section 9 of the Flammable Fabrics Act (FFA) provides that imported products subject to flammability standards under the FFA shall not be released from customs custody except in accordance with § 499 of the Tariff Act of 1930 providing for release only after inspection by CBP for compliance with U.S. laws. The CBP also has authority for the redelivery or recall of products already released under bond but later found not to comply with flammability standards and for obtaining liquidated damages for breach of a condition of the bond arising out of a failure either to correct the product to comply or to redeliver it. Such noncompliant or defective products must be destroyed or exported from the United States unless they can be modified by the owner or consignee in a manner that will enable them to be granted admission into the United States. The CPSC and the CBP have the authority to give the owner or consignee the opportunity to make such modifications and to monitor such modifications. Prior to the CPSIA, such products could also be ordered destroyed at the discretion of the CPSC. The CPSIA made destruction mandatory, unless the CBP permits export in lieu of destruction and the product is exported within 90 days of such permission. Before the CPSIA, at its discretion, the CPSC could condition importation of a consumer product on the manufacturer's/importer's compliance with the inspection and recordkeeping requirements of the CPSA. The CPSIA makes compliance with such requirements mandatory, meaning that an imported product must be refused entry into the United States if the importer does not comply with requirements related to its product. The CPSC may seek an injunction or seizure of a consumer product that does not comply with a consumer product safety rule or that is being manufactured, sold, distributed, or imported in violation of a CPSC order for remedial action or prohibiting importation. With regard to imported products that are admitted and subsequently become the subject of a recall, if the CPSC is not able to exercise jurisdiction over a foreign manufacturer that has no U.S. subsidiary/presence, the CPSC may order the importer to undertake a recall and to be responsible for the expense of a mandatory recall, since "manufacturer" is defined to include importers under the CPSA. The importer cannot obtain reimbursement under the CPSA, but might be able to obtain reimbursement from the foreign manufacturer as a contractual matter. Under CPSA §17(f), the owner or consignee of an imported consumer product denied entry into the United States must pay for all expenses in connection with its storage or destruction. In default of such payment, these expenses shall constitute a lien against any future importations made by such owner or consignee. Under FHSA §14(c), the owner or consignee must pay for all expenses (including travel, per diem, or subsistence, and salaries of officers or employees of the United States) in connection with the destruction of a hazardous substance denied importation into the United States; the supervision of the relabeling or other action authorized to bring a hazardous substance denied importation into compliance with the FHSA so that it may be granted importation; and the storage for any hazardous substance denied importation. In default of such payment, the FHSA, like the CPSA, provides that such expenses shall constitute a lien against any future importations made by such owner or consignee. The Office of Compliance and Field Operations within the CPSC conducts compliance and administrative enforcement activities under all administered acts, provides advice and guidance on complying with all administered acts, and reviews proposed standards and rules with respect to their enforceability. Among other things, it reviews consumer complaints, conducts inspections and in-depth investigations, and analyzes available data to identify those consumer products containing defects that pose a substantial risk of injury or do not comply with existing safety requirements. The Office negotiates and monitors corrective action plans for products that are defective or fail to comply with specific regulations. The Office of International Programs and Intergovernmental Affairs within the CPSC was established to enable a more coordinated and comprehensive approach to international cooperation with regard to harmonization of safety standards internationally and the ensuring of compliance with U.S. safety standards for products imported into the United States. Memoranda of understanding have been concluded with CPSC counterparts in various countries or regional groups, including the People's Republic of China, the European Union, and Canada. The CPSC held a public meeting on September 4, 2008, to explain their plans to implement the CPSIA and will continue to hold a series of such meetings. Current Legislation: P.L. 110-314 There have been a number of proposals in the 110 th Congress to address a range of consumer product safety issues. In addition to the two major CPSA reform bills that ultimately resulted in P.L. 110-314 , H.R. 4040 and S. 2045 / S. 2663 , there have been other comprehensive reform bills and bills addressing discrete issues, including safety standards for cigarette lighters, All-Terrain-Vehicles or ATVs, furniture, swimming pools, portable gasoline containers, durable infant or toddler consumer products such as strollers and cribs, and other products; certification of safety-standard compliance; the enactment of lead content standards for consumer products and more stringent lead in paint standards; third-party testing for product safety and compliance; increases in civil and/or criminal penalties; increases in CPSC personnel assigned to ports-of-entry; the prohibition of sales or resales of products that are the subject of a recall; expanded jurisdiction of the CPSC to cover amusement park rides at a fixed site; greater coordination among the various agencies involved in consumer safety issues; and others. Language from some of the free-standing bills addressing specific issues was incorporated into the CPSIA. The following sections will summarize the provisions of P.L. 110-314 . The final text was the result of a lengthy conference negotiation. The Senate-passed version of H.R. 4040 [hereinafter Senate Text] and the House-passed version of H.R. 4040 [hereinafter House Text] contained many similar provisions strengthening the authority and resources of the CPSC and also establishing standards concerning lead content in children's toys. However, the Senate Text contained additional reform provisions, such as whistleblower protection and several provisions concerning consumer product safety standards for specific items such as all-terrain vehicles and garage door openers. Conversely, most of the provisions of the House Text had parallel provisions in the Senate Text; the major exception was the provision adding a prohibition on industry-sponsored travel by members or employees of the CPSC, a response to the much-criticized practice by the CPSC of accepting travel and lodging expenses from industry sponsors for trips related to CPSC business, that was widely reported after the S. 2045 markup. On July 29, 2008, H.Rept. 110-787 , the Conference Report for H.R. 4040 , the Consumer Product Safety Improvement Act of 2008, was released after several months of negotiations in the conference committee to reconcile differences between the House and Senate versions of the bill. The bill passed the House of Representatives and the Senate on July 30, 2008 (424-1) and July 31, 2008 (89-3), respectively. On August 14, 2008, President Bush signed the bill into law as P.L. 110-314 . CPSC Chairman Nord and Commissioner Moore each expressed approval of the final legislation, with Chairman Nord expressing a desire for Congress to appropriate further funding to carry out the new mandates of the legislation. Children's Product Safety Lead Content and Measurement (§101) Under CPSIA §101, 15 U.S.C. §1278a, in products for children aged 12 and younger, the permissible lead level will be phased in over three years at 600 parts per million (ppm) within 180 days of enactment, 300ppm after one year, and 100ppm after three years. If 100ppm is not technically feasible, the CPSC must set the lowest level that is technologically feasible. After promulgation of either the 100ppm level or the lowest level technologically feasible, the CPSC is required to periodically review and lower the limit at least every five years. There are exceptions for certain materials or products and inaccessible component parts. If the CPSC determines that it is not technologically feasible for certain electronic devices to comply with the lead standard, it must also issue requirements to minimize exposure or accessibility to lead in those devices. The permissible lead level in paint is reduced to 0.009 percent (90 ppm) from 0.06 percent (600ppm), subject to subsequent periodic review and reduction to the lowest lead level technologically feasible. A CPSC Office of General Counsel memorandum clarifies that inventory of noncompliant products may not be sold after this provision's effective date of February 10, 2009. Although the CPSIA does not expressly ban such sale or distribution, the Office of General Counsel concludes that a reading of the CPSIA as a whole indicates such an interpretation. Third-Party Testing and Certification of Children's Products (§102) Section 102 of the CPSIA amends CPSA §14 (codified at 15 U.S.C. §2063) to require manufacturer certification of safety testing by accredited third-party laboratories of products designed or intended primarily for children aged 12 and younger. The CPSC must issue accreditation requirements for such laboratories and maintain a list of accredited laboratories; deadlines for the publication of such requirements differ according to the type of product being tested by the laboratory. Specific deadlines for publication of accreditation requirements after CPSIA enactment are established for the testing of lead paint (30 days of enactment), cribs and pacifiers (60 days of enactment), small parts (90 days of enactment), children's metal jewelry (120 days of enactment), and baby bouncers/walkers/jumpers (210 days of enactment). Accreditation requirements related to the testing of other children's products must be published as early as practicable, but no later than 10 months after CPSIA enactment or, for safety rules established or revised one year or more after CPSIA enactment, not later than 90 days before such rules take effect. For three years after enactment, CPSC proceedings for promulgating accreditation requirements are exempt from requirements of the Regulatory Flexibility Act and the rulemaking requirements of the Administrative Procedure Act. Upon request, proprietary labs insulated from the influence of the manufacturer/private labeler-owner may be accredited by the CPSC and permitted to test products if they provide equal or greater protection than available third-party labs. CPSC personnel are authorized to enter and inspect any accredited proprietary lab (CPSIA §215(a)). The CPSC is required to establish requirements for the periodic audit of third-party testing labs as a condition of continuing accreditation. The CPSC is authorized to revoke accreditation if necessary after an investigation finding that a lab failed to follow a requirement established by the CPSC or is unduly influenced by a manufacturer or government entity. It is unclear which preemption provisions in the CPSA, as amended by the CPSIA, if any, apply to this provision concerning third-party testing and certification. There are two preemption provisions that are possible applicable. The new provision added by CPSIA §106(h), discussed below, exempts from federal preemption any state/local toy safety standards in effect on the date of CPSIA enactment, if the state/locality applies for exemption within 90 days of CPSIA enactment. Under this provision, states/localities may also apply for exemption of future proposed state/local toy safety standards. If the preemption provisions of CPSIA §106 do not apply, the general preemption provisions under CPSA §26, which predate the CPSIA, might apply to the testing and certification provisions, which are amendments to the CPSA. These provisions permit states/localities to apply for exemption of a proposed safety standard or regulation which is designed to protect against a risk of injury associated with a consumer product subject to a consumer product safety standard under the CPSA. These provisions do not permit exemption of existing state/local product safety standards or regulations which prescribe requirements for the performance, composition, contents, design, finish, construction, packaging, or labeling and which are designed to deal with the same risk of injury as the federal standard, unless such requirements are identical to the those of the federal standard. It is unclear whether testing and certification requirements may be considered consumer product safety standards for the purpose of these preemption provisions. Tracking Labels for Children's Products (§103) Effective one year after the CPSIA enactment, CPSIA §103 amends CPSA §14 (codified at 15 U.S.C. §2063) to require a manufacturer to place tracking labels on children's products and packaging, to the extent practicable, containing information (manufacturer, production date, and production batch/run of the product) enabling the retailer and ultimate purchaser to identify recalled products and enhancing the ability of the manufacturer to track unsafe products to their precise sources. Advertisements, labels, and packaging for a consumer product will be prohibited from referring to a mandatory consumer product safety rule or a voluntary standard unless the product complies with such rule or standard. Standards and Registration Forms for Durable Nursery Products (§104) Under CPSIA §104 (15 U.S.C. §2056a), the Danny Keysar Child Product Safety Notification Act, the CPSC, in consultation with stakeholders and product engineers/experts, must establish mandatory safety standards for a variety of durable nursery products for use by children under five years of age. Such products include cribs, toddler beds, high chairs and booster/hook-on chairs, gates and other enclosures, bath seats, play yards, stationary activity centers, infant carriers, strollers walkers, swings, bassinets, and cradles. The CPSC is required to periodically review and revise such standards to ensure the highest level of safety feasible for such products. Any commercial users (including child care centers and hotels/motels) are prohibited from manufacturing, selling, reselling, leasing, or providing for use any cribs that do not comply with these mandatory safety standards. Manufacturers of durable children's products must provide consumers with registration forms in a required format/mode facilitating registration and to maintain databases of registrants to be used to notify such consumers in the event of a product recall or safety alert. The CPSC is required to study whether registration forms should also be mandatory for other children's products and to periodically review and assess the effectiveness of alternative recall notification technologies. Labeling for Certain Toy and Game Advertising (§105) CPSIA §105 amends FHSA §24 (codified at 15 U.S.C. §1278), requiring choking hazard labelling for certain toys and games, to require similar cautionary statements on or immediately adjacent to advertising that provides a direct means of purchase, including advertising on Internet websites, in catalogues, or other advertising materials. This requirement applies to advertisements by a retailer, manufacturer, importer, distributor, or private labeler. A manufacturer, importer, distributor, or private labeler is required to inform a retailer to whom it provides a product of any cautionary statement requirement applicable to that product. A retailer is not liable for violating the advertising requirement if it requested applicable cautionary statement information from a manufacturer, importer, distributor, or private labeler who failed to provide such information or provided false information. The statement must be displayed in a clear and conspicuous manner and in the language primarily used in the advertisement, website, or catalogue. Certain format and display requirements apply. The advertising requirements take effect for internet websites 120 days after enactment and for catalogues 180 days after enactment; the CPSC may grant a grace period for catalogues. The distribution of a noncompliant advertisement is a prohibited act under the CPSA. Adoption of a Mandatory Toy Safety Standard (§106) CPSIA §106 (15 U.S.C. §2056b) provides that ASTM International Standard F963-07, Consumer Safety Specification for Toy Safety , the voluntary toy safety standard promulgated by the American Society for Testing and Materials (ASTM), an independent standard-setting organization, shall be deemed a mandatory interim consumer product safety standard, pending review, in the form current on the date of enactment, with certain exceptions. The exceptions are §4.2 and Annex 4 or any provision that restates or incorporates an existing mandatory standard or ban promulgated by the CPSC. Within two years of CPSIA enactment, the CPSC must promulgate this interim standard, with revisions to further enhance toy safety, by a final rule after reviewing it. The CPSC is required to periodically review and revise the rule to ensure the highest level of toy safety. ASTM is required to notify the CPSC if it proposes revisions to this standard. The proposed revision will be incorporated into the CPSC rule and the revised standard will then be considered a CPSC rule effective 180 days after the ASTM notification was received, unless the CPSC notifies ASTM within 90 days of receiving such notification that it has determined that the proposed revision does not improve the safety of the products covered by the standard. The existing standard, without the proposed revision, will then continue to be the CPSC rule. CPSIA §106(h) provides that nothing in the federal toy standard or in the CPSA statute concerning preemption shall prevent a state or local safety requirement for toys or children's products from remaining in effect if it was in effect on the day before the date of CPSIA enactment and the state or locality has filed the requirement with the CPSC within 90 days after CPSIA enactment. Upon such application, the CPSC shall consider a proposed state or local safety standard and shall grant the exemption if the state or local standard provides a significantly higher degree of protection than the federal standard and does not unduly burden interstate commerce. Study of Disparities in Injury/Death Rates of Minority Children (§107) Section 107 of the CPSIA requires the U.S. Government Accountability Office (GAO), within 90 days of the date of enactment of this legislation, to initiate a study, by itself or an independent contractor, assessing racial/ethnic disparities in the risks and incidence of preventable injuries and deaths related to suffocation, poisonings, and drownings, including those linked to the use of cribs, mattresses, swimming pools, toys, and other products intended for use by children. Minority populations in the study include Black, Hispanic, American Indian, Alaskan Native, Native Hawaiian, and Asian/Pacific Islander children in the United States. GAO shall consult with the CPSC as necessary. GAO is required to report its findings to the relevant congressional committees not later than one year after the date of enactment of this legislation, including recommendations for minimizing risks of preventable deaths and injuries among minority children, for awareness and prevention campaigns targeting minority populations, and for education initiatives to reduce current statistical disparities. Ban on Specified Phthalates and Certain Alternatives in Certain Children's Products and Child Care Articles (§108) Beginning 180 days after enactment of the CPSIA, §108 of the CPSIA (15 U.S.C. §2057c) permanently bans the three phthalates (chemical plasticizers used in toys and other children's products) whose toxicity is not disputed and temporarily bans three other phthalates, pending a review by a Chronic Hazard Advisory Panel (CHAP). It prohibits children's toys or child care articles that contain more than 0.1% di-(2 ethylhexyl) phthalate (DEHP), dibutyl phthalate (DBP), or benzyl butyl phthalate (BBP). The sale of children's toys or child care articles containing concentrations of more than 0.1% of diisononyl phthalate (DINP), diisodecyl phthalate (DIDP), or di-n-octyl phthalate (DnOP) are prohibited on an interim basis until a review by a CHAP. After the CPSC receives the report from the CHAP, it must determine, by rule, whether to continue the interim ban; evaluate the CHAP findings and recommendations; and declare any children's product containing phthalates to be a banned hazardous product if it determines this necessary to protect children's health. This provision clarifies that it does not preempt state laws regulating the use of phthalate alternatives not specifically regulated in a standard under the CPSA. "Children's toy" is defined as a product designed or intended for a use by a child 12 years of age or younger, and "child care article" is defined as a product designed or intended for a child three years of age or younger to facilitate sleep, feeding, sucking, or teething. Strengthening Commission Administration and Resources Reauthorization Years and Funding (§201) Section 201(a) of the CPSIA amends CPSA §32(a) to authorize progressively increasing appropriations annually. Out of these amounts, funding shall be made available for travel, subsistence, and related expenses incurred for official duties of the Commissioners and employees in attending meetings. This travel money is to be used in lieu of accepting funds from outside sources, as further discussed below. In addition to requiring the CPSC to report on personnel development efforts, CPSIA §201(b) requires the CPSC to submit a report on funding allocation plans to the appropriate congressional committees, not later than 180 days after enactment of the act. This report must include the efforts of the CPSC to reach and educate second-hand retailers of consumer products, particularly with regard to recalls of durable nursery products. Such education efforts shall include the development of educational materials for distribution not later than one year after enactment of the CPSIA. Full Commission Funding and Interim Quorum (§202) Under CPSA §4(d) (codified at 15 U.S.C. §2053), three commissioners of the five constitute a quorum; two can constitute a quorum if necessary due to a vacancy on the Commission, but only for six months after the vacancy occurs. Title III of Pubic Law 102-389 limited funding to three Commissioners from FY1993 and thereafter. This limitation impeded the Commission's ability to meet the quorum necessary to take certain actions. The limitation dated back to the mid-1980s when Congress was contemplating restructuring the CPSC as a three-member commission or replacing the Commission with a single administrator, which had been the Senate's original proposed scheme in its 1972 version of the legislation that ultimately became the CPSA. During consideration of the 1990 reauthorization of the CPSC, the Senate bill would have permanently reduced the CPSC to three members with a quorum of two, but ultimately the authorization of a temporary quorum of two was adopted. If a vacancy lasted longer than six months, as had been the case recently, the Commission could not establish mandatory standards or engage in other rulemaking or procedures, including taking certain enforcement actions requiring decisions by the Commissioners, mandatory recalls, and corrective actions. The quorum requirements were temporarily superseded by §2204 of P.L. 110-53 , permitting two Commissioners, if they were not affiliated with the same political party, to constitute a quorum for six months beginning on the date of enactment of the act (August 3, 2007); this authority expired on February 3, 2008. Section 202(a) of the CPSIA provides that, if they are not affiliated with the same political party, two members shall constitute a quorum for one year beginning on the date of enactment of the act. CPSIA §202(b) repeals the funding limitation, effective one year after enactment of the act, in order to restore the CPSC to its full five-member size and prevent the recent quorum problems. Personnel (§202(c)) Section 202(c) of the CPSIA (15 U.S.C. §2053 note) requires the CPSC to increase the number of fulltime Commission employees to at least 500 by October 1, 2013, subject to the availability of appropriations and, out of this number, requires the addition of an unspecified number of personnel to be assigned to U.S. ports of entry or to inspect overseas production facilities. Under CPSIA §201(b), requiring a CPSC report to the appropriate congressional committees on funding allocation plans, the CPSC must include the number of full-time investigators and other full-time equivalents the CPSC intends to employ. This report must also include CPSC efforts to develop standards for training product safety inspectors and technical staff and CPSC efforts and policies encouraging scientific staff to seek appropriate publishing opportunities in peer-reviewed journals and other media. Reports to Congress (§203) Section 3003 of P.L. 104-66 (the Federal Reports Elimination and Sunset Act of 1995, codified as amended at 31 U.S.C. §1113 note) provided that, with certain exceptions, reports required to be submitted to Congress, as listed in H. Doc. 103-7, were terminated. Section 203 of the CPSIA (15 U.S.C. §2076 note) requires that after the date of enactment of the CPSIA, notwithstanding any rule, regulation or order to the contrary, the CPSC must comply with the requirement of CPSA §27(k) (codified at 15 U.S.C. §2076(k)) that it submit copies to Congress of budget recommendations, legislative recommendations and comments, and testimony that it submits to the President or the Office of Management and Budget. These copies are expressly exempted from the reporting limitations of P.L. 104-66 . Expedited Rulemaking Procedures (§204) Critics alleged that the prior rulemaking procedures under CPSA §9 and other acts under the CPSC's jurisdiction, the FHSA and the FFA, were unnecessarily onerous, requiring procedural steps beyond those required by the Administrative Procedures Act. Section 204 of the CPSIA streamlines the rulemaking procedures under CPSA §9 and similar provisions under the FHSA and FFA by eliminating the requirement for an advanced notice of proposed rulemaking (ANPR), a step not required by the Administrative Procedure Act (APA). This ANPR was required to include an invitation for persons to submit existing standards as proposed consumer product safety standards or statements of intention to develop or modify a voluntary standard, as well as commentary. Amendments conforming to the elimination of this requirement are also made. CPSIA §204 clarifies that the elimination of the ANPR requirement does not preclude a person from submitting all or part of an existing standard as a proposed consumer product safety standard. The FHSA is also amended to eliminate the required use of additional rulemaking procedures under the Food, Drug, and Cosmetic Act. Technical amendments to the FHSA replace references to the Secretary of Health, Education and Welfare (HEW) [now Health and Human Services (HHS)], which remained from the original authority of the Secretary of HEW and the Food and Drug Administration over the FHSA, with references to the CPSC. Technical amendments to the FFA replace references to the Secretary of Commerce and the Federal Trade Commission (FTC), which remained from their original authority over the FFA, with references to the CPSC. References to specific congressional committees in the rulemaking provisions of the FHSA and the FFA are changed to references to the "appropriate congressional committees." Inspector General Audits and Reports (§205) Section 205 of the CPSIA (15 U.S.C. §2076b) requires the Inspector General of the CPSC to: conduct reviews and audits to assess the CPSC's capital improvement efforts, including upgrades of its information technology system and the development of the new public safety database, and the adequacy of the accreditation and monitoring process for third-party testing laboratories; within one year of enactment of the CPSIA, conduct a review of (1) CPSC employee complaints concerning failures of other employees to properly enforce the rules and regulations of the laws enforced by the CPSC or otherwise carry out responsibilities if such failures raise issues of conflicts of interest, ethical violations, or the absence of good faith, and (2) CPSC actions to address such complaints and failures; submit annual reports with respect to the findings and recommendations resulting from these audits and reviews to the appropriate congressional committees beginning in FY2010; transmit a report to the appropriate congressional committees within 60 days of enactment of the CPSIA on the activities of the Inspector General, any barriers preventing robust oversight of the CPSC by the Inspector General, and any additional resources and authority needed for effective oversight. This provision further requires the CPSC, within thirty days of enactment of the CPSIA, to establish and maintain (1) a direct link from the homepage of the CPSC to the webpage of its Inspector General, and (2) a mechanism on the Inspector General's website by which individuals may anonymously report cases of waste, fraud, or abuse with respect to the CPSC. Ban on Industry-Sponsored Travel (§206) The CPSC has been criticized for the ethical issues raised by its practice of accepting funds from industry groups to cover travel to meetings and conferences. As noted above, CPSIA §201(a) amends the authorization of appropriations in the CPSA to provide funds annually from FY2010 to FY2014 for travel to attend meetings and similar functions in furtherance of the official duties of the Commissioners and employees. These funds are to be used in lieu of accepting payment or reimbursement for such expenses from any person seeking action from, doing business with, or conducting activities regulated by the CPSC or whose interests may be substantially affected by the performance (or nonperformance) of a Commissioner's or employee's official duties. CPSC Chair Nord supported these amendments. In the past, she had defended the practice of accepting such paid travel to seminars and conferences as enabling industry education and outreach concerning safety standards and CPSC procedures that otherwise would not have been possible under the previous CPSC budgets. Section 206 of the CPSIA adds a new §39 to the CPSA (15 U.S.C. §2086) with parallel language prohibiting Commissioners and employees of the CPSC from accepting travel and related expenses for any meeting or similar function related to official duties from a person seeking action from, doing business with, or conducting activities regulated by the CPSC and whose interests may be substantially affected by the performance of the Commissioner's or employee's official duties. Information Sharing with Other Government Agencies (§207) Section 207 of the CPSIA amends CPSA §29 (codified at 15 U.S.C. §2078) by authorizing the CPSC to share information obtained under the CPSA with federal, state, local, or foreign government agencies, notwithstanding the public disclosure requirements of the CPSA, where there is a prior agreement or other written certification that such information will be maintained in confidence and used only for law enforcement or consumer protection purposes and certain other conditions apply. The CPSC may terminate such agreements if it determines that the other agency has failed to abide by the conditions of the agreement. The CPSC shall not be required to disclose information it obtained from a foreign government agency or foreign source, if such information was provided on the condition of confidentiality, or through a CPSC reporting mechanism sponsored in part by foreign government agencies. However, nothing in this provision authorizes the CPSC to withhold information from Congress or prevents the CPSC from complying with a federal court order in an action by the United States or the CPSC. Foreign government agencies include multinational organizations comprising foreign states and vested with law enforcement or investigative authority in civil, criminal, and administrative matters. The CPSC must notify each state's health department of any CPSC mandatory recall or any voluntary recall of which it has been notified. Employee Training Exchanges (§208) Section 208 of the CPSIA (15 U.S.C. §2053a) authorizes the CPSC to engage in employee exchanges with foreign government agencies so that officers and employees of the CPSC and the foreign government agencies may receive or provide training. There is no requirement for reimbursement or reciprocity; any reimbursement for expenses incurred by the CPSC shall be credited to the appropriations account from which such expenses were paid. An officer or employee of a foreign government agency who is employed by the CPSC as part of a training exchange shall be considered a federal employee during such employment only for the purposes of federal laws governing work injury compensation for federal employees, tort claims liability of the Federal Government, federal employee ethics and government corruption crimes, and any other law or regulation governing the conduct of federal employees. Repeal of CPSA §30(d) (§237) Section 237 of the CPSIA streamlines certain regulatory proceedings under the CPSA by repealing CPSA §30(d) (15 U.S.C. §2079). The FHSA, FFA, and PPPA existed at the time the CPSA was enacted in 1972 and separately provided for regulatory authority and proceedings. When the CPSA was enacted, it included a requirement in CPSA §30(d) that a product which could be regulated under the FHSA, FFA, or PPPA could only be regulated under the CPSA if the CPSC first issued a rule finding that it was in the public interest to regulate a product under the CPSA. Cost-Benefit Analysis under the PPPA (§233) A GAO report concerning the effectiveness of cost-benefit analyses by the CPSC found, inter alia , that the CPSC often conducted such analyses in considering a consumer safety standard, even when not legally required to do so. GAO noted that although the CPSA, FHSA, and FFA required cost-benefit analyses in order to promulgate a standard, the PPPA did not. Nevertheless, CPSC had conducted such analyses on several occasions in considering special packaging standards under the PPPA. Apparently in response to such commentary, CPSIA §233 amends §3 of the PPPA, regarding establishment of special packaging standards, by clarifying that nothing in the act shall be construed to require a cost-benefit analysis of a potential safety standard under the act in order to promulgate such standard. Enhanced Enforcement and Cooperation Prohibition on Stockpiling (§213) CPSA §9(g) (codified at 15 U.S.C. §2058(g)) authorizes the CPSC to prohibit manufacturers from stockpiling products prior to the effective date of a consumer product safety rule; that is, from manufacturing the product at a higher-than-normal rate between the date that a rule is promulgated and the date it takes effect, in an attempt to circumvent the rule. This authority only applied to safety standards and rules promulgated under the CPSA and not to standards or rules promulgated under other statutes under CPSC jurisdiction such as the FHSA or FFA. Section 213 of the CPSIA amends this provision so that it authorizes the prohibition of stockpiling of products prior to the effective date of an applicable rule under any statute enforced by the CPSC. Prohibited Acts (§216) Section 216 of the CPSIA increases the scope of acts prohibited under CPSA §19 (codified at 15 U.S.C. §2068) by adding new prohibited acts and by expanding the application of existing prohibited acts. The additional or amended prohibitions include the sale, manufacture, distribution, or importation of a product regulated by the CPSC that does not comply with an applicable consumer product safety rule under the CPSA or any similar rule, regulations, standard or ban under any other act enforced by the CPSC [prohibition extends to products regulated under other acts such as the FHSA]; the sale, manufacture, distribution, or importation of a product that is the subject of a voluntary corrective action and recall of which either the CPSC has notified the public or the seller, distributor, or manufacturer knew or should have known; the sale, manufacture, distribution, or importation of a product that is the subject of a CPSC order for a recall or corrective action or a court order declaring an imminent hazard; the sale, manufacture, distribution, or importation of a banned hazardous substance, meaning a children's article or toy which is a hazardous substance or which contains a hazardous substance accessible to a child; failure to furnish a required compliance certification or issuance of a false compliance certification under any act enforced by the CPSC, including failure to comply with requirements for testing, certification, and tracking labels for certain children's products; sale, importation or distribution of a consumer product bearing a false safety compliance certification mark; misrepresentation to CPSC officers/employees of the scope of products subject to recall/corrective action or a material misrepresentation in a CPSC investigation; undue influence of a third-party laboratory with respect to testing a product for compliance with safety standards under any act enforced by the CPSC; the export for sale of any consumer product or substance regulated by the CPSC (except for the re-export of a product denied importation into the United States) that is the subject of a voluntary corrective action, a CPSC order for a recall or corrective action, a court order declaring an imminent hazard, or that is a banned hazardous substance (meaning a children's article or toy which is a hazardous substance or which contains a hazardous substance accessible to a child); and violation of a CPSC order prohibiting an export under new subsection 18(c) of the CPSA (see below). In particular, the prohibition on the sale of products that are the subject of a mandatory or voluntary recall closes a gap in the prior law, which permitted the continued sale of inventory that is the subject of a recall. The export restrictions are also new, since previously there were no restrictions on exports of recalled products or banned hazardous substances, beyond a requirement to notify the CPSC and the receiving country that an export did not comply with a U.S. safety standard or was a banned hazardous substance. In general, these CPSIA amendments prohibit violations of the new requirements under the CPSIA. Section 216 also makes a conforming amendment to CPSA §17(a)(2) to prohibit the importation of a consumer product that does not have a required certificate or label or has a false certificate. Penalties (§217) Section 217 of the CPSIA increases the civil and criminal penalties under the CPSA, the FHSA, and the FFA. The maximum civil penalty increases from $8,000 to $100,000 for each violation and from $1.825 million to $15,000,000 for a related series of violations. Not later than December 1, 2011, and every five years thereafter, the maximum civil penalty must be adjusted for inflation. Several factors must be considered in determining civil penalties under the CPSA, the FHSA, and the FFA, including the nature, circumstances, extent and gravity of the violation, in addition to those currently enumerated in these acts. The CPSC must consider mitigation of undue adverse economic impacts on small businesses. Not later than one year after enactment, the CPSC must promulgate regulations providing its interpretation of the criteria to be considered in imposing civil penalties. The amendments to the civil penalties take effect on the earlier of the date on which the final criteria regulations are issued or the date one year after enactment. The criminal penalties increase to a maximum of five years imprisonment, a fine pursuant to 18 U.S.C. §3571 (establishing the maximum monetary fines), or both, for knowing and willful violations of the CPSA and the FFA and for violations with intent to defraud or mislead or repeat offenses under the FHSA. Penalties may also include forfeiture of assets associated with the criminal violation of the CPSA or any other statutes enforced by the CPSC. Section 217 of the CPSIA also removes the requirement in the CPSA that directors, officers, and agents have knowledge of a notice of noncompliance in order to be subject to criminal penalties separate from those imposed on their corporation. Enforcement by State Attorneys General (§218) Prior to its amendment by the CPSIA, CPSA §24 (codified at 15 U.S.C. §2073), entitled "Private Enforcement of Product Safety Rules and of Section 15 Orders," provided for a cause of action that could be brought by "[a]ny interested person (including any individual or nonprofit, business, or other entity)" in a federal district court to enforce a consumer safety rule or corrective action order by an injunction. Despite the section heading and the absence of an express reference to state attorneys general, this provision apparently had been understood to authorize enforcement actions by state attorneys general, limited to injunctive relief. The FHSA and FFA were amended in 1990 to expressly authorize state attorneys general to enforce consumer safety rules under those statutes by obtaining injunctive relief. This amendment was justified and premised on the existence of similar authority under the CPSA. However, it appears that this authority was rarely, if ever, used by state attorneys general, as there apparently was no reported case precedent for such an action; it appears that state attorneys general more typically took action under state consumer protections laws, while urging the CPSC to take action under federal laws. Section 218 of the CPSIA amends CPSA §24 (codified at 15 U.S.C. §2073) by renaming the section "Additional Enforcement of Product Safety Rules and of Section 15 Orders" and adding a new subsection expressly authorizing state attorneys general (or other authorized state officer) to bring an action in any federal district court where the defendant is found or transacts business to obtain injunctive relief against certain prohibited acts under the CPSA. Such actions are subject to certain conditions, similar to the procedures in CPSA §24 and other similar consumer protection statutes. A state must give 30-day written notice to the CPSC before filing a civil action, except when a state has determined that immediate action is necessary to protect its residents from a substantial product hazard as defined in CPSA §15(a). In such cases, a state may file a suit immediately after notifying the CPSC of such determination. The CPSC may intervene in such civil actions to be heard on all matters arising from such actions and to appeal decisions in such actions. A state cannot bring a civil action where the same alleged violation is the subject of a pending criminal or civil action brought by the Federal Government, aside from suits alleging a violation of the ban on selling, manufacturing, distributing, or importing a product that is noncompliant, subject to a mandatory/voluntary corrective action, or a children's product that is a banned hazardous substance. Any outside private counsel retained to assist in such state civil actions is prohibited from sharing with parties in other private civil actions arising out of the same facts any information that is subject to a litigation privilege and was obtained during discovery in the state attorney general's action, or from otherwise using such information in the other private civil actions. In addition to the new state civil enforcement authority in the CPSA, CPSIA §217 adds a conforming provision to the PPPA authorizing state civil enforcement of a standard or rule under that act, subject to the procedural requirements of the CPSA. Nothing in the new CPSA authority for state civil enforcement actions or in the similar provisions in the FHSA, FFA, and PPPA shall be construed as preventing a state attorney general or other state officer from exercising his/her powers under the state laws or as prohibiting him/her from proceeding in state or federal court on the basis of an alleged violation of any civil or criminal state statute. Whistleblower Protections (§219) Notwithstanding criticism of whistleblower protection by CPSC Acting Chair Nord, CPSIA §219 adds a new §40 to the CPSA (15 U.S.C. §2087) to provide whistleblower protections for private sector employees. Such protections are not provided for federal, state, and local government agency employees; the compromise reached in the conference agreement eliminated proposed coverage of government employees. New CPSA §40 establishes a remedy for an employee of a manufacturer, private labeler, distributor, or retailer, who believes that he/she has been subjected to adverse employment actions in retaliation for (1) providing information to the employer, Federal Government, or a state attorney general relating to a violation of any laws, rules, orders, standards, or bans enforced by the CPSC; (2) testifying in or otherwise cooperating with a proceeding concerning such violation; or (3) objecting to or refusing to participate in any activity or policy that the employee reasonably believed would be a violation of laws, rules, orders, standards, or bans enforced by the CPSC. The remedy is not available to an employee who, of his/her own volition, intentionally caused a violation of any laws, rules, orders, standards, or bans enforced by the CPSC. The employee can file a complaint with the Secretary of Labor within 180 days of the alleged retaliatory action. The Secretary must then notify the person named as responsible for the retaliation and give him/her an opportunity to respond to the allegations. The Secretary must dismiss a complaint unless the complainant shows that the whistleblowing activities were a contributing factor in the adverse employment action. If the complainant shows this, but the employer shows, by clear and convincing evidence, that it would have taken the same unfavorable action in the absence of the whistleblowing activities, then the Secretary cannot further investigate the complaint. Otherwise, within 60 days of the complaint filing, the Secretary of Labor must conduct an investigation to determine whether there is reasonable cause to believe the complaint has merit and issue findings in writing, with a preliminary relief order where merited. Within 30 days of notification of the findings, the defendant can object and request a hearing; otherwise, the order becomes final and not subject to judicial review. The new provision establishes the standards for burden of proof and evidence. Within 120 days of the hearing, the Secretary of Labor must issue a final relief order or denial. If the Secretary determines that retaliation has occurred, the Secretary shall order the person responsible for the retaliation to take affirmative steps to redress the retaliation; to reinstate the complainant to his or her former position with compensation, including back pay, and other terms, conditions, and privileges of his/her employment; and to provide compensatory damages. At the request of the complainant, the Secretary can also assess a sum of the aggregate amount of all costs and fees reasonably incurred by the complainant for bringing the complaint. If the Secretary of Labor finds that the complaint was frivolous or in bad faith, the employer may be awarded attorneys' fees to be paid by the complainant. If the Secretary has not issued a final decision within 210 days of the complaint filing or within 90 days of a written determination, the complainant can bring an action for de novo review in a federal district court with jurisdiction, without regard to the amount in controversy. The same burdens of proof for the administrative hearing apply to the judicial review. The court has jurisdiction to grant all relief necessary to make the employee whole, including injunctive relief and compensatory damages (including reinstatement with the same seniority status, back pay with interest, and special damages such as reasonable attorney's fees, expert witness fees, and litigation costs). Except where a person has already sued in federal court as described in the above paragraph, any person adversely affected by a final administrative order can appeal to the federal appellate court having jurisdiction in the area where the violation allegedly occurred or in which the complainant resided when the violation allegedly occurred. Such appeal does not stay the relief order unless so ordered by the court. If such direct appeal is not made, the administrative order cannot be judicially reviewed in other proceedings. The Secretary of Labor can file a civil action in a federal district court for the District of Columbia or where the violation occurred to enforce an order against a person who has failed to comply. The court can grant all appropriate relief, including, but not limited to, injunctive relief and compensatory damages. Also, a person for whom an order of relief was granted may bring an action in a federal district court to require compliance, without regard to the amount in controversy or diversity of citizenship of the parties. The court may award court costs and fees as appropriate. Any nondiscretionary duty imposed by this section is enforceable in a mandamus proceeding under 28 U.S.C. §1361. Federal Law Preemption (§231) Certain provisions of the CPSA, FHSA, FFA, and PPPA establish the extent to which those acts preempt, limit, or otherwise affect any other federal, state, or local law or affect any cause of action under state or local law. Section 231(a) of the CPSIA (15 U.S.C. §2051 note) clarifies that these provisions may not be expanded, contracted in scope, limited, modified, interpreted, or extended in application in any rule, regulation, preamble, statement of policy, etc., of the CPSC. The CPSC may not construe the statutory preemption provisions as preempting any cause of action under state or local common law or state statutes regarding damage claims. The purpose of these provisions apparently is to prevent the CPSC from issuing directives or statements purporting to preempt state common-law tort causes of action in the preambles to regulations that it promulgates, such as it did with the "Standard for the Flammability (Open Flame) of Mattress Sets." Pursuant to Executive Order 12988 of February 5, 1996, the Federal Register notice issuing the final rule for the mattress standard explained the Commission's understanding of the preemptive effect of the Flammable Fabrics Act. Citing congressional intent evidenced in the legislative history and statutory text, the "Commission intends and expects that the new mattress flammability standard will preempt inconsistent state standards and requirements, whether in the form of positive enactments or court created requirements." Such preemption directives apparently have become more common in recent years, causing concern among opponents and observations by some legal scholars that these directives have become a "backdoor" method of expanding federal objectives. In the absence of express congressional, statutory direction with regard to preemption, agencies may interpret the preemptive intent through such directives and regulations. Commentators have noted that the federal courts are divided on the issue of the level of deference the courts should give to such agency preemption directives. Section 231(b) of the CPSIA clarifies that nothing in the CPSIA or the FHSA shall be interpreted as preempting or otherwise affecting state warning requirements established under state laws in effect prior to August 31, 2003. As discussed on page 11 of this report, the CPSIA includes certain preemption provisions regarding state toy standards. The CPSIA does not provide for federal preemption of state third-party testing and certification requirements. Enhanced Inspection, Public Notice, and Recall Public Disclosure of Information (§211) The CPSIA reduces the previous protections for disclosure of product information by amending CPSA §6 (codified at 15 U.S.C. §2055). This section provides for certain safeguards for the public disclosure of information on products that are identified as specific products of named manufacturers. Proprietary/trade secret information may not be disclosed, and information protected from disclosure by the Freedom of Information Act (FOIA) may not be disclosed. The manufacturer must be notified and given the opportunity to review information to be disclosed with regard to confidentiality and accuracy within a minimum period of time prior to disclosure, unless the CPSC finds that public health and safety require a lesser period of notice and publishes this finding. If the CPSC disagrees with the manufacturer and decides to disclose allegedly confidential or inaccurate information over the objections of the manufacturer, the manufacturer may sue in federal district court to enjoin disclosure. Certain types of information disclosure are exempt from these safeguards, including information regarding an imminently hazardous product, a violation of the CPSA, a rulemaking proceeding, an adjudicatory proceeding, or other proceeding under the CPSA. Consumer advocates and retailer critics of this provision prior to amendments made by the CPSIA asserted that these safeguards unnecessarily hindered the disclosure of safety and recall information, while industry advocates sought stronger protections with regard to substantiation and disclosure of information on product categories with problems that are not common to all manufacturers. Section 211 of the CPSIA reduces prior disclosure protections in several ways: A manufacturer/private labeler must respond within 15 days after the CPSC notifies it of the opportunity to mark as confidential information that could permit the public to identify it as the manufacturer/labeler of a product. Although the CPSA previously did not specify a time within which the manufacturer/labeler must respond, CPSC regulations concerning disclosures under the Freedom of Information Act (16 C.F.R. §1015.18) require a response in five working days to a notice concerning information previously submitted to the CPSC by the manufacturer/labeler. These regulations also require that a response must accompany information submitted after a CPSC notice of the opportunity to request confidentiality (the submission may indicate a final confidentiality response within 10 working days of the new submission). The amendment reduces from 30 to 15 days before disclosure the time within which the CPSC must notify a manufacturer/labeler of an intended disclosure and provide the opportunity to comment on accuracy, and from 10 to five days the time within which the CPSC must notify a manufacturer/labeler that it will still disclose information claimed to be inaccurate based on a CPSC determination that the disclosure is accurate and fair. The CPSC is no longer required to publish in the Federal Register a finding that public health and safety require a lesser period of notice to the manufacturer, as it was before the CPSIA; it may publish this in any manner. Exemption of certain information from the disclosure protections is expanded to include violations of any rule or law enforced by the CPSC, not just the CPSA, and information for which the CPSC publishes a finding that public health and safety requires disclosure with a lesser period of notice and comment on accuracy than normally required. The CPSC is authorized to file a request for expedited consideration in a civil action in the federal district court for the District of Columbia to enjoin the disclosure of allegedly inaccurate information. However, such expedited consideration is not available in an action to enjoin disclosure on the grounds that it is protected or confidential under other laws. The Conference Report noted the Conferees' view that such expedited consideration should not delay action on other important matters before the court, such as Class A or B felonies. Establishment of a Public Consumer Product Safety Database (§212) Section 212 of the CPSIA adds a new section 6A to the CPSA (15 U.S.C. §2055a), establishing a publicly available, searchable, internet-accessible database on the safety of consumer products within two years of enactment. This provision resolves the issues some database opponents had with the database provision of the Senate-passed version of H.R. 4040 . CPSC Acting Chair Nord previously had criticized the mandatory database under the Senate-passed version of H.R. 4040 (to be established without a study concerning feasibility, effectiveness, or other concerns) because it would have permitted publication of information and complaints received from consumers before the CPSC had the opportunity to vet the information for validity or accuracy and also because its implementation would have required 25 percent of the CPSC budget. However, proponents of the database pointed out that the National Highway Transportation Safety Administration already has such a database including automobile complaints reported by consumers that is publicly accessible through its website. The CPSC currently maintains the National Electronic Injury Surveillance System (NEISS), which is accessible to the public through the CPSC website. According to the CPSC website, "NEISS injury data are gathered from the emergency departments of 100 hospitals selected as a probability sample of all 5,300+ U.S. hospitals with emergency departments. The system's foundation rests on emergency department surveillance data, but the system also has the flexibility to gather additional data at either the surveillance or the investigation level." The database mandated by the CPSIA is more comprehensive, drawing information from a variety of sources, including consumers. GAO has concluded that the current data systems, including NEISS, upon which the CPSC depends in prioritizing its regulatory and enforcement activities, are inadequate. Under new CPSA §6A, the CPSC must transmit to Congress, within 180 days of the enactment of the CPSIA, a detailed plan for establishing and maintaining this database, including integration of the database into the CPSC's overall information technology improvement plans (the CPSC must expedite such plans). The plan shall include a detailed implementation schedule and plans for a public awareness campaign. Not later than 18 months after the plan is submitted, the CPSC must establish the database. The database shall include reports of harm (injuries, illness, death, or risks of injuries, illness, or death) relating to the use of consumer products, and other substances regulated by the CPSC, that are received by the CPSC from consumers, government agencies, health care professionals (such as physicians, hospitals and coroners), child service providers, and public safety entities (such as police and firefighters); information derived from a notice for a mandatory recall of a substantial product hazard or a notice for a voluntary corrective action; comments that a manufacturer/private labeler requests be included in the database to respond to information concerning its products; and any additional information the CPSC determines to be in the public interest. The new section establishes requirements for information to be included in reports submitted to the CPSC and for the mode of submission. The information on the database must be organized and categorized so that the information is sortable and retrievable by the date of submission, the name of the consumer product, the model name, the manufacturer's/private labeler's name, and other information fields that are in the public interest. The CPSC shall provide a clear and conspicuous notice that the CPSC does not guarantee the accuracy, completeness, or adequacy of the database contents. The name and address of a person submitting a report of harm for a product may not be disclosed by the CPSC, except that such information may be provided to the manufacturer/private labeler of the product with the express written consent of such person for the purpose of verifying the report. The safeguard restrictions of CPSA §6(a and b), briefly discussed in the previous section of this report, do not apply to the database disclosure of reports received from consumers, health-care providers, public safety entities, and government agencies. However, such safeguards apply to database information received via a report of a safety risk from a manufacturer, distributor or retailer under CPSA §15(b)or any other mandatory or voluntary reporting program established between the CPSC and a manufacturer, retailer, or private labeler. Reports must be available on the database within 15 business days of receipt. Any information determined to be duplicative or inaccurate shall not be included when the report is added to the database or, if the report is already on the database, be removed or corrected within 7 business days of such determination. Within five business days of receipt, the CPSC is required to submit a report of harm to the manufacturer, who then has 10 business days to respond, to request the inclusion of its comments on the database, and to vet the report for and designate confidential or protected information. The CPSC must redact in the database any information it determines to be protected (trade secret or FOIA). If the CPSC determines that the designated information is not protected, it shall so notify the manufacturer or private labeler, who may bring an action seeking removal of such information from the database in the federal district court where it resides or has its principal place of business or in the District of Columbia. The CPSC is required to submit an annual report to the appropriate congressional committees on the operation of the database, including the cost and the number of reports and comments received, posted, and corrected or removed. Within two years of the establishment of the database, the GAO shall submit a report to the appropriate congressional committees containing an analysis of the general usefulness of the database, including an assessment of whether a broad range of the public uses the database and finds it useful, and recommendations for measures to increase use of the database by consumers and to ensure use by a broad range of the public. The Conference Report notes that, as part of general authorizations for FY2010 to FY2014, the Conferees authorized $25,000,000 to establish and maintain this database and to upgrade and integrate the CPSC information technology systems. Substantial Product Hazard Reporting Requirement (§214(a)(2)) Section 15 of the CPSA (15 U.S.C. §2064) requires manufacturers, distributors, and retailers to inform the CPSC when they learn that a product they distributed fails to comply with a consumer safety rule/standard, poses a substantial product hazard, or creates an unreasonable risk of injury or death. Prior to amendment by the CPSIA, the language of the provision did not include notification of noncompliance with rules or standards promulgated by the CPSC under other acts in its jurisdiction. Section 214(a)(2)(A) of the CPSIA expands the scope of CPSA §15(b) to require manufacturers, distributors, and retailers of any product or substance regulated by the CPSC, except for motor vehicle equipment, to notify the CPSC about products that do not comply with any rule, regulations, standard, or ban promulgated by the CPSC under any act. Section 214(a)(2)(C) of the CPSIA further amends CPSA §15(b) to provide that a notification to the CPSC that a product fails to comply with a rule promulgated under the FHSA, FFA, or PPPA may not be used as the basis for criminal prosecution under the FHSA except for offenses requiring a showing of intent to defraud or mislead. The Conference Report clarifies that the Conferees included this provision "to avoid an unjust result under a possible construction of section 5 that provides for strict liability for criminal enforcement without regard to any applicable requirement of knowledge, intent, or willfulness in such situations. . . . The Conferees do not intend for [this] to be used to shelter bad actors . . . but rather to ensure that there are no unintended impediments to the flow of information to the Commission." The House report, in discussing a similar provision in the House-passed version of H.R. 4040 , clarifies that this applies when such notification constitutes the sole basis for criminal liability without a requirement of knowledge, willfulness, or intent. The CPSA criminal offenses require knowledge and willfulness. The FFA offenses generally require willfulness, although the FFA offense of failure to notify the CPSC of the export of a non-compliant product does not. Other acts administered and enforced by the CPSC do not provide for criminal penalties. Enhanced Public Notice of Substantial Product Hazards Section 214(a)(3) of the CPSIA improves public notification by amending CPSA §15(c) (codified at 15 U.S.C. §2064(c)) to authorize the CPSC to order a manufacturer, distributor, or retailer of a product presenting a substantial product hazard to give public notice of such hazard via its website, notice to third-party internet sellers of the product, announcements in languages other than English, and announcements on radio and television where the CPSC determines that a substantial number of consumers may not be reached by other types of notice. This section further clarifies that the CPSC may require any notices under CPSA §15(c)(1) to be distributed in a language other than English, if it determines that doing so is necessary to adequately protect the public. Enhanced Authority for Corrective Action Plans and Recalls (§214) Section 214 of the CPSIA enhances the authority of the CPSC to order corrective action plans and recalls in several ways. Section 214(a)(1) of the CPSIA expands the definition of "substantial product hazard" under CPSA §15(a)(1) (codified at 15 U.S.C. §2064(a)(1)) to include failure to comply with a rule, regulation, standard, or ban under any act enforced by the CPSC, as well as with an applicable consumer product safety rule under the CPSA. Section 214(a)(3 and 4) of the CPSIA amends CPSA §15(c and f) (codified at 15 U.S.C. §2064(c and f)) to enhance recall authority by expanding the scope of the hazard notification authority to include products against which an imminent hazard action has been filed in federal court as well as products determined by the CPSC to be a substantial hazard; authorizing the CPSC to order a manufacturer, distributor, or retailer to cease product distribution; notify other persons involved in transporting, storing, handling, or distributing the product to cease distribution; and to notify appropriate state and local health officials; requiring the CPSC to rescind any order concerning an allegedly imminently hazardous product if a federal district court determines that the product is not an imminently hazardous product; and clarifying that the requirement for a hearing prior to the issuance of an order to cease distribution and notify the public of a substantial product hazard does not apply to an order concerning a product against which the CPSC has filed an imminent hazard action. Section 214(b) amends CPSA §15(d) (codified at 15 U.S.C. §2064(d)) to strengthen CPSC authorities relating to corrective action plans by authorizing the CPSC to order public notice and corrective actions it determines are in the public interest and removes the ability of the manufacturer, distributor or retailer to choose which corrective action it may take; expanding and clarifying the scope of CPSC authority to include orders to conform with requirements of applicable rules, regulations, standards, or bans, not just applicable consumer product safety rules; requiring a CPSC corrective action order to include a requirement that the person to whom the order applies must submit a plan for such action to the CPSC for affirmative approval in writing, replacing the current passive requirement that the plan be satisfactory to the CPSC; authorizing the CPSC to order an amendment of a corrective action plan if it finds that the approved plan is ineffective or inappropriate and requiring it to consider whether a repair or replacement changes the intended functionality of the product; and authorizing the CPSC to revoke its approval of an action plan if it finds that a person has failed to comply substantially with its obligations under the action plan and prohibiting such person from distributing the product after receiving notice of such revocation. Requirements for Recall Notice Content (§214(c)) CPSIA §214(c) adds a new subsection 15(i) to the CPSA (15 U.S.C. §2064(i)) that requires the CPSC, within 180 days of enactment of the CPSIA, to establish guidelines for the information to be included in any recall/corrective action notice or imminent hazard notice that would aid consumers in identifying/understanding the specific product recalled, the nature of the associated hazard, and any available remedies. The provision further details the type of information required to be contained in a recall notice of a substantial product hazard. This information includes the model or stock keeping unit (SKU) number, common product names, photograph, description of action being taken, the number of product units for which such action is being taken, description of the substantial product hazard, identification of the manufacturers and distributors of the product, the dates the product was manufactured and sold, details of any deaths or injuries associated with the product, remedies available to the consumer, and any other information the CPSC deems necessary. Identification of Supply Chain (§215(b)) Section 215(b) of the CPSIA amends CPSA §16 (codified at 15 U.S.C. §2065), regarding inspection and recordkeeping, by adding a new subsection (c) to require importers, retailers or distributors of a consumer product or other product or substance regulated by the CPSC to identify the manufacturer upon the request of a CPSC officer or employee. Conversely, a manufacturer is similarly required to identify each retailer or distributor whom the manufacturer directly supplied with a consumer product and each subcontractor involved in the manufacture of such product or from whom the manufacturer obtained a component of such product. Financial Responsibility (§224) Section 224 of the CPSIA adds a new section 41 to the CPSA (15 U.S.C. §2088), requiring the CPSC, in consultation with U.S. Customs and Border Protection (CBP) and other relevant federal agencies, to identify any consumer product, or other product or substance regulated by any statute enforced by the CPSC, for which the cost of destruction would normally exceed the bond amounts under the customs laws and to recommend a bond sufficient to cover the costs of destroying the product. The new section further provides for a GAO study to determine the feasibility of mandating an escrow, proof of insurance, or other security to cover the costs of destruction of a domestically produced product or substance regulated under any act enforced by the CPSC or the costs of an effective recall of a domestic or imported product or substance regulated by the CPSC. The GAO must submit a report on the results of this study to the appropriate congressional committees within 180 days of enactment of the CPSIA, including an assessment of whether such requirements could be implemented and recommendations for implementation. Annual Reporting Requirement (§209) Section 209 of the CPSIA amends the annual reporting requirement under CPSA §27(j) (codified at 15 U.S.C. §2076(j)) to include information on the number and summary of recall orders issued under CPSA §§12 and 15; a summary of voluntary actions taken by manufacturers in consultation with the CPSC and with public notice by the CPSC; and an assessment of such orders and actions. Additionally, within one year of the date of enactment of the CPSIA, the annual report shall include progress reports and incident updates with respect to corrective action plans ordered under CPSA §15(d); injury and death statistics for substantial product hazards under CPSA §15(c); and the number and type of communications from consumers to the CPSC for each product for which the CPSC orders corrective action. Inspection of Certified Proprietary Laboratories (§215(a)) Section 215(a) of the CPSIA amends CPSA §2065(a) (codified at 15 U.S.C. §2065(a)) to authorize CPSC officers and employees to enter and inspect certified proprietary laboratories. Safety of Imported and Exported Products Export of Recalled and Nonconforming Products (§221) Section 221 of the CPSIA amends CPSA §18 (codified at 15 U.S.C. §2067) to authorize the CPSC to ban the exportation from the United States of any consumer product that does not comply with U.S. consumer product safety rules, unless the importing country permits importation of such product into that country. The CPSC must notify the importing country of the impending shipment. If the importing country has not notified the CPSC of its import permission within thirty days of the CPSC notice, the CPSC may take appropriate action to dispose of the product. These restrictions do not apply to the exportation of a product refused admission into the United States and permitted by U.S. customs authorities to be exported in lieu of destruction. Related conforming amendments are also made to the FFA. Prior to amendment, CPSA §18 permitted the export of products that do not comply with U.S. consumer safety rules to other countries, requiring only that the CPSC had to notify the appropriate agencies in the foreign countries that such products were being exported to those countries. Development of Methodology to Identify Unsafe Imports (§222) Section 222(a and b) of the CPSIA (15 U.S.C. §2066 note) requires the CPSC, within two years of enactment of the act, to develop a risk assessment methodology to identify consumer product shipments that are intended for import into the United States and are likely to include products that violate CPSA §17(a) (15 U.S.C. §2066(a)) and other import laws enforced by the CPSC. In developing this methodology, the CPSC is required to use, as far as practicable, the International Trade Data System (ITDS) established under the Tariff Act of 1930 to evaluate and assess information about shipments of consumer products intended for import into the United States; incorporate this methodology into its information methodology modernization plan; and examine how to share information maintained by the CPSC, including the public database and substantial product hazard list, for the purpose of identifying shipments of noncompliant products. Section 222(d) of the CPSIA requires the CPSC, not later than 180 days of completion of the risk assessment methodology, to submit a report to the appropriate congressional committees including a plan for implementing the methodology; an assessment of whether the CPSC requires additional statutory authority to implement the methodology; the level of appropriations necessary to implement the methodology; changes made or to be made to the CPSC memorandum of understanding with the CBP; the status of CPSC access to the Automated Targeting System and the development of the Automated Targeting system rule; and the status of the effectiveness of the International Trade Data System in enhancing cooperation between the CPSC and CBP to identify non-compliant shipments. Cooperation with U.S. Customs and Border Protection (§222(c)) Section 222(c) of the CPSIA (15 U.S.C. §2066 note) requires the CPSC, within one year of enactment of this act, to develop a plan for sharing information and coordinating with CBP to improve enforcement and consumer protection. This plan must consider the number of CPSC personnel that should be stationed at U.S. ports of entry to identify shipments of consumer products that violate import safety laws enforced by the CPSC; the nature and extent of cooperation between CPSC and CBP personnel in identifying such noncompliant shipments; the number of CPSC personnel that should be stationed at the National Targeting Center of CBP, including the nature and extent of cooperation with the CBP, the responsibilities of the CPSC personnel, and usefulness of information at the Center in identifying noncompliant shipments; the development of rules for the Automated Targeting System and expedited access of the CPSC to the System; and the information and resources necessary for the development, updating, and effective implementation of the risk assessment methodology. Substantial Product Hazard List and Destruction of Unsafe Imports (§223) Section 223 of the CPSIA adds a new subsection (j) to CPSA §15 (codified at 15 U.S.C. §2064(j)) requiring the CPSC to specify by rule, for any consumer product or class of products, characteristics that constitute a substantial product hazard, if such characteristics are readily observable and covered by voluntary standards that have been effective in reducing the risk of injury and experience substantial compliance. A person adversely affected by such a rule may petition for judicial review under the CPSA not later than 60 days after promulgation of the rule. CPSIA §223 amends a couple provisions to require rather than permit certain actions with regard to imports. CPSA §17(e) (codified at 15 U.S.C. §2066(e)), formerly permitting CBP to destroy products refused importation into the United States in lieu of exportation, is amended to require the destruction of such products unless the CBP permits export in lieu of destruction and such products are exported within ninety days of export approval. CPSA §17(g) (codified at 15 U.S.C. §2066(g)), formerly permitting the CPSC, at its discretion, to condition importation on a manufacturer's compliance with inspection and recordkeeping requirements, is amended to require manufacturers of imports to comply with all inspection and recordkeeping requirements or the products will be refused admission. The CPSC must advise the customs authorities of who is not in compliance. A related new subsection (d) of CPSA §16 (codified at 15 U.S.C. §2065(d)) requires the CPSC, by rule, to condition manufacturing, selling, distributing, or importing any consumer product or other product on the manufacturer's compliance with the inspection and recordkeeping requirements of the CPSA and the related rules. Study of CPSC Authority Related to Imported Products (§225) Section 225 of the CPSIA requires GAO, within one year of the enactment of this act, to conduct a study of the authorities of the CPSA to assess their effectiveness in preventing the importation of unsafe consumer products and to submit a report of its findings to the appropriate congressional committees. This report must include recommendations with respect to plans to prevent such importation; inspection of foreign manufacturing plants by the CPSC; and a requirement that foreign manufacturers consent to the jurisdiction of U.S. courts for enforcement actions by the CPSC. Miscellaneous Provisions Adoption of a Mandatory All-Terrain Vehicles (ATVs) Safety Standard (§232) CPSIA §232 adds a new CPSA §42 (15 U.S.C. §2089), requiring the CPSC to publish in the Federal Register, as a mandatory consumer product safety standard, the American National Standard for Four Wheel All-Terrain Vehicles Equipment Configuration and Performance Requirements developed by the Specialty Vehicle Institute of America (American National Standard ANSI/SVIA-1-2007). It is unlawful for a manufacturer or distributor to import or distribute a non-compliant ATV in commerce in the United States or, until a three-wheel ATV standard is issued, a new three-wheeled ATV. Upon revision of these standards by the standard-setting organizations, the CPSC must incorporate by a rule revisions that are related to safe performance and any additional changes necessary to reduce an unreasonable risk of injury. The CPSC must also consider strengthening additional ATV safety standards. Formaldehyde Study (§234) GAO is required to conduct a study on the use of formaldehyde in the manufacturing of textiles and apparel not later than two years after the enactment of the CPSIA. Expedited Judicial Review CPSIA §236 provides for expedited judicial review of a consumer product safety rule relating to the identification of substantial hazards under CPSA §15(j); all-terrain vehicles under CPSA §42; durable infant and toddler products under CPSIA §104; and mandatory toy safety standards under CPSIA §104. A person adversely affected by such a rule may petition in the U.S. Court of Appeals for the District of Columbia Circuit for expedited judicial review of the rule within 60 days of its promulgation. The judgment of the court affirming or setting aside the rule is final, subject to review by the U.S. Supreme Court. A rule to which expedited judicial review applies is not subject to judicial review in proceedings relating to imported products under CPSA §17 or in civil or criminal proceedings for enforcement. Definitions Among other technical and conforming changes, CPSIA §235 adds definitions for "appropriate congressional committees," "children's product," and "third-party-logistics provider." "Appropriate congressional committees" are defined as the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate. "Children's product" is defined as a consumer product designed or intended primarily for children 12 years of age or younger. Several factors are to be considered in determining whether a product is primarily intended for a child 12 years of age or younger, including a manufacturer statement or label about the intended use of the product; whether the packaging, display, promotion or advertising of the product represents it as appropriate for use by children 12 years of age or younger; whether the product is commonly recognized by consumers as being intended for use by children 12 years of age or younger; and the Age Determination Guidelines issued by the CPSC in 2002. "Third-party logistics provider" is defined as a person who solely receives, holds or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product. CPSIA §235 also adds third-party logistics providers to the list of carriers that are not deemed to be manufacturers, distributors, or retailers of a consumer product under the CPSA solely by reason of receiving or transporting a consumer product in the ordinary course of their business and thus are exempt from the requirements of the CPSA. Pool and Spa Safety Act Technical Corrections CPSIA §238 amends the Virginia Graeme Baker Pool and Spa Safety Act by adding a definition of "state" to the act and by providing for the adoption by the CPSC of revisions made to the pool and spa safety standard by the American Society of Mechanical Engineers, an independent standard-setting organization (the earlier act had mandated adoption of the voluntary standard). Provisions Deleted in the Conference Agreement The Senate Text contained several provisions concerning consumer safety product standards or studies concerning specific consumer products that did not have counterparts in the House Text and ultimately were not included in the final text of the conference agreement, including (section numbers from Senate Text) garage door openers (§31); carbon monoxide poisoning from portable gas generators and charcoal briquettes (§32); cigarette lighters (§33); and equestrian helmets (§41). Although the House Text did not include such provisions because its sole focus was reform of the CPSC and its authority and enforcement powers, language in H.Rept. 110-501 (2007) directed the CPSC to take action concerning single-product issues, including the promulgation by the CPSC of a final rule on cigarette lighters; a public awareness campaign concerning smoke alarms and smoke detection systems; a consideration of a safety standard concerning the warning labels for the lead content of ceramic food containers or serving ware; a consideration of CPSC authority to regulate pet toys that could be used by children and possible rules concerning the lead content and use of lead paint in such pet toys; a consideration of the tipping hazards of home appliances and furniture and possible safety standards; and a study of injuries and deaths related to toy guns and possible rules for marking of toys guns distinguishing them from actual firearms. The House Committee on Energy and Commerce noted in its report that it became aware of the potential dangers posed by asbestos in toys late in the legislative process and would take up these issues in subsequent hearings and legislation. The Conference Report echoed all the concerns noted above, directing the CPSC to consider these issues and take action regarding safety standards for such products and hazards. Additionally, the Conference Report recognized nanotechnology as a new, emerging technology used in the manufacture of consumer products and expressed its expectation that the CPSC would review the technology and the safety of its application in consumer products.

Public alarm about the spate of recent product recalls throughout 2007, particularly of toys and other products used by children, has focused attention on the Consumer Product Safety Commission (the CPSC or the Commission). This scrutiny led to consideration of major amendments to the Consumer Product Safety Act (CPSA), which established and authorized the CPSC in 1972 in response to growing concerns about protecting the public from unsafe, defective consumer products. Jurisdiction over the administration and enforcement of several existing consumer safety statutes was transferred from other agencies to and consolidated under the CPSC. However, in the years since its establishment, the staff and resources of the CPSC have been considerably reduced, leading many observers to doubt its ability to fulfill its mission effectively. Consequently, Congress considered major reform legislation to address organizational and systemic deficiencies. Legislative proposals in the 110th Congress included provisions targeting specific consumer product defects and hazards. On July 29, 2008, H.Rept. 110-787, the Conference Report for H.R. 4040, the Consumer Product Safety Improvement Act of 2008 (CPSIA), was released after several months of negotiations in the conference committee to reconcile differences between the House and Senate versions of the bill. The bill passed the House of Representatives and the Senate on July 30, 2008 (424-1) and July 31, 2008 (89-3), respectively. On August 14, 2008, President Bush signed the bill into law as P.L. 110-314. CPSC Chairman Nord and Commissioner Moore each expressed approval of the final legislation, with Chairman Nord expressing a desire for Congress to appropriate further funding to carry out the new mandates of the legislation. This report provides an overview of the prior authority of the CPSC to establish consumer product safety standards and to inspect and recall unsafe consumer products, and discusses P.L. 110-314, the Consumer Product Safety Improvement Act of 2008, reforming the CPSC and strengthening enforcement of consumer product safety standards. It supersedes CRS Report RL34399, Consumer Product Safety Improvement Act of 2008: H.R. 4040, by [author name scrubbed] (out of print but available from author). For an overview of issues regarding safety of consumer products imported from China, see CRS Report RS22713, Health and Safety Concerns Over U.S. Imports of Chinese Products: An Overview, by [author name scrubbed]. For an overview of the issue of phthalates in children's products, see CRS Report RL34572, Phthalates in Plastics and Possible Human Health Effects, by [author name scrubbed] and [author name scrubbed].

Background1 Two recent events heightened congressional concern about the state of judicial security: the murders of the husband and mother of United States District Judge Joan Lefkow by a disgruntled litigant and the murders of Judge Rowland Barton, his court reporter, a deputy sheriff, and a federal officer in Atlanta, Georgia. The 109 th Congress responded by introducing a number of bills. Some pieces of legislation addressed issues of courthouse security and physical security for judges and court personnel, whereas other legislation went beyond courthouse security and physical security for judges and court personnel and addressed issues concerning the integrity of the judicial system in the United States. Legislation has been introduced in the 110 th Congress that addresses many of the same issues that were addressed by legislation in the 109 th Congress. This report discusses the state of judicial security in the United States, as well as legislation introduced in the 110 th Congress that would enhance judicial security. This report also provides a brief overview of legislation introduced in 109 th Congress that would have addressed judicial security. This report, however, does not discuss the agencies involved in providing security for the federal judiciary. Current Issues in Judicial Security Court Security Data suggests that judges, both federal and state, are the targets of threats and other aggressive behavior. Between October 1, 1980, and September 30, 1993, the U.S. Marshals Service (USMS) collected information about reports of inappropriate communications, threats, and attacks involving federal judicial officials. During the 13-year period, 3,096 reports were recorded by the USMS. Approximately 8% of the reports involved inappropriate communications that appeared to be linked to later, more serious actions; 4% involved incidents where court officials were attacked or involved in attacks against others; and another 4% involved incidents where court officials were in danger of being harmed by people who threatened or attempted to take inappropriate actions. More recently, the USMS reported that they received an estimated 700 threats against members of the judiciary each year. Of these, about 20 were serious enough to warrant a protective detail and about 12 warranted around-the-clock protection. Additional data, while more limited, demonstrate that state and local judges face many of the same threats as federal judges. A recent report from the Bureau of Justice Assistance (BJA) discussed data collected by the National Sheriff's Association (NSA). The NSA data indicated that over the past 35 years: 8 state or local judges have been killed; 13 state or local judges have been assaulted; 3 local prosecutors have been killed; 4 local prosecutors have been assaulted; 5, if not more, local law enforcement officers have been killed at local courthouses; 27 local law enforcement officers have been assaulted at local courthouses; 42 court participants have been killed at local courthouses; and 53 court participants have been assaulted at local courthouses. Data about the types of threats Pennsylvania judges face were collected as a part of a "survey of judicial safety." Of the judges who responded to the survey, 52% reported that they had experienced one or more incidents of "inappropriate communications," "inappropriate approaches," "threatening communications," "physical assaults," or "any threatening actions" in the past year. Thirty-five percent of the respondents reported that they changed their judicial conduct "somewhat" or "a great deal" because either they or one of their associates had experienced one or more threats, inappropriate approaches, or physical assaults. Moreover, New York's Office of Court Administration reported that since 1987, it has handled more than 2,000 reported threats against judges, with more than 1,300 of the reported threats occurring since 1995. There have been concerns about the ability of the U.S. Marshals Service (USMS) to provide security for the federal judiciary. A Department of Justice (DOJ), Office of the Inspector General (OIG), report on the U.S. Marshal's Judicial Security process found that USMS routinely failed to assess the threats against federal judges in a timely manner. The OIG found that USMS has limited ability to collect and share intelligence on threats to the judiciary amongst its districts and its representatives on the Federal Bureau of Investigation's (FBI's) Joint Terrorism Task Forces. The OIG also found that USMS lacked adequate risk-based standards for determining the appropriate means for protecting judges during high-risk trials and for protecting threatened judges while they are not in court. In congressional testimony, Judge Jane R. Roth stated that funding and staffing issues at the USMS have decreased its ability to provide adequate protection for the federal judiciary. Judge Roth noted that on many occasions, the Judicial Conference had found that the USMS did not have adequate staff to protect the judiciary. Judge Roth testified that DOJ had not shared information about USMS staffing levels, but "many United States Marshals report to us that their staffing levels have been significantly reduced." Judge Roth also questioned whether the law enforcement responsibilities (fugitive apprehension, asset forfeiture, and witness protection) had caused budgetary problems for the Marshals' judiciary security program because the USMS must serve both the executive and judicial branches. A report that reviewed the protection provided to the federal judiciary by the USMS found "[t]he staffing level of the USMS for protection of the Judiciary has not grown commensurate with operational demands." Specifically, the USMS is having problems with providing an adequate number of Deputy U.S. Marshals (DUSMs) for judicial security duties. There is federal funding available for state courts; however, with respect to judicial security in state courts, state courts cannot directly apply for such funding. They have to request such funding from the state's executive branch, which means that state courts must compete with executive branch agencies for federal funding. This has proven to be a barrier for state courts in directly accessing federal funding for court security measures. Witness Intimidation Witness intimidation reduces the likelihood that citizens will engage with the criminal justice system, which could deprive police and prosecutors of critical evidence. Witness intimidation can reduce public confidence in the criminal justice system and it can create the perception that the criminal justice system cannot protect citizens. Witness intimidation can be the result of actual or perceived threats from an offender or his associates, but it can also be the result of more general community norms that discourage residents from cooperating with the police or prosecutors. Witnesses can be intimidated in many ways, including implicit threats, looks, or gestures, explicit threats of violence, actual physical violence, property damage, or other threats, such as challenges to child custody or immigration status. Threats are more common than actual physical violence, but they can be just as effective in deterring cooperation with police and prosecutors. Some witnesses might experience one incident of intimidation, but others might experience an escalating series of threats and actions that become more violent over time. Other witnesses might not experience intimidation directly, but they believe that they will receive retaliation if they cooperate with law enforcement. According to a Community Oriented Policing Services (COPS) report, "small-scale studies and surveys of police and prosecutors suggest that witness intimidation is pervasive and increasing." The report cites a study of witnesses appearing in criminal courts in Bronx County, New York, which shows that 36% of witnesses had been directly threatened, and of those that were not directly threatened, 57% feared reprisals. The report also states that prosecutors believe that witness intimidation plays a role in 75%-100% of violent crime committed in gang-controlled neighborhoods, but it might be less of a factor in neighborhoods not dominated by gangs and drugs. The report also notes that it is hard to quantify the prevalence of witness intimidation for several reasons. Some reasons include crime is under-reported for reasons not related to witness intimidation; in cases where a witness is successfully intimidated, neither the crime nor the intimidation is reported; victimization surveys and interviews with witnesses whose cases go to trial only capture information from a subset of witnesses; and there has been no empirical research on the scope or specific characteristics of community-wide intimidation. A report from the National Center for Victims of Crime presented data from surveys and interviews of youths in Massachusetts. The youth surveys and interviews focused on different topics related to gangs and violence, including experiences with gang-related crime and witness intimidation. Thirty-eight percent of survey respondents reported hearing about threats against schoolmates and 28% reported hearing about threats made against neighbors because they reported gang crime. Of the respondents who had reported a gang crime, 12% reported receiving a threat because they reported the crime. The most common way threats were made against schoolmates, neighbors, or the respondents themselves were face-to-face contacts, followed by receiving telephone calls. Respondents reported that half of the threats against schoolmates and neighbors they heard about involved beatings, though the researchers warn that this figure might be inflated because respondents were more likely to hear about threats that involved violence. Threats were also delivered though notes, online, and indirectly by stalking the person who reported the crime, vandalizing their property, or socially isolating them. Legislation in the 110th Congress In an effort to strengthen court security, the 109 th Congress responded with a number of measures that would have affected both the federal and state judicial systems. Similar legislation was introduced in the 110 th Congress. H.R. 660 and S. 378 would have addressed many of the same issues that legislation in the 109 th Congress sought to address. On January 7, 2008, H.R. 660 was enacted into law ( P.L. 110 - 177 ). P.L. 110 - 177 (1) improves judicial security measures and increases funding for judicial security; (2) amends the criminal code to provide greater protection for judges, their family members, and witnesses; and (3) provides grant funding for states to provide protection for judges and witnesses. Four other bills, H.R. 933 , H.R. 3547 , S. 79 , and S. 456 , would have created a short-term witness protection section in the USMS. All four bills would have also created a grant program to provide funding for short-term witness protection programs. Another bill, H.R. 2325 , would have, along with amending the criminal code to provide greater protection for federal judges, federal law enforcement officers, and their family members, allowed federal judges and justices, U.S. Attorneys, and any other officer or employee of the Department of Justice whose duties include representing the United States in court to carry firearms. Other bills introduced in the 110 th Congress that sought to address issues of court security include S. 456 , the Gang Abatement and Prevention Act of 2007, and H.R. 2325 , the Court and Law Enforcement Officers Protection Act of 2007. The Court Security Improvement Act of 2007 (P.L. 110-177) This section discusses provisions of P.L. 110 - 117 that address judicial security and witness protection. The following section discusses provisions of the six above-referenced bills that address judicial security but are not included in P.L. 110 - 177 . Increased Sentences Several provisions in P.L. 110 - 177 increase sentences for specified offenses, as discussed below. General Modifications of Federal Murder Crime and Related Crimes22 P.L. 110 - 177 increases the maximum penalty from 10 years to 15 years for persons convicted of voluntary manslaughter. For involuntary manslaughter, the maximum penalty increases from six years to eight years. Modification of Tampering with a Witness, Victim, or an Informant Offense25 P.L. 110 - 177 sets forth new penalties relating to the suppression of testimony, communication to relevant officials, or production of official documents in an official proceeding. If an offense results in a killing, the offense would be punishable by the sentences prescribed in 18 U.S.C. § 1111 and § 1112. If an offense involves attempted murder, or the use or attempted use of physical force, P.L. 110-177 requires imprisonment for not more than 20 years if the offense involves the threatened use of physical force against any person. If the offense involves intimidating, threatening, corruptly persuading another person, or attempting to do so, or engaging in misleading conduct toward another person with the intent of (1) preventing the person from testifying, (2) destroying physical evidence, (3) avoiding a summons, or (4) providing information about a possible federal offense, or a violation of parole, probation, or release pending a judicial proceeding, P.L. 110-177 requires a fine, imprisonment for not more than 20 years, or both. If the offense involves intentionally harassing, or attempting to harass, a person and thereby prevents the person from (1) attending or testifying in an official proceeding, (2) notifying federal officials about a violation or possible violation of any pre- or post-sentencing release, (3) arresting or seeking the arrest of someone in connection with a crime, or (4) causing a criminal prosecution, or a parole or probation revocation hearing to be held, or assisting in such prosecution or hearing, P.L. 110-177 requires a fine, imprisonment for not more than three years, or both. Modification of Retaliation Offense26 P.L. 110 - 177 increases the sentence to a maximum term of imprisonment of 30 years for anyone convicted of attempting to kill another person with the intent of retaliating against the person for (1) the attendance of a witness or party at an official proceeding, or any testimony given or any record, document, or other object produced by a witness in an official proceeding, or (2) providing to a law enforcement officer any information relating to the commission or possible commission of a federal offense or a violation of conditions of probation, supervised release, parole, or release pending judicial proceedings. P.L. 110 - 177 also increases the sentence for anyone who knowingly engages in, threatens, or attempts to engage in any conduct that causes bodily injury or damage to another person's property with the intent of retaliating against the person from a maximum term of imprisonment of 10 years to 20 years. Clarification of Venue for Retaliation Against a Witness28 P.L. 110 - 177 permits a prosecution for retaliating against a witness, victim, or informant to be brought in the district where the official proceeding was intended to be affected, or in which the offense occurred. Assault Penalties29 P.L. 110 - 177 sets forth new penalties for individuals that assault United States officials, United States judges, federal law enforcement officers, or officials whose killing would be a crime under 18 U.S.C. §1114, or their immediate family members, with the intent to impede, intimidate, or interfere with officials, judges, or law enforcement officers while they are engaged in the performance of official duties, or with intent to retaliate against officials, judges, or law enforcement officers on account of their performance of official duties. Under P.L. 110 - 177 , anyone who commits a simple assault punishable under 18 U.S.C. §115 can be fined and sentenced to not more than a year imprisonment. If an assault punishable under 18 U.S.C. §115 involved physical contact with the victim or the intent to commit another felony, the offender can be fined and sentenced to not more than 10 years imprisonment. Under P.L. 110 - 177 , if an assault resulted in bodily injury, the offender can be fined and sentenced to not more than 20 years imprisonment. If an assault resulted in serious bodily injury (as defined in 18 U.S.C. §1365, and including any conduct that, if the conduct occurred in the special maritime and territorial jurisdiction of the United States, would violate 18 U.S.C. §2241 or §2242) or a dangerous weapon was used in relation to the offense, the offender can be fined and sentenced to not more than 30 years imprisonment. New Federal Grant Programs Several provisions in P.L. 110 - 177 create new grant programs, as discussed below. Grants to States to Protect Witnesses and Victims of Crime30 P.L. 110 - 177 expands an existing grant program so funds could be used for witness and victim protection. The grant program can provide funds to states, units of local government, and Indian tribes to create and expand witness and victim protection programs in order to prevent threats, intimidation, and retaliation against victims of, and witnesses to, violent crimes. P.L. 110 - 177 authorizes $20 million annually for the program for FY2008 through FY2012. Eligibility of State Courts for Certain Federal Grants31 P.L. 110 - 177 permits the Bureau of Justice Assistance (BJA) to make Correctional Options grants to state courts to improve the security for state and local court systems. Priority would be given to state court applicants that have the greatest demonstrated need to provide court security in order to administer justice. P.L. 110 - 177 amends current law so that 10% of the funds appropriated for Correctional Options grants are awarded to state courts for the purpose of providing court security. The Act would also make state and local courts eligible to receive funding under the Bulletproof Vest Grant program to help pay the cost of providing bulletproof vests to court officers. P.L. 110 - 177 permits the Attorney General to require, as appropriate, states, units of local government, and Indian tribes applying for grants to demonstrate that they considered the needs of the judicial branch and consulted with the judicial officer of the highest court of the state, unit, or tribe, and with the chief law enforcement officer of the law enforcement agency responsible for the security needs of the judicial branch. Grants to States for Threat Assessment Databases33 P.L. 110 - 177 creates a new grant program that awards grants to the highest court in the state for the purposes of establishing and maintaining a threat assessment database. P.L. 110 - 177 defines a threat assessment database as a database through which a state can (1) analyze trends and patterns in domestic terrorism and crime, (2) project the probabilities that specific acts of domestic terrorism or crime will occur, and (3) develop measures and procedures that can effectively reduce the probabilities that those acts will occur. The law also requires the Attorney General to develop a core set of data elements to be used by each state's database so that the information can be effectively shared with other states and the Department of Justice. P.L. 110 - 177 authorizes $15 million for each FY for FY2006 through FY2009. Measures to Protect Judicial Personnel Several provisions in P.L. 110 - 177 include measures to protect judicial personnel, as discussed below. Judicial Branch Security Requirements34 P.L. 110 - 177 requires the Director of the USMS and the Judicial Conference of the United States to consult with one another on a continuing basis regarding the security requirement of the judicial branch, to ensure that the views of the Judicial Conference regarding security needs for the judiciary are taken into account when determining staffing levels, setting priorities for programs regarding judicial security, and allocating judicial security resources. Under P.L. 110 - 177 , the USMS retains the final authority regarding the security requirements for the judicial branch. Additional Amounts for the USMS to Protect the Judiciary35 P.L. 110 - 177 authorizes an additional $20 million for each FY2007 to FY2011 for the USMS to provide protection for the judiciary. The additional funds are to be used to hire entry-level deputy marshals to provide judicial security; hire senior-level deputy marshals to investigate threats to the judiciary and provide protective details to members of the judiciary and Assistant U.S. Attorneys; and hire senior-level deputy marshals and program analysts and provide secure computer systems for the Office of Protective Intelligence. Protection Against Malicious Recording of Fictitious Liens Against a Federal Employee37 P.L. 110 - 177 makes it illegal to file, attempt to file, or conspire to file, in any public record, or in any private record that is generally available to the public, any false lien or encumbrance against the real or personal property of a U.S. employee (as designated in 18 U.S.C. § 1114), on account of the performance of official duties by the employee, knowing or having reason to know that the lien or encumbrance is false, or contains any false, fictitious or fraudulent information. Under P.L. 110 - 177 , individuals convicted of filing a fictitious lien against a federal employee can be fined, sentenced to no more than 10 years in prison, or both. Protection of Individuals Performing Certain Federal and Other Functions38 P.L. 110 - 177 makes it illegal to make restricted personal information about covered persons, or a member of the immediate family of the covered person, publicly available. P.L. 110 - 177 requires an individual to be found guilty of an offense under the section if the individual made the information publicly available (1) with the intent to threaten, intimidate, or incite a crime of violence against the covered individual or an immediate family member, or (2) with the intent and knowledge that the information would be used to threaten, intimidate, or facilitate the commission of a crime of violence against the covered individual or an immediate family member. The law provides for a sentence of not more than five years in prison, a fine, or both for an individual found guilty of a crime under the section. Report on the Security of Federal Prosecutors41 P.L. 110 - 177 requires the Attorney General to submit a report about the security of Assistant U.S. Attorneys and other federal attorneys arising from the prosecution of terrorists, violent criminal gangs, drug traffickers, gun traffickers, white supremacists, and those who commit fraud and other white-collar offenses to Congress no later than 90 days after enactment of the Act. Prohibition of Possession of Dangerous Weapons in Federal Court Facilities42 P.L. 110 - 177 makes it illegal to possess or bring a "dangerous weapon" into a federal court facility, or to attempt to do so. Reauthorization of Fugitive Apprehension Task Forces43 P.L. 110 - 177 reauthorizes the fugitive apprehension task forces that are directed and coordinated by the U.S. Marshals Service. The task forces locate and apprehend fugitives and are composed of members of federal, state, and local law enforcement. P.L. 110 - 177 authorizes $10 million each FY for FY2008 through FY2012 for the fugitive apprehension task forces. Financial Disclosure Reports44 P.L. 110 - 177 extends the provision in current law that allows for the redaction of information in financial disclosure reports submitted by judges, justices, or judicial officers until December 31, 2011. Other Legislation in the 110th Congress This section discusses provisions in S. 378 , H.R. 933 , S. 79 , H.R. 2325 , and H.R. 3547 that would have addressed judicial security but are not included in P.L. 110 - 177 . Increased Sentences Several provisions in the aforementioned bills would have increased sentences for specified offenses, as discussed below. Special Penalties for Murder, Kidnapping, and Related Crimes Against Federal Judges and Federal Law Enforcement Officers46 H.R. 2325 would have created specific penalties for people who commit certain crimes against federal judges or law enforcement officers (as those terms are defined in 18 U.S.C. § 115). The bill would have provided for a fine and imprisonment for any term of years not less than 30 years, or life, or, if death results, the death penalty, for anyone who is convicted of murdering, attempting to murder, or conspiring to murder a federal judge or law enforcement officer. The bill would have required a fine and a term of imprisonment of not less than 15 years, but not more than 40 years, for anyone convicted of committing voluntary manslaughter against a federal judge or law enforcement officer. The bill would have also required a fine and a term of imprisonment of not less than 3 years, but not more than 15 years, for anyone convicted of committing involuntary manslaughter against a federal judge or law enforcement officer. The bill would have provided for a fine and a term of imprisonment for any term of years not less than 30 years, or life, or, if death results, the death penalty, for anyone convicted of kidnapping a federal judge or law enforcement officer. Penalties for Certain Assaults47 H.R. 2325 would have increased the penalty from a fine, 8 years imprisonment, or both to a fine, 15 years imprisonment, or both for anyone who forcibly assaults, resists, opposes, impedes, intimidates, or interferes with a U.S. government employee (as defined in 18 U.S.C. § 1114) while the employee is engaged in or on account of the employee's performance of official duties, or for anyone who forcibly assaults or intimidates any former U.S. government employee on account of the employee's performance of official duties during the employee's time of service, if the person's actions constitute assault other than simple assault. The bill would have increased the penalty from a fine, 15 years imprisonment, or both to a fine, 20 years imprisonment, or both for anyone who uses a deadly or dangerous weapon to commit one of the above described assaults, or who inflicts bodily injury while committing one of the above described assaults. The bill would have also set forth specific penalties for assaults against federal judges and law enforcement officers. The bill would have required a fine and imprisonment for not less than 2 years, but not more than 10 years, for an assault against a federal judge or law enforcement officer that resulted in bodily injury (as defined in 18 U.S.C. § 1365). The bill would have required a fine and imprisonment for not less than 5 years, but not more than 15 years, for an assault against a federal judge or law enforcement officer that resulted in substantial bodily injury (as defined in 18 U.S.C. § 113). The bill would have provided for a fine and imprisonment of not less than 10 years, but not more than 25 years, if the offender used or possessed a dangerous weapon during an assault against a federal judge or law enforcement officer, or if the assault resulted in serious bodily injury (as defined in 18 U.S.C. § 2119(2)). The bill would have also required that any penalty imposed for assaulting a federal judge or law enforcement officer be in addition to any other punishment imposed for other criminal conduct during the same criminal episode. Special Penalties for Retaliating Against a Federal Judge or Federal Law Enforcement Officer by Murdering or Assaulting a Family Member48 H.R. 2325 set forth specific penalties for anyone that (1) assaults, kidnaps, or murders, or attempts or conspires to kidnap or murder, or threatens to assault, kidnap, or murder a member of the immediate family of a federal judge or law enforcement officer; (2) threatens to assault, kidnap, or murder a federal judge or law enforcement officer; or (3) assaults, kidnaps, or murders, or attempts or conspires to kidnap or murder, or threatens to assault, kidnap, or murder, any person who formerly served as a federal judge or law enforcement officer or the immediate family member of any person who formerly served as a federal judge or law enforcement officer, with the intent to impede, intimidate, or interfere with a federal judge or law enforcement officer while engaged in the performance of official duties, or with the intent to retaliate against a federal judge or law enforcement officer on account of the performance of official duties. In the case of murder, attempted murder, conspiracy to murder, or manslaughter, the bill would have provided for the same penalty as the penalty specified in 18 U.S.C. § 1114(b). In the case of kidnapping, attempted kidnapping, or conspiracy to kidnap, the bill would have provided for the same penalty as the penalty specified in 18 U.S.C. § 1201(a). In the case of assault, the bill would have provided for the same penalty as the penalty specified in 18 U.S.C. § 111. In the case of a threat, the bill would have provided for a penalty of a fine and imprisonment of not less than 2 years, but not more than 10 years. The bill would have also required that any penalty imposed would be in addition to any other punishment imposed for other criminal conduct during the same criminal episode. New Federal Grant Programs Several provision in the aforementioned bills would have created new grant programs, as discussed below. Short-term State Witness Protection Section49 H.R. 933 , H.R. 3547 , S. 79 , and S. 456 would have amended Chapter 37 of Title 28 by adding a new section, which would have established a Short-term State Witness Protection Section within the USMS. Under all of the bills, the proposed Short-term State Witness Protection Section would have provided protection for witnesses in state and local trials involving homicide or other major violent crimes pursuant to cooperative agreements with state and local prosecutors' offices and the U.S. Attorney for the District of Columbia. H.R. 933 would have also allowed the Short-term State Witness Protection Section to provide protection for witnesses in state and local trials involving serious drug offenses. Under H.R. 933 and S. 79 , the Short-term State Witness Protection Section would have been required to give priority in awarding grants (see next section) and providing services to prosecutors' offices in states with an average of not less than 100 murders per year during the five-year period immediately proceeding an application for protection. Under H.R. 3547 and S. 456 , the Short-term State Witness Protection Section would have been required to give priority in awarding grants and providing services to prosecutors' offices in states with an average of not less than 100 murders per year and that include a city, town, or township with an average violent crime rate that is above the national average during the five-year period immediately proceeding an application for protection. Short-term State Witness Protection Grants50 H.R. 933 , H.R. 3547 , S. 79 , and S. 456 would have also authorized a grant program to provide funding for short-term witness protection. H.R. 933 would have allowed the Attorney General to make grant awards for short-term witness protection to state and local district attorneys offices and the U.S. attorney for the District of Columbia. H.R. 933 would have allowed the Attorney General to make grant awards to state and local district attorneys only in states with an average of not less than 100 murders per year during the most recent five-year period. H.R. 933 would have allowed the Attorney General to make awards to state and local district attorneys offices for the purpose of providing short-term witness protection to witnesses in trials involving homicide or a serious violent felony or serious drug offense. S. 79 would have allowed the Attorney General to make grant awards to state and local criminal prosecutors' offices and the U.S. Attorney for the District of Columbia that are located in a state with an average of not less than 100 murders per year during the most recent five-year period. S. 79 would have allowed the Attorney General to make grant awards to prosecutors' offices for the purpose of providing short-term protection to witnesses in trials involving homicide or serious violent felonies. Under H.R. 933 and S. 79 , grants awarded to prosecutors' offices could have been used to provide protection to witnesses or the grant award can be credited, pursuant to a cooperative agreement, to the Short-term State Witness Protection Section for providing protection to witnesses. The grant program that would have been authorized by H.R. 3547 and S. 456 is similar to the one that would have been authorized by H.R. 933 and S. 79 , with a few exceptions. Under H.R. 3547 and S. 456 , the Attorney General could have awarded grants to state and local criminal prosecutors' offices, or to the U.S. Attorney for the District of Columbia for identifying witnesses in need of protection or for providing short-term protection to witnesses in trials involving homicide or serious violent felonies. H.R. 3547 and S. 456 would not have limited the Attorney General to making grants under the proposed program to state and local district attorneys in states with an average of not less than 100 murders per year during the most recent five-year period. Under H.R. 3547 and S. 456 , grants awarded to prosecutors' offices could have been used to identify witnesses in need of protection, provide protection to witnesses (including tattoo removal services), or the grant award could an be credited, pursuant to a cooperative agreement, to the Short-term State Witness Protection Section for providing protection to witnesses. H.R. 933 , H.R. 3547 , S. 79 , and S. 456 would have authorized $90 million annually for FY2008 though FY2010 to make grants for short-term witness protection. Witness Protection Services54 Both H.R. 3547 and S. 456 would have made it so that in cases where a state requests the Attorney General to provide temporary protection to a witness (pursuant to 18 U.S.C. §3521(e)), the state would not have to reimburse the Attorney General for the costs of providing protection if the witness is a part of an investigation or prosecution that in any way relates to crimes of violence committed by a criminal street gang, as defined under the laws of the state seeking assistance. Expansion of the Federal Witness Relocation and Protection Program55 Both H.R. 3547 and S. 456 would have expanded the circumstances under which the Attorney General can provide for the relocation and protection of witnesses or potential witnesses in federal or state cases pursuant to 18 U.S.C. § 3521 to include witnesses or potential witnesses in cases against criminal street gangs, serious drug offenses, or homicide. Measures to Protect Judicial Personnel Several provisions in the aforementioned bills would have included measures to protect judicial personnel, as discussed below. Protection of Family Members56 S. 378 would have allowed information about the individual to be redacted from financial disclosure reports, as require under current law, if releasing the information would put the family members of justices, judges and judicial officers in danger. Under current law financial disclosure reports submitted by judges, justices, or judicial officers can have information redacted if the Judicial Conference, in consultation with the USMS, believes that revelation of the information could put the individual in danger. Authority of Federal Judges and Prosecutors to Carry Firearms58 H.R. 2325 would have allowed federal judges and justices, U.S. Attorneys, and any other officer or employee of the Department of Justice whose duties include representing the United States in court to carry firearms. The bill would have required the Attorney General to issue regulations on how this provision is to be carried out. The bill would have also allowed current and retired Amtrack Police Department officers and current and retired law enforcement or police officers of the executive branch of the federal government to carry concealed firearms, so long as they meet certain requirements specified in law. The bill would have also modified the requirements that retired law enforcement officers must meet in order to carry a concealed firearm.

The 2005 murders of the husband and mother of United States District Judge Joan Lefkow by a disgruntled litigant and the murders of Judge Rowland Barton, his court reporter, a deputy sheriff, and a federal officer in Atlanta, Georgia, focused national attention on the need for increased court security. Data from the U.S. Marshals Service (USMS), Pennsylvania's survey of judicial safety, and the New York Office of Court Administration demonstrate that judges are the targets of threats and other aggressive actions. In addition, congressional testimony and a report by the Department of Justice's (DOJ's) Office of the Inspector General (OIG) raise questions about the abilities of the USMS to protect the federal judiciary. The USMS is the primary agency responsible for the security of the federal judiciary. According to a March 2004 OIG report, USMS routinely failed to assess the threats against federal judges in a timely manner and it has limited ability to collect and share intelligence on threats to the judiciary to appropriate entities. The concerns noted by the OIG may be due, in part, to funding and staffing issues highlighted in recent congressional testimony. Several bills introduced in the 110th Congress sought to address judicial security. H.R. 660 and S. 378 would have addressed many of the same issues that legislation introduced in the 109th Congress sought to address. On January 7, 2008, H.R. 660 was enacted into law (P.L. 110-177). P.L. 110-177 (1) improves judicial security measures and increases funding for judicial security; (2) amends the criminal code to provide greater protection for judges, their family members, and witnesses; and (3) provides grant funding for states to provide protection for judges and witnesses. Four other bills, H.R. 933, H.R. 3547, S. 79, and S. 456, would have created a short-term witness protection section in the USMS. All four bills would have also created a grant program to provide funding for short-term witness protection programs. Another bill, H.R. 2325, would have, along with amending the criminal code to provide greater protection for federal judges, federal law enforcement officers, and their family members, allowed federal judges and justices, U.S. Attorneys, and any other officer or employee of the Department of Justice whose duties include representing the United States in court to carry firearms. This report discusses the state of judicial security in the United States and the legislation introduced in the 110th Congress related to judicial security. This report will not be updated.

Eligibility Requirements The eligibility for DIC by survivors is based on (1) the eligibility of the veteran, which is determined by the circumstances of the veteran's death and his or her disability compensation rating; and (2) the survivor meeting certain criteria related to either relationship to the veteran, age, or income. Veteran Eligibility The recipients of DIC must be the survivors of qualifying veterans. By statute, a veteran is defined as a "person who served in the active military, naval, or air service, and who was discharged or released therefrom under conditions other than dishonorable." DIC is paid to eligible survivors for three categories of veterans whose deaths fit one of the following circumstances: 1. veterans who died on active duty, active duty for training, or inactive duty for training; 2. veterans who died due to service-connected disabilities; or 3. veterans who died from non-service-related causes not as a result of willful misconduct and were receiving, or eligible to receive, disability compensation from the VA for service-connected disabilities rated at 100% subject to the following stipulations: the disabilities were rated as 100% disabled for 10 years or more prior to death; the disabilities were rated as 100% since discharge or release from active duty for at least five years prior to death; or the veterans were prisoners of war who had service-connected disabilities rated at 100% for at least one year prior to death after September 30, 1999. The Veterans' Benefits Act of 2010 ( P.L. 111-275 ) expanded the criteria for survivors of veterans who were prisoners of war and died from non-service-related causes by eliminating the requirement that the veteran had to have died after September 30, 1999, for certain DIC applications that were pending a final decision on or after October 1, 2011. The VA determines the eligibility of veterans and their entitlement to disability compensation through evidence found in military service records and circumstances of death. Recipient Eligibility Veterans' dependents are not generally entitled to all VA benefits, but some benefits are available based on the relationship the dependent may have had with the veteran. If the eligibility criteria for DIC related to the veteran's death are met, the survivors also have certain criteria to meet to be eligible for DIC. The three different groups of recipients are spouses, children, and dependent parents of deceased veterans. Each group has specific eligibility requirements. Surviving Spouses A surviving spouse is eligible if he or she was married to the veteran for at least one year before the veteran's death, or has a child with the veteran, or if the veteran left the military due to a service-connected disability, the marriage was within 15 years of the discharge; cohabited with the veteran for the duration of the marriage unless the couple underwent a period of separation that was not the fault of the surviving spouse; and has not remarried before reaching the age of 57. Surviving Children Surviving children are eligible for DIC if they are independent of the surviving spouse, unmarried, and below the age of 18. If they are aged 18 to 23, they must be pursuing an approved course of education to be eligible for DIC. Children who are permanently incapable of supporting themselves at the age of 18 or older remain entitled to DIC. Surviving Parents Surviving parents are required to provide evidence of financial dependence on the deceased veteran before becoming eligible for DIC. This evidence is gained through a calculation of countable income by the VA that cannot exceed the amounts outlined in the Income for VA Purposes (IVAP) tables. Monthly Benefit Amounts Surviving Spouses Surviving spouses receive monthly benefits at a current base rate of $1,254.19 in 2015, if the veteran died on or after January 1, 1993. Otherwise, payment is based on the veteran's pay grade at the time of death with the current base rate being $1,254.19. A higher amount may be provided to the surviving spouse for several reasons: if the veteran, eight years before death, was receiving or entitled to receive disability compensation for a service-connected disability rated at totally disabled (100%)—an additional $266.32 per month; if the surviving spouse has dependent children—an additional $310.71 per month for each child; if the surviving spouse has a disability that requires aid and assistance—an additional $310.71 per month; or if the surviving spouse is permanently housebound—an additional $145.55 per month. Surviving Children Surviving children under the age of 18 (or under the age of 23 if they are students, who are independent of the surviving spouse) are entitled to DIC in the following current monthly amounts: one child receives $310.71, and each additional child receives an additional $310.71. Moreover, if the surviving spouse has one or more children under the age of 18 on the award, an additional flat $270 shall be received per month for two years as part of a two-year transitional benefit. For example, in 2015 a surviving spouse with two children under the age of 18 would receive monthly benefits for surviving children in the amount of $891.42; $310.71 per child in addition to the flat $270 per month for the first two years. If a child is permanently incapable of self-support before the age of 18, the child remains eligible for DIC past the age of 18 in the amount of $529.55 per month. Children in school over the age of 18 (and under the age of 23) are also eligible for benefits at the rate of $263.23 per month. Surviving Parents Under current law, the maximum allowable DIC for surviving dependent parents is reduced for countable income above $800, or $1,000 if both parents are a married couple. Monthly benefits received by parents fluctuate by income. In the case of a sole surviving parent, the monthly DIC benefit ranges between $5 and $621. For parents who are still married to each other or have remarried other individuals, the range is between $5 and $422. For parents who are not living with each other nor living with different spouses, the range is between $5 and $449. Application Process To claim DIC benefits, a survivor must complete and submit to the local VA office VA Form 21-534a and Department of Defense (DD) Form 1300. The effective date of DIC entitlement is the first day of the month that the death occurred for claims filed within one year of the death. After one year, the DIC entitlement starts on the date the claim is received by the VA. DIC Statistics for FY2013 In FY2013, 376,979 spouses, children, and parents of veterans received more than $5.8 billion in DIC. On average, each spousal survivor received $15,744 in annual compensation. Child recipients received an average of $7,094 in annual compensation. Policy Issues Several policy issues are associated with DIC, including the DIC offset of Survivor Benefit Plan (military retirement survivor) payments, often referred to as the "widow's tax;" adequacy of the payments for survivors compared with other retirement systems' payments to surviving spouses; remarriage age of 57; length of time for a totally disabled rating for non-service-connected deaths to qualify for DIC; and maximum DIC payment for parents based on income levels that have not been adjusted for inflation. DIC and SBP Offset The Survivor Benefit Plan (SBP) is a form of insurance provided by the Department of Defense to military retirees that does not require service-connected death or disability for survivors to receive payments. A military retiree elects to have lower monthly retirement pay—the insurance premium for SBP is taken from retirement pay—to ensure that his or her survivors can receive a monthly payment after his or her death. However, this income is taxable, whereas DIC is tax-free. If the survivor of a military retiree is also eligible for and receives DIC, the SBP payment is reduced dollar for dollar by the DIC amount (but not below zero). DIC Percentage of Income Compared with Other Pension Programs There is a disparity between the percentage of income a DIC recipient is paid and the percentages given to recipients of other retirement and pension plans. Currently, an eligible surviving spouse would receive a basic DIC benefit of $1,254.19 monthly. This is just under 41% of the basic compensation rate for a veteran with a spouse receiving disability compensation at the 100% disabled rating. This has called into question the adequacy of DIC payments. Private pension plans are required to pay 50% of their benefit to surviving spouses, but retirees in some plans may elect to give their surviving spouses a larger percentage. As a result of the variance in pension plans, benefits, and survivor options, it is difficult to discern what the average pension benefit for a surviving spouse in the private sector might be. SBP recipients receive 55% of the military retiree's retirement pay. Federal employee pension plans provide 55% of retirement pay, or 50% of retirement pay along with an initial lump-sum payment, depending on the plan. A low-income elderly or disabled veteran may be eligible for the Improved Disability Pension, with a maximum annual rate of $12,868 for a veteran with one dependent in 2015. In the event of his or her death, the surviving spouse may be eligible for the Improved Death Pension Benefit, with a maximum annual rate of $8,630 for an individual without a dependent child in 2015. The surviving spouse could receive, under the Improved Death Pension, about 67.1% of the veteran's Improved Disability Pension. As a percentage of 100% disability compensation, DIC is below the 50% or more level for survivors associated with other retirement or pension benefits. However, unlike pension benefits, DIC is not structured as a percentage of the disability compensation received by the veteran. Under the current DIC structure, the surviving spouse of a veteran who died with a disability rating of 60% ($1,156.09 per month) or less would receive a higher DIC payment ($1,254.19 at the basic monthly rate) than the veteran received in disability compensation while alive. However, if DIC were 50% of the disability compensation received by the veteran, a survivor would receive a basic monthly benefit (based on the veteran's disability rating) ranging from approximately $67 to $1,535. This range exists because a veteran could die from a service-connected condition that is rated at less than 100%. DIC Remarriage Age Until 2003, a surviving spouse could not remarry and continue to receive DIC benefits. That changed with the enactment of the Veterans Benefits Act of 2003 ( P.L. 108-183 ), which allowed a surviving spouse aged 57 or older to remarry and keep DIC benefits. However, surviving spouses who do not remarry will continue to have their military Survivor Benefit Plan (SBP) reduced by their DIC benefits. For the military Survivor Benefit Plan and for federal employees, the remarriage age is 55 for retaining benefits, and for Social Security beneficiaries, the remarriage age is 60. The difference in ages for remarriage means that a remarried surviving spouse may not be able to keep all of his or her benefits if he or she remarries. Disability Requirement for Non-Service-Connected Deaths As stated earlier (see " Eligibility Requirements " section), if a veteran's death was not service-connected, the veteran must have been receiving, or been eligible to receive, disability compensation as 100% disabled for 10 years or more prior to death to enable a survivor to be eligible for DIC. Some totally disabled veterans have expressed concern that their surviving spouses would not receive a benefit if they die from non-service-connected causes if they have not been totally disabled for at least 10 years. The 10-year disability requirement for non-service-connected deaths can be viewed as a measure of the survivor's dependence on the veteran's disability compensation. This view assumes that the longer the veteran was disabled, the more dependent the survivors were on the veteran's disability compensation as a replacement of the veteran's earnings. Maximum Benefit for Dependent Parents For survivors, income is not a factor in DIC eligibility unless the survivor is a dependent parent. The maximum DIC amount payable to parents is only for parents below a certain income level; $800 for a single parent and $1,000 for a married couple. These amounts were enacted into law in 1968 and unlike other income levels related to benefits, they have not been adjusted for inflation. The $800 income limit in 1968 is equivalent to $5,442.21 in 2014. Over time, dependent parents may see reductions in DIC as their incomes increase due to cost-of-living adjustments in their other income, and the $800 and $1,000 income limits not being adjusted for inflation. Legislative History DIC has been paid in some form to survivors since the Revolutionary War. At that time, women and children survivors of officers received a seven-year pension amounting to half of the officer's entitled pay (according to a 1780 act of the Continental Congress). During the Civil War, survivor compensation was expanded to cover all servicemembers at a rate that would be payable to totally disabled veterans. The Civil War also led to other changes to survivor compensation, especially for survivors of servicemembers with service-connected disabilities. They were covered under the Act of July 14, 1862, which was referred to as General Law and amended various times in the 19 th century. In 1917, Congress passed the War Risk Insurance Act to eliminate the need for non-service pensions and highlighted that service-connected payments for death and disability were compensation payments. The act changed the system to meet the current needs of World War I veterans and their survivors and eliminated the pay discrepancy between officers and soldiers. The Servicemen's Indemnity Act of 1951 replaced this life insurance system with a new system where the servicemembers did not contribute to the insurance program, but the government provided monthly payments to eligible survivors of $120 with a 2.25% increase per year until a $10,000 insurance maximum was reached. Potentially eligible survivors included spouses, children, parents, and siblings. Because legislation had been written in response to need, dependency and indemnity compensation was unorganized and administered by four different administrations by the mid-1950s, and congressional and executive committees were formed to make the issuance of compensation more streamlined and manageable. Death compensation was set up similar to the way it is now by the time the final report of the President's Commission on Veterans' Pensions, Veterans' Benefits in the United States: Report to the President by the President's Commission of Veterans Pensions (hereafter referred to as the Bradley Report) was written in 1956. Death compensation was provided to survivors (except for dependent parents) regardless of income. The rate of compensation depended on whether the veteran served in peacetime or wartime. In 1969, after review of the Bradley Report, recommendations from a commission headed by Robert M. McCurdy in 1967, and extensive testimony from several other federal administrations and veterans service organizations, Congress devised a different, more equitable system for survivor compensation that gave fixed rates to each pay grade. The base rate was adjusted for a cost-of-living increase to reflect changes in the cost of living since the last base rate had been determined in 1956, 13 years earlier. In 1969, years of service were no longer a factor in determining DIC. There were no subsequent changes of significance to DIC legislation until 1993, when the rate tables for surviving spouses were eliminated and one flat monthly rate was reinstated. In 2003, surviving spouses who remarried after reaching the age of 57 were able to retain DIC.

The Department of Veterans Affairs (VA) administers directly, or in conjunction with other federal agencies, programs that provide benefits and other services to veterans and their spouses, dependents, and beneficiaries. One of the benefits that VA administers is Dependency and Indemnity Compensation (DIC) for survivors of certain servicemembers and veterans. DIC is a monthly tax-free cash payment to survivors and dependents of servicemembers killed while on active military duty and those of certain veterans. Survivors of veterans who die from service-related conditions are eligible for DIC. Survivors of veterans who die from non-service-connected conditions may be eligible for DIC if the veteran was eligible for, or was receiving, disability compensation as totally disabled (a 100% rating) for a period of time (specified in statute) before the veteran's death. Several policy issues are associated with DIC, including the DIC offset of Survivor Benefit Plan (military retirement survivor) payments, often referred to as the "widow's tax"; adequacy of the payments for survivors compared with other retirement systems' payments to surviving spouses; the remarriage age of 57; length of time for a totally disabled rating for non-service-connected deaths to qualify for DIC; and maximum DIC payment for parents based on income levels that have not been adjusted for inflation. This report outlines the eligibility requirements and benefit levels for DIC and related policy issues.

Introduction Article I of the Constitution, in Sections 2 and 3, authorizes the House of Representatives and Senate to choose their own officers. The number of such congressional support personnel, as well as their specific responsibilities, is left to the discretion of each chamber. Over time, both chambers have authorized a number of offices to assist them, collectively or individually, in their work. These offices perform legislative, administrative, financial, and ceremonial functions. They also ensure the protection of Congress and preserve its institutional memory. The roles of House support offices have been established by House Rules, statute, and custom. They may also be shaped by congressional authorities with oversight, funding, or appointing responsibility for the offices. The House Administration Committee, for example, has jurisdiction over legislation pertaining to services to the House. The committee is also charged with providing policy direction for the Inspector General and oversight of the Clerk, Sergeant at Arms, Chief Administrative Officer, and the Inspector General. The committee may approve a reorganization of these offices. It also frequently distributes "Dear Colleague" letters to communicate its response to internal operational issues relating to these and other support offices. The House Appropriations Committee, Subcommittee on Legislative Branch, through its consideration of the annual spending measure for the legislative branch, also shapes the chamber's internal operations. Guidance from the committee may be found in hearings, the House report accompanying the legislative branch appropriations bill, the bill text, and the conference committee report. The Speaker, as the appointing authority for some of these offices and as a member of the House Office Building Commission, also has influence over their work. This report is an overview of the relationships among, and different roles and functions performed by, the "daily operations" offices in the U.S. House of Representatives. The organizational authorities are also addressed. Certain entities shared with the Senate, like the legislative support agencies, are included in this report, although it focuses whenever possible on their service to the House. Offices with responsibilities in more than one area are addressed in successive sections. More detailed information on select offices is available in additional Congressional Research Service products identified throughout. Offices Assisting Legislative Duties Members of the U.S. House of Representatives and their staff have numerous avenues for assistance in legislative matters. Support offices are available to participate in all stages of the legislative process, from background research on public policy issues, to the drafting of potential bills, through the submission, consideration, and evaluation of proposed legislation. The three legislative branch agencies, the Congressional Research Service (CRS), Congressional Budget Office (CBO), and the Government Accountability Office (GAO), serve both chambers. Other legislative support offices are dedicated mainly to serving the House of Representatives. Legislative Branch Agencies: CRS, CBO, and GAO Three agencies are dedicated to serving the legislative branch in legislative, representational, and oversight matters: the Congressional Research Service (CRS), the Congressional Budget Office (CBO), and the Government Accountability Office (GAO). These agencies each assist committees, Members of both chambers, and their staff by providing nonpartisan research and analysis. The Congressional Research Service (CRS) is the public policy research arm of Congress. It provides nonpartisan, confidential analysis exclusively for Members of Congress. CRS staff conduct briefings on specific policy issues, arrange regular educational seminars on a variety of legislative topics, produce reports on current legislative issues, deliver expert testimony before congressional committees, and prepare customized written analyses in response to specific inquiries. Originally established as the Legislative Reference Service in 1914, the Congressional Research Service was renamed and given expanded research and analytic duties with the passage of the Legislative Reorganization Act of 1970. The Librarian of Congress, after consultation with the Joint Committee on the Library, appoints the director of CRS. The Congressional Budget Office (CBO) provides estimates of the costs of bills, joint resolutions, and amendments. These estimates are required for any measure reported by a regular or conference committee that may vary revenues or expenditures, although estimates may be issued at other stages of the legislative process upon request. CBO issues the projected effect of the measure for the current and four ensuing fiscal years. Since passage of the Unfunded Mandates Reform Act of 1995, CBO has also been charged with estimating the impact of these reported measures on state and local governments for the same time period. CBO also provides estimates of the nation's spending and revenue over the next 10 years; an analysis of the President's annual budget proposal; Monthly Budget Reviews , which track the monthly status of outlays, receipts, and the deficit or surplus throughout the year; studies requested by congressional committees and subcommittees; and, resources permitting, requests from individual Members. Along with the House and Senate Budget Committees, CBO was established as part of the Congressional Budget and Impoundment Control Act of 1974. Its director is appointed by the Speaker of the House and the President pro tempore of the Senate, acting jointly, after consideration of recommendations made by the House and Senate Budget Committees. The Government Accountability Office (GAO), formerly known as the General Accounting Office, was originally established by the Budget and Accounting Act of 1921. GAO is directed by the Comptroller General of the United States, who is appointed for a 15-year term by the President, with the advice and consent of the Senate. GAO assists in congressional oversight by evaluating the performance of government policies and programs. GAO also conducts financial and management audits and makes recommendations for corrective legislation and actions. Its Office of Special Investigations examines allegations of fraud, misconduct, and waste. Some GAO work is prescribed in mandates, including statutes, congressional resolutions, conference reports, and committee reports. Requests also come from the congressional leadership, committee chairs and ranking minority Members, and only in rare instances, individual Members, with priority in those cases going to Members on a committee of jurisdiction. GAO informs these requesters within 10 days whether or not the request can be undertaken. GAO may also initiate its own work. If a congressional request results in a written report, the requester may ask that its public release be restricted for 30 calendar days after issuance. Restrictions may be lifted, after consultation with the requester, if related legislation is under consideration in either chamber. Clerk of the House The Clerk of the House is an elected officer of the House who performs legislative, administrative, educational, and preservation duties. A Clerk has been elected at the start of each Congress since 1789. The Committee on House Administration provides oversight for this office. Nine offices assist the Clerk in areas currently under the Clerk's jurisdiction. Two of these offices are directly involved in the daily legislative operations of the House. The first, the Office of Legislative Operations, assists the Clerk in fulfilling duties related to the handling of House documents. These include a mandate that the Clerk "attest and affix the seal of the House to all writs, warrants and subpoenas issued by order of the House and certify the passage of all bills and joint resolutions," and present House-originated bills and Joint Resolutions to the President. Within this office are five clerks: bill clerks receive introduced bills and amendments; enrolling clerks prepare the official engrossed copy of House-passed bills, transmit messages to the Senate regarding approved legislation, and prepare the official enrolled copy of any House-originated bill or resolution; journal clerks compile the minutes of proceedings in the House, fulfilling the requirement in Article I, Section V of the Constitution that "each House shall keep a Journal of its Proceedings"; reading clerks read all of the bills, resolutions, and amendments before the House; and the tally clerks operate the electronic roll call voting system. Another legislative function under the Clerk's direction is the production of the Congressional Record and supervision of the official reporters, who have provided verbatim transcripts of congressional debate for this publication since 1873. Office of the Legislative Counsel The House Office of the Legislative Counsel provides impartial and confidential drafting services to all Members and committee offices. The office is charged with assisting clients "in the achievement of a clear, faithful, and coherent expression of legislative policies" and is prohibited from advocating any position. With the exception of amendments made in order by the Rules Committee under special rules, there is no general requirement that Members utilize this service for their drafting needs. The office may be involved in several stages of the legislative process. It may assist conference committee managers in the drafting of a bill or the accompanying explanatory statement. It also aids House committees and subcommittees in drafting bills. Finally, the office may assist individual Members in drafting bills and amendments, subject to time constraints. Originally established as the Legislative Drafting Service with the Revenue Act of 1918, the office currently operates under provisions set forth in the Legislative Reorganization Act of 1970. The office is headed by the Legislative Counsel of the House, who is appointed by the Speaker. Office of the Parliamentarian The Office of the Parliamentarian provides advice on the interpretation of House Rules and precedents. A parliamentarian has been appointed by the Speaker each Congress since 1927. The position has remained strictly nonpartisan, as evidenced by the long tenures of the occupants: Lewis Deschler, the first parliamentarian, served from 1928-1974; William Holmes Brown, 1974-1994; Charles W. Johnson, III, 1994-2004; John V. Sullivan, 2004-2012; and Thomas J. Wickham Jr., 2012-present. The Speaker, or other designated presiding officer, is responsible for ruling on questions of order in the House. The parliamentarian or an assistant is always present when the House or Committee of the Whole is in session, ready to assist in determining appropriate rulings and responses. The parliamentarian sits on the top tier of the House dais, located to the presiding officer's right. The Rules of the House are not self-enforcing, and any Member alleging a violation must rise to make a point of order and insist upon enforcement. Although no requirement exists that the House follows the advice of the parliamentarian, and Members may appeal certain types of rulings, in most cases the parliamentarian's advice is considered definitive. In addition to procedural interpretations during debate, the office advises the Speaker on referring proposed legislation to the appropriate committees, based on the House Rules and precedents. Individual Members may also make an inquiry with the Office of the Parliamentarian. These inquiries may concern, for example, questions of jurisdiction before a bill is introduced. The parliamentarian may also assist offices in understanding the meaning and application of specific procedural tools. The office also oversees the revision of the House Rules and Manual , officially titled Constitution, Jefferson's Manual and Rules of the House of Representatives , which is usually authorized by resolution each Congress. This manual is a compilation of source material on parliamentary procedure. Office of the Law Revision Counsel The Office of the Law Revision Counsel revises, prepares, and publishes the United States Code, which is an arrangement by subject matter of all general and permanent U.S. laws. Most of the work of the office is subsequent to the legislative process. Its main legislative duty consists of submitting to the Committee on the Judiciary one title of the Code at a time, reflecting a complete compilation and revision of the law, including any amendments. It may also submit to the committee recommendations for the repeal of obsolete provisions and for technical or clarifying corrections. The Committee on the Judiciary may then consider incorporating the submissions of the office into a bill to report to the House. The office was first authorized by the Committee Reform Amendments of 1974 ( H.Res. 988 ), which was enacted into permanent law by P.L. 93-554 . It is located in the Ford House Office Building and is led by the Law Revision Counsel, who is appointed by the Speaker. Administrative, Operational, and Financial Offices With four House Office Buildings, approximately 10,000 employees, and visits from dignitaries and tourists alike, the U.S. House of Representatives has over time developed a means of ensuring the institution's smooth operation. The administrative support offices address various needs of Members and staff, ensure the proper maintenance of the House facilities, and facilitate the exchange of information both within the Capitol and beyond. Clerk of the House In addition to certain legislative, ceremonial, and preservation duties, the Clerk of the House performs various administrative functions. These are carried out under the oversight of the Committee on House Administration. At the commencement of every session of Congress, the Clerk is charged with compiling and delivering to all Members "a list of the reports that any officer or Department is required to make to Congress," citing the relevant authority. The Clerk is also responsible for distributing the House Calendars each legislative day and, after the close of a session, a copy of the Journal to each Member, the President, and state legislatures, as requested. Upon the death, resignation, or expulsion of any Member, the Clerk is responsible for managing that Member's office until a successor is elected. The Clerk also prepares semiannual reports on the operations and finances of this office, subject to the review of the Committee on House Administration. Various offices under the Clerk perform numerous administrative functions, including supporting the Republican and Democratic Cloakrooms and certain other Members' areas; maintaining the electronic voting system; providing information and printed records both to the House and the general public through the Legislative Resource Center (LRC); and maintaining public disclosure documents, including financial and travel forms, as well as the registration of lobbyists. The Office of House Employment Counsel also provides legal advice on employment practices within the chamber to the employing offices. The House Employment Counsel was established by the Legislative Branch Appropriations Act of FY2002 in response to the Congressional Accountability Act of 1995 (CAA). The CAA applied certain labor, civil rights, and workplace laws to legislative branch employees and established the Office of Compliance to administer and enforce its implementation and mediate disputes. The House Employment Counsel provides legal assistance to employing offices in the House and may review personnel policies and decisions. The counsel may also provide legal representation for these offices. Like the House General Counsel, who provides legal representation concerning other aspects of the official duties of Members, officers, and employees, the House Employment Counsel may appear before any court of the United States, with the exception of the Supreme Court, "without compliance with any requirements for admission to practice before such court." Chief Administrative Officer The Office of the Chief Administrative Officer was established at the beginning of the 104 th Congress to assume the duties of the Director of Non-legislative and Financial Services. The Chief Administrative Officer (CAO) executes both administrative and financial duties. Elected by the House, the CAO is subject to the oversight of the Committee on House Administration. The CAO's office operates the First Call Customer Solutions Center, which is the initial point of contact for House offices requiring the assistance of the Office of the Chief Administrative Officer. First Call handles orders for tapes of proceedings on the House Floor, the filing of Dear Colleague letters, administration of the mass transit benefit program, reservation and arrangement of rooms for special events, and other general information requests. The CAO's office houses the Administrative Counsel, who provides legal research and advice for offices under the CAO. The counsel also examines district office and long-term automobile leases to ensure compliance with House Rules and the regulations set forth by the Committee on House Administration, which publishes these requirements. A Member is personally liable for payments for any lease not in compliance, and guidelines in the Members' Handbook stipulate that the House will not authorize disbursement of funds to make payments under the terms of the lease agreement until the Administrative Counsel has reviewed the lease agreement and has signed the Attachment. Similarly, the Administrative Counsel must review any proposed substantive amendment ... before the House will authorize any payment pursuant to such an amendment. The CAO's office also performs various functions related to employee assistance and management. These include operating the resume referral and outplacement service, disbursing monthly pay and benefits for Members and staff, administering the House child care center, and offering various employee development and training programs. Another responsibility of the CAO is the provision of information technology (IT) and telecommunication support for Members, committees, officers, and staff. The office oversees information security issues, offers training sessions in the House Learning Center, and assists offices in establishing and maintaining their websites. The CAO also oversees additional House support services, including the three press galleries (the periodical press gallery, the press gallery, and the radio/TV correspondents' gallery); the recording studio; the photography office; the furniture support service office; the supply store; and the gift shop. The CAO is responsible for the financial and budgetary operations of the House. Financial counselors in the CAO's office advise Members, committees, officers, and other offices of the House on the use of their official expenses. Additional staff within the CAO's office assist in the maintenance of the systems necessary to process the financial operations of the House and prepare the CAO's appropriations requests. The CAO's financial duties also require that the office maintain records of all financial operations of the House, including receipts and disbursement data pertaining to House funds, and assist in the preparation of the quarterly Statement of Disbursements of the House . As part of his financial duties, the CAO must submit this report within 60 days after the last day of each quarter and contains detailed, itemized information on each disbursement of the House of Representatives. Sergeant at Arms The House Sergeant at Arms is an elected officer who performs administrative, ceremonial, and protective roles. He is subject to the oversight of the Committee on House Administration. The House Sergeant at Arms is a member of the Congressional Accessibility Services Board (see " Office of Congressional Accessibility Service "). Other administrative duties of the Office of the Sergeant at Arms include the issuance of identification badges and pins. The Garage and Parking Security division administers the parking program and enforces the rules of the House Garages, under the guidance of the Committee on House Administration. Office of Interparliamentary Affairs The House of Representatives Office of Interparliamentary Affairs was established with the passage of the FY2004 Legislative Branch Appropriations Act. Its duties include facilitating official visits from foreign parliamentarians to the House of Representatives and, along with the Sergeant at Arms and the Clerk of the House, assisting delegations of Members of the House to foreign nations. The office is also charged with coordinating the participation of the House of Representatives in other interparliamentary exchanges and organizations. The office is led by a director who is appointed by the Speaker. House Office Building Commission The section of the U.S. Code governing the operations and maintenance of the Capitol complex states that the House of Representatives Office Building ... shall be under the control and supervision of the Architect of the Capitol, subject to the approval and direction of a commission consisting of the Speaker of the House of Representatives and two other Representatives in Congress, to be appointed by the Speaker. In the past, the two other appointed seats have traditionally been occupied by the majority and minority leaders. The House Office Building Commission was first authorized by an act approved on March 4, 1907. This was soon followed by a joint resolution governing the room assignment process in the House, approved on May 28, 1908. This resolution placed room assignments under the control of the Superintendent of House Office Buildings, subject to the approval and direction of the commission. The commission may issue rules and regulations that govern the use and occupancy of all rooms in the House Office Buildings. These regulations include, for example, a prohibition on smoking in certain areas, soliciting political contributions in any House facility, and placing certain items in hallways. Along with the Committee on House Administration and the Architect of the Capitol, the House Office Building Commission has assisted in the consideration of parking issues. The commission also has authority over the approval of the acquisition or leasing of new buildings and facilities. Recent responsibilities in this area have included overseeing the planning for the alternative computing facility and expansion space included in the Capitol Visitor Center. Architect of the Capitol, the Superintendent of House Office Buildings, Electricians, and Engineers The Architect of the Capitol operates and maintains the buildings and grounds of the U.S. Capitol. The Architect is responsible for the Capitol Power Plant, subject to the direction of the House Office Building Commission. His office contains the Capitol Guide Service, and he is also a member of the Congressional Accessibility Services Board. The Architect is authorized to employ a Superintendent of the House Office Buildings to serve under his jurisdiction. The Superintendent is responsible for the maintenance of the Ford, Rayburn, Longworth, and Cannon House Office Buildings, as well as the former Page Dormitory. The Superintendent supervises the biennial office lottery and moves, coordinates the House recycling program, and oversees the general maintenance of the House buildings. The electricians and engineers in the House of Representatives are responsible for the lighting, heating, and ventilation of the House side of the Capitol. They are "subject exclusively to the orders, and in all respects under the direction, of the Architect of the Capitol, subject to the control of the Speaker; and no removal or appointment shall be made except with his approval." Office of Congressional Accessibility Services The Capitol Visitor Center opened to the public on December 2, 2008. In anticipation of its opening, the Capitol Visitor Center Act of 2008 was enacted to provide for its administration. The act also reorganized the management of offices related to the visitor experience. It placed the Capitol Guide Service under the Architect of the Capitol and established the Office of Congressional Accessibility Services. The office coordinates services and information for individuals with disabilities, including Members, staff, and visitors, within the Capitol Complex. The office is subject to the direction of a board, which consists of the Senate Sergeant at Arms, the Secretary of the Senate, the House Sergeant at Arms, the Clerk of the House, and the Architect of the Capitol. The board appoints the Director of Accessibility Services. House Commission on Congressional Mailing Standards Also known as the Franking Commission, the House Commission on Congressional Mailing Standards is directed to "provide guidance, assistance, advice, and counsel, through advisory opinions or consultations, in connection with the mailing or contemplated mailing of franked mail." The commission is composed of six members appointed by the Speaker, with membership evenly split among the parties. Oversight is provided by the Committee on House Administration. Legal and Regulatory Offices Three support offices, including the Inspector General, the Office of Compliance, and the Office of General Counsel, work to ensure that the House of Representatives maintains proper oversight over its internal activities and complies with legal requirements regarding employment and other practices. Inspector General The House of Representatives employs an Inspector General (IG), who, pursuant to Rule II, is charged with providing "audit, investigative, and advisory services to the House and joint entities in a manner consistent with government-wide standards." House Rule II also states that the IG may suggest remedial actions following audits and report to the Committee on Ethics information involving possible violations of House Rules or applicable laws related to the performance of official duties. The office was established in the 103 rd Congress, pursuant to H.Res. 423 , 102 nd Congress. In the 104 th Congress, the IG gained the authority to conduct additional audits that had previously been the responsibility of the Government Accountability Office (then General Accounting Office). The requirement for the submission of audits was amended to include the House Appropriations Committee in the list of recipients in the 113 th Congress. The IG is jointly appointed by the Speaker, majority leader, and the minority leader. The Committee on House Administration provides oversight and policy direction. Office of Compliance The Office of Compliance was established to enforce and administer the Congressional Accountability Act of 1995 (CAA). The act applies certain labor, civil rights, and workplace laws to legislative branch employees. The CAA covers employees working in district or state offices as well as those in Washington, DC. Certain entities may be exempt from specific provisions. Under the Congressional Accountability Act, employing offices retain discretion over certain workplace policies including, for example, work schedules, salaries, and vacation. Employing offices may also be subject to additional standards set by the House of Representatives, Senate, civil service, or other internal authority, as applicable. The office also provides a means of dispute resolution for employees who allege violations of the CAA. The office is charged with educating employees of the legislative branch about their rights and obligations regarding employment and access practices. To this end, the office has produced a handbook on the application of the CAA, as well as a number of reports on the results of its investigations of congressional compliance. The office must report annually to Congress statistics on its activities and biennially on the applicability of federal employment and access laws to the legislative branch. A board of directors, composed of five individuals appointed jointly by the Speaker of the House of Representatives, the majority leader of the Senate, and the minority leaders in both chambers, heads the office. The office is subject to the oversight of the Committee on House Administration and by the Senate's Committees on Rules and Administration and on Homeland Security and Governmental Affairs. Office of General Counsel House Rule II, clause 8 provides authorization for the Office of General Counsel. Led by the General Counsel, this office provides legal assistance and representation to Members, committees, officers, and employees of the House of Representatives on matters pertaining to their official duties. These may include advising offices on confidentiality issues, release of constituent information, requests from executive branch agencies, and the issuance and response to subpoenas. Assistance to offices with employment and labor issues, however, falls within the jurisdiction of the Office of House Employment Counsel in the Office of the Clerk. Similarly, routine leasing agreements for automobiles and district offices are reviewed by the Administrative Counsel within the Office of the Chief Administrative Officer. The assistance of the office in responding to subpoenas received by Members or employees is governed by House Rule VIII, which requires the recipient to notify the Speaker and subsequently the House of any such action. The office may also assist in the preparation of committee subpoenas. The General Counsel is authorized to appear before any court of the United States, with the exception of the Supreme Court, "without compliance with any requirements for admission to practice before such court." The services of the office are provided without regard to political affiliation. The office was first established by H.Res. 423 , adopted April 9, 1992, and later incorporated into the Rules of the House of Representatives adopted for the 103 rd Congress, on January 5, 1993. The Speaker, with the consultation of the Bipartisan Legal Advisory Group, directs the office and appoints its staff. Offices Supporting Ceremonial Traditions and the Preservation of Institutional Memory A number of offices share responsibility for maintaining the ceremonial traditions of the U.S. House of Representatives and the preservation of its institutional memory. Clerk of the House The Clerk of the House has a ceremonial role at the commencement of the first session of each Congress. At this meeting, the Clerk examines credentials, calls the roll, and records the presence of all Members, Delegates, and the Resident Commissioner. Pending the election of a Speaker, the Clerk must also "preserve order and decorum and decide all questions of order, subject to appeal." The Clerk also has various curatorial duties concerning House artwork and artifacts, records management, and historical publications. Under the direction of the House Fine Arts Board, the Clerk is "responsible for the administration, maintenance, and display of the works of fine art and other property" of the House of Representatives. The curatorial services division assists in this duty by recommending acquisitions, maintaining artwork, and researching the collection. The Clerk is also responsible for administering the archiving of records of the House of Representatives and sits on the Advisory Committee on the Records of Congress. The Clerk's office is available to consult with Members and committees on records management practices. The purpose of these consultations is both to assist an office in its daily operations and to help preserve historically relevant documents. While the files generated by a Member's personal office are the property of the Member, committees are required to archive their official records. Committee records requiring archiving include those relating to bills and resolutions, oversight, administrative matters, and file copies of reference materials, such as hearings and reports. House Rule VII directs the Clerk to receive noncurrent records of each House committee at the end of each Congress. More recent records remain onsite, and older records are transferred to the Archivist of the United States. These records are preserved in the Center for Legislative Archives at the National Archives and Records Administration but remain the property of the House. The Clerk authorizes the archivist to release documents for public examination according to the guidelines established in the Rule. The Clerk has the authority to determine that release of a record would be detrimental to the public interest or inconsistent with the rights and privileges of the House. Although rare, if such a determination is made, the Clerk must notify in writing the chairman and ranking minority Member of the Committee on House Administration, and the decision is subject to subsequent House and committee orders. Committee chairs may submit a list of staff members who are authorized to retrieve retired committee records. Members may choose to transfer their personal records to a repository at the end of their service in the House. In a records management guideline for Members, the Clerk has outlined factors to consider when preparing a deed of gift and placing restrictions on access to materials. The Chief Administrative Officer, under the direction of the Committee on House Administration, may arrange for the transportation of these personal materials back to the Member's district. The office also maintains the Biographical Directory of the United States Congress . This source allows users to search Members from the Continental Congress through the present based on criteria such as name, state, position, party, or time of service. The source also lists research collections of the Member's personal papers, if applicable. An online version is available at http://bioguide.congress.gov/biosearch/biosearch.asp . Other historical publications, including the new edition of Women in Congress , are also produced by this office. Sergeant at Arms The House Sergeant at Arms is charged with maintaining the decorum of the chamber. The Sergeant at Arms is the guardian of the Mace, an artifact that symbolizes his office. The Mace is carried to a pedestal on the Speaker's right at the beginning of each day. It remains there while the House is in session and is lowered when the House resolves itself into the Committee of the Whole. The Mace may be wielded by the Sergeant at Arms to maintain order and decorum in the chamber. The Sergeant at Arms also assists in preparation for ceremonial occasions, including presidential inaugurations, joint sessions and meetings of Congress, and visits of foreign dignitaries. When necessary, the Sergeant at Arms assists in supervising funeral arrangements for Members of Congress. House Chaplain With the exception of a period in the late 1850s, the House of Representatives has had an elected chaplain since 1789. The House Chaplain offers a prayer to begin each day's session, which is followed by the approval of the Journal and the recitation of the Pledge of Allegiance. In addition to offering his own prayers, the chaplain coordinates the visits of guest chaplains. These guests are recommended to the House Chaplain by individual House Members and, in the past, have represented a diversity of religious faiths. Prayers before the House are printed in the Congressional Record . Historian of the House House Rule II provides for the establishment of an Office of the Historian. A rule providing for the Historian was originally adopted during the 101 st Congress. It had been preceded by the Office of the Bicentennial, which coordinated the planning for the 200 th anniversary of the House. The Historian and other employees of the office are appointed by the Speaker. The Librarian of Congress was authorized by the History of the House Awareness and Preservation Act of 1999 to arrange for a new history of the chamber, in consultation with the Committee on House Administration. In 2002, Librarian of Congress James H. Billington announced the appointment of Robert V. Remini as a Distinguished Visiting Scholar of American History in the John W. Kluge Center at the Library of Congress in order to undertake this project. After a long vacancy in the position of House Historian, Dr. Remini was appointed by the Speaker in 2005 to fill this role. Dr. Remini retired and then-Speaker Nancy Pelosi named Dr. Matthew Wasniewski historian on October 20, 2010. Offices Assisting in Security and the Maintenance of Order The Capitol Police, under the direction of the Capitol Police Board, has been delegated primary responsibility for security on Capitol Hill. The House and Senate Appropriations Committees provide oversight of funding, administration, operations, and policies, with the Committee on House Administration and the Speaker providing additional oversight on matters pertaining to the House. Two other offices, including the House Sergeant at Arms and the Office of the Attending Physician, work with the police to ensure the safety and comfort of Members, their staff, and visitors. Sergeant at Arms Along with the Architect of the Capitol, the Sergeant at Arms and Doorkeeper of the Senate, and the Chief of the Capitol Police (acting in an ex-officio, non-voting capacity), the House Sergeant at Arms provides guidance for security measures and policy across the Capitol by serving as a member of the Capitol Police Board. The Legislative Branch Appropriations Act for FY2003 redefined the board, stating that its purpose "is to oversee and support the Capitol Police in its mission and to advance coordination between the Capitol Police and the Sergeant at Arms of the House of Representatives and the Sergeant at Arms and Doorkeeper of the Senate, in their law enforcement capacities, and the Congress." The Office of the Sergeant at Arms coordinates daily security needs with the Capitol Police. Duties include arranging for protective details for House leadership, requesting security clearances for appropriate staff, coordinating a security presence at hearings upon request, and supervising logistics for major events involving Members. The Sergeant at Arms also works with Law Enforcement Coordinators (LECs) from each office. The Sergeant at Arms of the House of Representatives is also required to "attend the House during its sittings and maintain order under the direction of the Speaker or other presiding officer." This is a duty the Sergeant at Arms has executed since 1789. The Sergeant at Arms is also charged with enforcing the rules of access to the Hall of the House as well as the room above it. Office of the Attending Physician The Office of the Attending Physician provides emergency medical assistance for Members of Congress, Justices of the Supreme Court, staff, and visitors. Care may range from performing minor first aid services to administering treatment until a patient may be transported to a local hospital. The office also participates in the planning for, and response to, any disaster that may occur. After the anthrax attacks in 2001, for example, the office coordinated the testing and care of affected staffers. The Office of the Attending Physician offers CPR and first aid courses and arranges educational health fairs for congressional staff. The office also provides travel immunization advice for official congressional travel. Additional services are offered to Members for an annual fee. Services include routine exams, consultations, and certain diagnostic tests. The office does not provide vision or dental care, and prescriptions may be written but not dispensed. Fees are established by the Committee on House Administration, upon the recommendation of an independent consulting actuary. Fees, and further descriptions of services, may be announced in "Dear Colleague" letters. The office is led by a medical officer from the U.S. Navy, a tradition begun in 1928. Expenses are provided for as a joint expense of the House and Senate in the annual Legislative Branch Appropriations Acts. The FY2010 Consolidated Appropriations Act provided an allowance for the Attending Physician, a Senior Medical Officer, three medical officers, and 13 additional assistants. While these personnel remain on the payroll of the Navy, the legislative branch bills include a "reimbursement to the Department of the Navy for expenses incurred for staff and equipment assigned to the Office of the Attending Physician," to be credited to the applicable appropriation.

Article I of the Constitution, in Sections 2 and 3, authorizes the House of Representatives and Senate to choose their own officers. The number of such congressional support personnel, as well as their specific responsibilities, is left to the discretion of the chambers. Over time, both chambers have authorized a number of offices that assist them, collectively or individually, in their work. In the House, these offices include the Clerk of the House, Chief Administrative Officer, Sergeant at Arms, Office of the Legislative Counsel, Office of the Parliamentarian, Office of the Law Revision Counsel, Office of Interparliamentary Affairs, House Commission on Congressional Mailing Standards, Office of the Inspector General, Office of General Counsel, House Chaplain, and the Historian of the House. These offices perform legislative, administrative, financial, and ceremonial functions. They also ensure the protection of Congress and preserve its institutional memory. The roles of House support offices have been established by House Rules, statute, and custom. They are also shaped by the congressional authorities with policy, oversight, and funding responsibilities for the offices. These include the House Administration Committee, the House Appropriations Committee, the House Office Building Commission, and the Office of the Speaker. This report is an overview of the different roles performed and the organizational authorities that govern the "daily operations" offices in the House of Representatives. Certain entities that assist both the House and Senate, like the Architect of the Capitol, Office of Congressional Accessibility Services, Office of Compliance, the Office of the Attending Physician, the Government Accountability Office (GAO), the Congressional Budget Office (CBO), and the Congressional Research Service (CRS), are included in this report, although the focus here is on their services to the House. The report is organized by function, with sections on offices supporting legislative duties; administrative, operational, and financial offices; legal and regulatory offices; ceremonial and historical offices; and security offices. Offices with responsibilities in more than one area are addressed in successive sections. More detailed information on select offices is also available in additional CRS products identified throughout.

Introduction In 2007, American International Group (AIG) was the fifth-largest insurer in the world with $110 billion in overall revenues. In the United States, it ranked second in property/casualty insurance premiums ($37.7 billion/7.5% market share) and first in life insurance premiums ($53.0 billion/8.9%). For particular lines, AIG ranked first in surplus lines, ninth in private passenger auto, first in overall commercial lines (fifth in commercial auto), and fourth in mortgage guaranty. It was outside the top 10 in homeowners insurance. According to the National Association of Insurance Commissioners (NAIC), AIG had more than 70 state-regulated insurance subsidiaries in the United States, with more than 175 non-insurance or foreign entities under the general holding company. Although primarily operating as an insurer, prior to the crisis AIG was overseen at the holding company level by the federal Office of Thrift Supervision (OTS) because the company owned a relatively small thrift subsidiary. The bulk of the company's insurance operations were regulated by the individual state regulators as, per the 1945 McCarran-Ferguson Act, the states act as the primary regulators of the business of insurance. Because AIG was primarily an insurer, it was largely outside of the normal Federal Reserve (Fed) facilities that lend to thrifts (and banks) facing liquidity difficulties and the normal Federal Deposit Insurance Corporation (FDIC) receivership provisions that apply to FDIC-insured depository institutions. AIG, as was true of most financial institutions, suffered losses on a wide variety of financial instruments in 2008. The exceptional losses which resulted in the essential failure of AIG arose primarily from two sources: the derivative activities of the AIG Financial Products (AIGFP) subsidiary, and the securities lending activities managed by AIG Investments with securities largely from the AIG insurance subsidiaries. Regulatory oversight of these sources was split. The OTS was responsible for oversight of AIGFP, while the state insurance regulators were responsible for oversight of the insurance subsidiaries which supplied the securities lending operations, and would ultimately bear losses if the securities, or their equivalent value, could not be returned. With the company facing losses on various operations, AIG experienced a significant decline in its stock price and downgrades from the major credit rating agencies in 2008. These downgrades led to immediate demands for significant amounts of collateral (approximately $14 billion to $15 billion in collateral payments, according to contemporary press reports). As financial demands on the company mounted, bankruptcy appeared a possibility, as occurred with Lehman Brothers in the same timeframe. Fears about the spillover effects from such a failure brought calls for government action to avert such a failure. Many feared that AIG was "too big to fail" due to the potential for widespread disruption to financial markets resulting from such a failure. AIG's size was not the only concern in this regard, but also its innumerable connections to other financial institutions. The New York Insurance Superintendent, primary regulator of many of the AIG insurance subsidiaries, led an effort to provide the parent AIG holding company with access to up to $20 billion in cash from AIG's insurance subsidiaries, which were perceived as solvent and relatively liquid. Ultimately, this transfer did not take place and efforts to find private funding for AIG failed as well; instead, the Federal Reserve approved an extraordinary loan of up to $85 billion in September 2008. As AIG's financial position weakened following the initial Fed loan, several rounds of additional funding were provided to AIG by both the Fed and the Troubled Asset Relief Program (TARP), which was authorized by the Emergency Economic Stabilization Act of 2008 (EESA) and administered by Treasury. Assistance to AIG was restructured several times, including loosening of the terms of the assistance. (See Appendix A below for more complete discussion of the changes to AIG's assistance.) The 2010 Dodd Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) overhauled the financial regulatory structure in the United States. Of particular note with regard to AIG, the act moved all federal financial holding company regulation to the Federal Reserve and moved the oversight of thrift subsidiaries to the Office of the Comptroller of the Currency. Thus, both the AIG holding company and the AIG thrift subsidiary were overseen by different agencies after Dodd-Frank compared to before the crisis. In addition, the act created a Financial Stability Oversight Council (FSOC) and the possibility of enhanced supervision by the Fed of designated institutions (popularly known as systemically important financial institutions or SIFIs). FSOC designated AIG for enhanced supervision by the Fed in July 2013, and the designation was removed in September 2017. The act also put restrictions on the Federal Reserve's lending authority that would limit its ability to make future extraordinary assistance available to individual companies, as was done in the case of AIG. The Dodd-Frank Act did not create a federal insurance regulator; thus the states continue to be the primary regulators of the various insurance operations of AIG. The assistance for AIG provoked controversy on several different levels. Significant attention, and anger, was directed at questions of employee compensation. Following reports of bonuses being paid for employees of AIGFP, the House passed legislation ( H.R. 1664 , 111 th Congress) aimed at prohibiting "unreasonable and excessive compensation and compensation not based on performance standards" for TARP recipients, including AIG (see Appendix B for additional information on executive compensation restrictions under TARP). Issues around TARP compensation continued in the 113 th Congress, with the House Committee on Oversight & Government Reform's Subcommittee on Economic Growth, Job Creation & Regulatory Affairs holding a hearing entitled " Bailout Rewards: The Treasury Department's Continued Approval of Excessive Pay for Executives at Taxpayer-Funded Companies . " Questions have also been raised about the transparency and legality of the assistance. Although the billions of dollars in government assistance went to the AIG, in many cases, it can be argued that AIG acted as an intermediary for this assistance. In short order after drawing on government assistance, substantial funds flowed out of AIG to entities on the other side of AIG's financial transactions, such as securities lending or credit default swaps. Seen from this view, the true beneficiary of many of the federal funds that flowed to AIG was not AIG itself, but instead AIG's counterparties, who may not have received full payment in the event of a bankruptcy. In the interest of transparency, many argued that AIG's counterparties, particularly those who received payments facilitated by government assistance, should be identified. Many of these counterparties were only identified after public and congressional pressure. Lawsuits challenging the legality of the government actions relating to the assistance, particularly the equity taken as part of this assistance, have been filed by Starr International Company, Inc. (Starr). This company is owned by Maurice "Hank" Greenberg, formerly the CEO of AIG and a major stockholder in the company. Starr has sought compensation for the allegedly unconstitutional taking of AIG shareholder property without compensation in connection with the federal assistance package rescuing AIG from bankruptcy. The U.S. Court of Federal Claims found for Starr on the merits of this case, but declined to award damages. This ruling was appealed, and on May 9, 2017, the U.S. Court of Appeals for the Federal Circuit issued a decision remanding the case to the Court of Federal Claims to vacate the judgment and dismiss the case. At the time of this decision, Starr's attorney reportedly indicated that an appeal was likely. Summary of Government Assistance to AIG The extraordinary direct government assistance for AIG that began in September 2008 ended in 2013. All loans to assist AIG have been repaid and the assets purchased from AIG by Federal Reserve entities have been sold. The common equity holdings in AIG that resulted from both Federal Reserve and U.S. Treasury TARP assistance for AIG have been sold. The final connection between the government and AIG was a relatively small amount of warrants issued to the Treasury as part of the TARP assistance; AIG repurchased these warrants for approximately $25 million on March 1, 2013. With the sale of the TARP warrants, the TARP corporate governance and executive compensation restrictions imposed on AIG were lifted. The government assistance for AIG took a variety of different forms, with the initial Federal Reserve loans followed by TARP assistance in three major restructurings in November 2008, March 2009, and September 2010. The following briefly summarizes the primary types of assistance (see Appendix A for more complete details). Federal Reserve Loans to AIG The initial assistance for AIG came in the form of an $85 billion loan commitment announced on September 16, 2008. In addition to a high, variable interest rate, the government received a nearly 80% share of the common equity in AIG. This loan was augmented by an additional $37.8 billion loan commitment in October 2008, which was collateralized by securities from the AIG securities lending program. The maximum amount outstanding under these loans was over $90 billion in October 2008. The limit on the Fed loan was reduced to $60 billion in November 2008 and $35 billion in March 2009. The 2009 reduction occurred as the Fed accepted $25 billion in AIG subsidiary equity as partial repayment of the loans. The loans were eventually repaid in January 2011, primarily through cash gained by AIG from sales of various assets and from TARP assistance. The Fed received a total of $8.2 billion in interest and dividends from these loans and the common equity stake resulting from the loans was sold by the Treasury for $17.55 billion. In general, Federal Reserve profits are mostly remitted to the Treasury and such remittances more than doubled from 2007 to 2010. Federal Reserve Loans to Finance Asset Purchases from AIG In November 2008, the Fed loan to AIG was partially replaced by Fed loans to Limited Liability Corporations (LLCs) created and controlled by the Fed, which were known as Maiden Lane II and Maiden Lane III. Up to $52.5 billion in loans from the Fed were committed to Maiden Lanes II and III with $43.8 billion actually disbursed. These LLCs purchased various securities, which were an ongoing financial drain on AIG at the time. After purchase, these securities were held by the LLCs and then sold as market conditions improved. All the loans were repaid by June 2012, and the facilities ultimately returned an additional $9.5 billion in interest and other gains to the Fed. AIG Commercial Paper Funding Facility Borrowing The Commercial Paper Funding Facility (CPFF) was created by the Federal Reserve in 2008 as a widely available vehicle to provide liquidity during the financial crisis. AIG and its subsidiaries were approved to borrow up to a maximum of $20.9 billion, with actual borrowing reaching $16.1 billion in January 2009. AIG's CPFF borrowing is typically not included in the reporting of AIG assistance done by the Fed and Treasury. This borrowing, however, occurred at the same time as AIG was accessing the other Fed loans and TARP assistance and likely was preferred over these sources because CPFF charged lower interest rates and individual CPFF borrowers and borrowing amounts were not reported by the Fed at the time. The Dodd-Frank Act required the Fed to report full details of the CPFF and other Fed facilities. This reporting shows AIG borrowing beginning in October 2008 and extending until April 2010. Although interest amounts were not reported, according to CRS estimates based on the principal amounts and interest rates that were reported, the Fed appears to have received approximately $0.4 billion in interest from AIG's CPFF borrowing. TARP Assistance for AIG In November 2008, $40 billion in TARP assistance was committed to AIG, and it was disbursed through Treasury purchase of AIG preferred equity. The commitment was increased to nearly $70 billion in March 2009, and the maximum level of disbursement of $67.8 billion was reached in January 2011, primarily to facilitate the withdrawal of Federal Reserve involvement with AIG. Although TARP assistance took the form of preferred equity purchases, $47.5 billion in AIG preferred equity was converted into common equity, which brought the government ownership stake in AIG to a high of 92% in January 2011. The Treasury began selling the common equity in May 2011 and completed the sales in December 2012. AIG completely redeemed the unconverted preferred equity in March 2012. In addition to the equity, the Treasury received a relatively small number of stock warrants through TARP, which it sold back to AIG in March 2013. The Treasury received approximately $34.1 billion from its various sales of the TARP common equity, $20.3 billion from the preferred equity, $0.03 billion from the warrant sales, and $0.9 billion in cash dividends and other income. Comparing the total amount disbursed to the total amount recouped shows an approximately $12.5 billion shortfall on the TARP portion of the assistance for AIG. Table 1 below summarizes the direct government assistance for AIG, including maximum amounts committed by the government, the amounts actually disbursed, and the returns from this assistance. Indirect Assistance for AIG Although the loans and preferred equity purchase directly aided AIG, the company also benefited from other actions taken by the U.S. government to address the financial crisis. For example, TARP provided nearly $205 billion in additional capital to U.S. banks in 2008 and early 2009. To the extent that AIG had assets that depended on the health of these banks, or liabilities, such as CDS, that might have increased with the failure of these banks, the TARP assistance for banks would have aided AIG's financial position as well as the financial position of most other financial institutions. If AIG was perceived as being "too big to fail" due to the government assistance, the company may also have received an advantage in insurance markets and in debt markets compared to other firms competing with AIG. The reputational effect of government-backing, however, also had negative effects on the company to the degree that AIG even changed the name of its primary insurance subsidiary. Such second-order effects from the government actions are difficult to quantify and typically are not included in assessments of the assistance for AIG. Another indirect, but more definite, benefit to AIG from government action during the crisis came from policy rulings by the Internal Revenue Service (IRS). Under normal circumstances, a corporation undergoing a change in control is not able to carry forward previous tax losses. Government holdings gained through TARP, however, generally have not been treated by the IRS as causing such a change in control. AIG was able to report a $17.7 billion accounting gain from these tax benefits in 2011. Economic theory would suggest that these tax benefits resulted in the government receiving a higher price for the AIG shares when they were sold, so the final result may not have been to increase the overall cost of the AIG assistance. Whether or not one includes these tax rulings as specific assistance for AIG, however, would significantly change the assessment of the overall financial results from the assistance. Neither the Treasury nor the Congressional Budget Office (CBO) have included these tax rulings in their assessments of the assistance for AIG. What Did the Assistance for AIG Cost? From the above accounting, which largely follows that offered by the Treasury in its announcements, the cost of the AIG assistance seems relatively straightforward. Summing the various amounts of interest, dividends, and equity sales returned to the Treasury and Federal Reserve compared with the amount disbursed results in a positive return of $23.1 billion (including the CPFF amounts not included by Treasury in such calculations). This cash accounting, however, falls short of a full economic assessment of the assistance for AIG. Such assessments typically include other factors, such as the time value of money (a dollar in 2008 was not worth the same as a dollar in 2012) and the opportunity cost of the funds involved (what would the returns have been if the money involved had been used for other purposes?). The budgetary cost estimates undertaken by CBO incorporate some broader economic principles in assessing the costs of government actions. In particular, CBO's official budgetary cost estimates for TARP must follow not only the Federal Credit Reform Act, which requires that the present value of the full long-term cost of loans and loan guarantees be recognized, but also that market rates be used in these calculations rather than the lower Treasury borrowing costs. These requirements have the effect of lowering the returns. This effect can be seen by comparing the CBO estimates with the more simple cash accounting above. CBO estimates a budgetary cost of $15 billion attributed to the TARP portion of the AIG assistance, compared to a negative return of $12.5 billion using the simple cash accounting. The Federal Reserve actions which make up a majority of the returns from the government assistance for AIG are not subject to regular CBO or OMB budgetary cost assessment. CBO did publish a study of the budgetary impact and subsidy cost of the Federal Reserve's response to the financial crisis in May 2010. CBO estimated a cost of $2 billion from the Federal Reserve loans to AIG at their inception, compared to a final positive return of $35.6 billion on a cash accounting basis. The CBO estimates for TARP became significantly more positive over time, and it is quite possible that, were CBO to redo the estimates at the current date, the estimate for the Federal Reserve actions would become more positive as well. Appendix A. Details of Government Assistance for AIG Assistance Prior to TARP Involvement Initial Loan On September 16, 2008, the Fed announced, after consultation with the Treasury Department, that it would lend up to $85 billion to AIG over the next two years. Drawing from the loan facility would only occur at the discretion of the Fed. A new CEO was installed after the initial intervention and Fed staff was put on site with the company to oversee operations. The interest rate on the funds drawn from the Fed was 8.5 percentage points above the London Interbank Offered Rate (LIBOR), a rate that banks charge to lend to each other. AIG also was to pay a flat 8.5% interest rate on any funds that it did not draw from the facility. The government received warrants that, if exercised, would give the government a 79.9% ownership stake in AIG. Three independent trustees were to be named by the Fed to oversee the firm for the duration of the loan. The trustees for the AIG Credit Trust were announced on January 16, 2009, and the warrants were later exercised. This lending facility (and its successors) was secured by the assets of AIG's holding company and non-regulated subsidiaries. In other words, the Fed could seize AIG's assets if AIG failed to honor the terms of the loan. This reduced the risk that the Fed, and the taxpayers, would suffer a loss, assuming, of course, that the Fed would have been willing to seize these assets. The risk still remained that if AIG turned out to be insolvent, its assets might be insufficient to cover the amount it had borrowed from the Fed. On September 18, 2008, the Fed announced that it had initially lent $28 billion of the $85 billion possible. This amount grew to approximately $61 billion on November 5, 2008, shortly before the restructuring of the loan discussed below in " Federal Reserve Loan Restructuring ." Securities Borrowing Facility On October 8, 2008, the Fed announced that it was expanding its assistance to AIG by swapping cash for up to $37.8 billion of AIG's investment-grade, fixed-income securities. These securities stemmed from the AIG securities lending program. As some counterparties stopped participating in the lending program, AIG was forced to incur losses on its securities lending investments. AIG needed liquidity from the Fed to cover these losses and counterparty withdrawals. This lending facility was to extend for nearly two years, until September 16, 2010, and advances from the securities borrowing facility to AIG paid an interest rate of 1% over the average overnight repo rate. As of November 5, 2008, shortly before the facility was restructured, $19.9 billion of the $37.8 billion was outstanding. Although this assistance resembled a typical collateralized loan (the lender receives assets as collateral, and the borrower receives cash), the Fed characterized the agreement as a loan of securities from AIG to the Fed in exchange for cash collateral. The arrangement may have been structured this way due to New York state insurance law provisions regarding insurers using securities as collateral in a loan. Commercial Paper Funding Facility The Commercial Paper Funding Facility (CPFF) was initially announced by the Fed on October 7, 2008, as a measure to restore liquidity in the commercial paper market. It was a general facility, open to many recipients, not only AIG. Through the CPFF, the Fed purchased both asset-backed and unsecured commercial paper. Rather than charging an interest rate, the Fed purchased the paper at a discount based on the three-month overnight index swap rate (OIS). Unsecured paper was discounted by 3%, whereas secured paper was discounted by 1%. AIG announced that, as of November 5, 2008, it had been authorized to issue up to $20.9 billion of commercial paper to the CPFF and had actually issued approximately $15.3 billion of this amount. Subsequent downgrades of AIG's airline leasing subsidiary (ILFC) reduced the maximum amount AIG could access from the CPFF to $15.2 billion in early January 2009. ILFC had approximately $1.7 billion outstanding to the CPFF when it was downgraded; this amount was repaid by January 28, 2009. On February 17, 2010, the reported total CPFF borrowing outstanding was $2.3 billion. CPFF new purchase of commercial paper expired February 1, 2010, with maximum maturities extending 90 days from this point. Thus, by the end of April 2010, all AIG borrowing from the CPFF was repaid. November 2008 Revision of Assistance to AIG On November 10, 2008, the Federal Reserve and the U.S. Treasury announced a restructuring of the federal intervention to support AIG. Following the initial loan, some, notably AIG's former CEO Maurice Greenberg, criticized the terms as overly harsh, arguing that the loan itself might be contributing to AIG's eventual failure as a company. As evidenced by the additional borrowing after the September 16, 2008 loan, AIG had continued to see cash flow out of the company. The revised agreement eased the payment terms for AIG and had three primary parts: (1) restructuring of the initial $85 billion Fed loan, (2) a $40 billion direct capital injection from the Treasury, and (3) up to $52.5 billion in Fed loans used to purchase troubled assets. Separately, AIG continued to access the Fed CPFF as described above. Federal Reserve Loan Restructuring The Fed reduced the $85 billion loan facility to $60 billion, extended the time period to five years, and eased the financial terms considerably. Specifically, the interest rate on the amount outstanding was reduced by 5.5 percentage points (to LIBOR plus 3%), and the fee on undrawn funds was reduced by 7.75 percentage points (to 0.75%). Troubled Asset Relief Program Assistance Through TARP, the Treasury purchased $40 billion in preferred shares of AIG. In addition to the preferred shares, the Treasury also received warrants for common shares equal to 2% of the outstanding AIG shares. AIG was the first announced non-bank to receive TARP funds. The $40 billion in preferred AIG shares held by the Treasury were slated to pay a 10% dividend per annum, accrued quarterly. The amount of shares held in trust for the benefit of the U.S. Treasury under the previous Fed loan was also reduced so that the total government equity interest in AIG (trust shares plus Treasury warrants) remained under 80% after the TARP intervention. Purchase of Troubled Assets Although the Emergency Economic Stabilization Act of 2008 provided for Treasury purchase of troubled assets under TARP, the troubled asset purchases related to AIG were done by LLCs created and controlled by the Federal Reserve. This structure was similar to that created by the Fed to facilitate the purchase of Bear Stearns by JPMorgan Chase in March 2008. Two LLCs were set up for AIG—Maiden Lane II for residential mortgage-backed securities (RMBS) and Maiden Lane III for collateralized debt obligations (CDO). Residential Mortgage-Backed Securities/Maiden Lane II Under the November 2008 restructuring, the Residential Mortgage-Backed Securities (RMBS) LLC/Maiden Lane II could receive loans up to $22.5 billion by the Fed and $1 billion from AIG to purchase RMBS from AIG's securities lending portfolio. The previous $37.8 billion securities lending loan facility was repaid and terminated following the creation of this LLC. The Fed was credited with interest from its loan to Maiden Lane II at a rate of LIBOR plus 1% for a term of six years, extendable by the Fed. The $1 billion loan from AIG was credited with interest at a rate of LIBOR plus 3%. The AIG loan, however, was subordinate to the Fed's. Any proceeds from Maiden Lane II were to be distributed in the following order: (1) operating expenses of the LLC, (2) principal due to the Fed, (3) interest due to the Fed, and (4) deferred payment and interest due to AIG. Should additional funds remain at the liquidation of the LLC, these remaining funds were to be shared by the Fed and AIG with AIG receiving one-sixth of the value. Ultimately the securities in Maiden Lane II were sufficient to fully repay the loans, with interest. The Fed received approximately $2.3 billion in capital gains, with AIG receiving approximately $460 million The actual amount of Fed loan made to Maiden Lane II totaled $19.5 billion of the $22.5 billion maximum. Maiden Lane II purchased RMBS with this amount along with the $1 billion loan from AIG. The securities purchased had a face value of nearly double the purchase price ($39.3 billion). Collateralized Debt Obligations/Maiden Lane III Under the November 2008 restructuring, the CDO LLC/Maiden Lane III could receive loans up to $30 billion from the Fed and $5 billion from AIG to purchase CDOs on which AIG had written credit default swaps. At the same time that the CDOs were purchased, the CDS written on these CDOs were terminated, relieving financial pressure on AIG. The Fed and AIG were to be credited with interest from the loans at a rate of LIBOR plus 3% until repaid. The proceeds from Maiden Lane III were to be distributed in the following order: (1) operating expenses of the LLC, (2) principal due to the Fed, (3) interest due to the Fed, and (4) deferred payment and interest due to AIG. Should any funds remain after this distribution, they were to go two-thirds to the Fed and one-third to AIG. Ultimately the securities in Maiden Lane III were sufficient to fully repay the loans, with interest. The Fed received approximately $5.9 billion in capital gains, with AIG receiving approximately $2.9 billion. The actual amount of the Fed loan to Maiden Lane III was $24.3 billion of the $30 billion maximum, while AIG loaned the LLC $5 billion. In addition to these loans, Maiden Lane III purchase of CDOs was also funded by approximately $35 billion in cash collateral previously posted to holders of CDS by AIGFP. In return for the use of this collateral, AIGFP received approximately $2.5 billion from the LLC. The total par value of CDOs purchased by Maiden Lane III was approximately $62.1 billion. A summary of the assistance under the November 2008 plan is presented in Table A-2 . March 2009 Revision of Assistance to AIG On March 2, 2009, the Treasury and Fed announced another revision of the financial assistance to AIG. On the same day, AIG announced a loss of more than $60 billion in the fourth quarter of 2008. In response to the poor results and ongoing financial turmoil, private credit ratings agencies were reportedly considering further downgrading AIG, which would most likely have resulted in further significant cash demands due to collateral calls. According to the Treasury, AIG "continues to face significant challenges, driven by the rapid deterioration in certain financial markets in the last two months of the year and continued turbulence in the markets generally." The revised assistance was intended to "enhance the company's capital and liquidity in order to facilitate the orderly completion of the company's global divestiture program." The announced revised assistance included the following: Exchange of the previous $40 billion in preferred shares purchased through the TARP program for $41.6 billion in preferred shares that more closely resembled common equity, thus improving AIG's financial position. Dividends paid on these new shares remained at 10%, but were non-cumulative and only paid when declared by AIG's Board of Directors. Should dividends not be paid for four consecutive quarters, the government would have had the right to appoint at least two new directors to the board. Commitment of up to $29.8 billion in additional preferred share purchases from TARP. Timing of these share purchases was at the discretion of AIG. Reduction of interest rate on the existing Fed loan facility by removing the floor of 3.5% over the LIBOR portion of the rate. The rate became three-month LIBOR plus 3%, which was approximately 4.25% at the time. Limit on Fed revolving credit facility was reduced from $60 billion to as low as $25 billion. Up to $34.5 billion of the approximately $38 billion outstanding on the Fed credit facility was to be repaid by asset transfers from AIG to the Fed. Specifically, (1) $8.5 billion in ongoing life insurance cash flows were to be securitized by AIG and transferred to the Fed; and (2) approximately $26 billion in equity interests in two of AIG's large foreign life insurance subsidiaries (ALICO and AIA) are to be issued to the Fed. This would effectively transfer a majority stake in these companies to the Fed, but the companies would still be managed by AIG. A $25 billion repayment of the Fed loan through the transfer of equity interest worth $16 billion in AIA and $9 billion in ALICO was completed on December 1, 2009, with a corresponding reduction in the Fed loan maximum to $35 billion. According to AIG's 2009 annual 10-K filing with the SEC, the repayment through securitization of life insurance cash flows was no longer expected to occur and has not occurred. Separately, AIG continued to access the Fed's Commercial Paper Funding Facility, which was extended to February 2010. A summary of assistance under the March 2009 plan is presented in Table A-3 . September 2010 Revision of Assistance for AIG The structure under which AIG's assistance was ultimately wound down was announced in September 2010 with the multiple transactions involved closing on January 14, 2011. The essence of this restructuring was to (1) end the Fed's direct involvement with AIG through loan repayment and transfer of the Fed's equity interests to the Treasury and (2) convert the government's preferred shares into common shares, which could then be more easily sold. The specific steps included the following: Repayment and termination of the Fed loan facility . AIG repaid $19.5 billion to the Fed with cash from the disposal of various assets. Transfer to the Treasury of the Fed's preferred equity interests resulting from AIG subsidiaries AIA and Alico . AIG drew $20.3 billion of TARP funds to purchase the Fed's equity in AIG's subsidiaries. This equity was transferred to the Treasury to redeem the TARP funds. The remaining equity (approximately $5.7 billion) was redeemed by funds from sales of other AIG assets. As was the plan when the Fed held the assets, the equity interests held by the Treasury following the transfer were to be redeemed by AIG following further asset sales. Conversion of TARP preferred shares into common equity . $49.1 billion in TARP preferred share holdings were converted into approximately 1.1 billion common shares worth approximately $43 billion in September 2010. After combining this with the approximately 562.9 million shares (then worth $22 billion) resulting from the initial Fed loan, the Treasury held 1.655 billion shares of AIG common stock, or 92.1% of the AIG common stock. Reduced TARP funding facility . At AIG's discretion, $2 billion of new Series G preferred shares could be issued by AIG and purchased by the Treasury. These shares would have paid a 5% dividend and any outstanding shares were to convert to common shares at the end of March 2012. None of these shares were issued and this facility was cancelled. Issuance of warrants to private shareholders . Through an exceptional dividend, AIG issued warrants to existing private shareholders. They extend for 10 years and allow for the purchase of up to 75 million new shares of common stock at the price of $45 a share. These warrants provided a direct benefit to private AIG stockholders while potentially reducing the return on the government's assistance to AIG. This benefit was approximately $1.2 billion at the warrant's initial trading price. Table A-4 summarizes the assistance for AIG after the latest restructuring plan was completed in January 2011, but before any further asset sales or loan repayments. Appendix B. Executive Compensation Restrictions Under TARP By accepting TARP assistance, AIG became subject to the executive compensation standards for their senior executive officers (SEOs, generally the chief executive officer, the chief financial, and the three next most highly compensated officials) generally required under Section 111 of EESA. In addition to these general restrictions, Treasury imposed additional executive compensation restrictions on AIG that are more stringent than for other participants in TARP in recognition of the special assistance received by AIG. The TARP executive compensation restrictions were amended and strengthened by the 111 th Congress in the American Recovery and Reinvestment Act of 2009, which amended Section 111 of EESA to further limit executive compensation for financial institutions receiving assistance under that act. Among other things, for applicable companies, the new language requires the adoption of standards by Treasury that 1. prohibit paying certain executives any bonus, retention, or incentive compensation other than certain long-term restricted stock that has a value not greater than one-third of the total annual compensation of the employee receiving the stock (the determination of how many executives will be subject to these limitations depends on the amount of funds received by the TARP recipient); 2. require the recovery of any bonus, retention award, or incentive compensation paid to SEOs and the next 20 most highly compensated employees based on earnings, revenues, gains, or other criteria that are later found to be materially inaccurate; 3. prohibit any compensation plan that would encourage manipulation of the reported earnings of the firm to enhance the compensation of any of its employees; 4. prohibit the provision of "golden parachute" payment to an SEO and the next five most highly compensated employees for departure from a company for any reason, except for payments for services performed or benefits accrued; and 5. prohibit any compensation plan that would encourage manipulation of the reported earnings of the firm to enhance the compensation of any of its employees. Although Section 111(b)(1) of the amended EESA indicated that these standards applied all TARP recipients until they repay TARP funding, later language (Section 111(b)(3)(iii)) specifically allows bonuses required to be paid under employment contracts executed before February 11, 2009, to go forward notwithstanding the new requirements. The Special Master for TARP Executive Compensation released several specific determinations for AIG compensation.

American International Group (AIG), one of the world's major insurers, was the largest recipient of government financial assistance during the 2007-2009 financial crisis. At the maximum, the Federal Reserve (Fed) and the Treasury committed approximately $182.3 billion in specific extraordinary assistance for AIG and another $15.2 billion through a more widely available lending facility. The amount actually disbursed to assist AIG reached a maximum of $141.8 billion in April 2009. In return, AIG paid interest and dividends on the funding and the U.S. Treasury ultimately received a 92% ownership share in the company. The government assistance for AIG ended in 2013. All Federal Reserve loans have been repaid and the Treasury has sold all of the financial holdings that resulted from the assistance. Going into the financial crisis, the overarching AIG holding company was regulated by the Office of Thrift Supervision (OTS), but most of its U.S. operating subsidiaries were regulated by various states. Because AIG was primarily an insurer, it was largely outside of the normal Federal Reserve facilities that lend to thrifts facing liquidity difficulties and the normal Federal Deposit Insurance Corporation (FDIC) receivership provisions that apply to banking institutions. September 2008 saw a panic in financial markets marked by the failure of large financial institutions, such as Fannie Mae, Freddie Mac, and Lehman Brothers. In addition to suffering from the general market downturn, AIG faced extraordinary losses resulting largely from two sources: (1) the AIG Financial Products subsidiary, which specialized in financial derivatives and was primarily the regulatory responsibility of the OTS; and (2) a securities lending program, which used securities originating in the state-regulated insurance subsidiaries. In the panic conditions prevailing at the time, the Federal Reserve determined that "a disorderly failure of AIG could add to already significant levels of financial market fragility" and stepped in to support the company. Had AIG not been given assistance by the government, bankruptcy seemed a near certainty. The Federal Reserve support was later supplemented and ultimately replaced by assistance from the U.S. Treasury's Troubled Asset Relief Program (TARP). The AIG rescue produced unexpected financial returns for the government. The Fed loans were completely repaid and it directly received approximately $18.1 billion in interest, dividends, and capital gains. In addition, another $17.55 billion in capital gains from the Fed assistance accrued to the Treasury. The $67.84 billion in TARP assistance, however, resulted in a negative return to the government, as $54.35 billion was recouped from asset sales and $0.96 billion was received in dividends, warrants, and other income. If one offsets the negative return to TARP of $12.5 billion with the $35.6 billion in positive returns for the Fed assistance, the entire assistance for AIG showed a positive return of approximately $23.1 billion. It should be noted that these figures are the simple cash returns from the AIG transactions and do not take into account the full economic costs of the assistance. Fully accounting for these costs would result in lower returns to the government, although no agency has performed such a full assessment of the AIG assistance. The Congressional Budget Office (CBO) estimates of the budgetary cost of the TARP assistance for AIG, which is a broader economic analysis of the cost, find a loss of $15 billion compared with the $12.52 billion cash loss. CBO does not, however, regularly perform cost estimates on Federal Reserve actions. Under the Dodd Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203), the Financial Stability Oversight Council designated AIG for enhanced regulation by the Fed in July 2013. This designation was removed in September 2017.

Introduction Climate change has received considerable policy attention in the past several years both internationally and within the United States. A major report released by the Intergovernmental Panel on Climate Change in 2013 found widespread evidence of climate warming, and many are concerned that climate change may be severe and rapid with potentially catastrophic consequences for humans and the functioning of ecosystems. The National Academies maintains that the climate change challenge is unlikely to be solved with any single strategy or by the people of any single country. Policy efforts to address climate change use a variety of methods, frequently including mitigation and adaptation. Mitigation activities aim to reduce greenhouse gases (GHGs) from the Earth's atmosphere. Carbon dioxide is the dominant greenhouse gas emitted naturally through the carbon cycle and through human activities like the burning of fossil fuels. Other commonly discussed GHGs include methane, nitrous oxide, hydroflourocarbons, perflourocarbons, and sulfur hexaflouride. Adaptation activities seek to improve an individual's or institution's ability to cope with or avoid harmful impacts of climate change, and to take advantage of potential beneficial ones. Some observers are concerned that current mitigation and adaptation strategies may not prevent change quickly enough to avoid extreme climate disruptions. Geoengineering has been suggested by some as a timely additional method to mitigation and adaptation that could be included in climate change policy efforts. Geoengineering technologies, applied to climate, aim to achieve large-scale and deliberate modifications of the Earth's energy balance in order to reduce temperatures and counteract anthropogenic (i.e., human-made) climate change; these climate modifications would not be limited by country boundaries. As an unproven concept, geoengineering raises substantial environmental and ethical concerns for some observers. Others respond that the uncertainties of geoengineering may only be resolved through further scientific and technical examination. Proposed geoengineering technologies vary greatly in terms of their technological characteristics and possible consequences. They are generally classified in two main groups: Solar radiation management (SRM) method: technologies that would increase the reflectivity, or albedo, of the Earth's atmosphere or surface, and Carbon dioxide removal (CDR) method: technologies or practices that would remove CO 2 and other GHGs from the atmosphere. Much of the geoengineering technology discussion centers on SRM methods (e.g., enhanced albedo, aerosol injection). SRM methods could be deployed relatively quickly if necessary, and their impact on the climate would be more immediate than that of CDR methods. Because SRM methods do not reduce GHG from the atmosphere, global warming could resume at a rapid pace if a deployed SRM method fails or is terminated at any time. At least one relatively simple SRM method is already being deployed with government assistance. Other proposed SRM methods are at the conceptualization stage. CDR methods include afforestation, ocean fertilization, and the use of biomass to capture and store carbon. Prior to 2013, neither the United Nations Framework Convention on Climate Change (UNFCCC) nor the Intergovernmental Panel on Climate Change (IPCC) had made any official mention of geoengineering science or technology in their negotiation texts or their reports. However, in the IPCC's Scientific-Technical Assessment for its Fifth Assessment Report (AR5), released on September 26, 2013, the Panel addressed for the first time the current status of geoengineering research and its potential impacts as follows: Methods that aim to deliberately alter the climate system to counter climate change, termed geoengineering, have been proposed. Limited evidence precludes a comprehensive quantitative assessment of both Solar Radiation Management (SRM) and Carbon Dioxide Removal (CDR) and their impact on the climate system. CDR methods have biogeochemical and technological limitations to their potential on a global scale. There is insufficient knowledge to quantify how much CO 2 emissions could be partially offset by CDR on a century timescale. Modeling indicates that SRM methods, if realizable, have the potential to substantially offset a global temperature rise, but they would also modify the global water cycle, and would not reduce ocean acidification. [Additionally, scaling SRM to substantial levels would carry the risk that if] SRM were terminated for any reason, there is high confidence that global surface temperatures would rise very rapidly to values consistent with the greenhouse gas forcing. CDR and SRM methods carry side effects and long-term consequences on a global scale. Neither the 112 th nor the 113 th Congress, thus far, has taken any legislative action on geoengineering. In 2009, the House Science and Technology Committee of the 111 th Congress held hearings on geoengineering that examined the "potential environmental risks and benefits of various proposals, associated domestic and international governance issues, evaluation mechanisms and criteria, research and development (R&D) needs, and economic rationales supporting the deployment of geoengineering activities." Some foreign governments, including the United Kingdom's, as well as scientists from Germany and India, have considered engaging in the research or deployment of geoengineering technologies because of concern over the slow progress of emissions reductions, the uncertainties of climate sensitivity, the possible existence of climate thresholds (or "tipping points"), and the political, social, and economic impact of pursuing aggressive GHG mitigation strategies. Congressional interest in geoengineering has focused primarily on whether geoengineering is a realistic, effective, and appropriate tool for the United States to use to address climate change. However, if geoengineering technologies are deployed by the United States, another government, or a private entity, several new concerns are likely to arise related to government support for, and oversight of, geoengineering as well as the transboundary and long-term effects of geoengineering. Such was the case in the summer of 2012, when an American citizen conducted a geoengineering experiment (ocean fertilization) off the west coast of Canada that some say violated two international conventions. This report is intended as a primer on the policy issues, science, and governance of geoengineering technologies. The report will first set the policy parameters under which geoengineering technologies may be considered. It will then describe selected technologies in detail and discuss their status. The third section provides a discussion of possible approaches to governmental involvement in, and oversight of, geoengineering, including a summary of domestic and international instruments and institutions that may affect geoengineering projects. Geoengineering Governance Geoengineering technologies aim to modify the Earth's energy balance in order to reduce temperatures and counteract anthropogenic climate change through large-scale and deliberate modifications. Implementation of some of the technologies may be controlled locally, while other technologies may require global input on implementation. Additionally, whether a technology can be controlled or not once implemented differs by technology type. Little research has been done on most geoengineering methods, and no major directed research programs are in place. Peer reviewed literature is scant, and deployment of the technology—either through controlled field tests or commercial enterprise—has been minimal. Most interested observers agree that more research would be required to test the feasibility, effectiveness, cost, social and environmental impacts, and the possible unintended consequences of geoengineering before deployment; others reject exploration of the options as too risky. The uncertainties have led some policymakers to consider the need and the role for governmental oversight to guide research in the short term and to oversee potential deployment in the long term. Such governance structures, both domestic and international, could either support or constrain geoengineering activities, depending on the decisions of policymakers. As both technological development and policy considerations for geoengineering are in their early stages, several questions of governance remain in play: What risk factors and policy considerations enter into the debate over geoengineering activities and government oversight? At what point, if ever, should there be government oversight of geoengineering activities? If there is government oversight, what form should it take? If there is government oversight, who should be responsible for it? If there is publicly funded research and development, what should it cover and which disciplines should be engaged in it? Risk Factors As a new and emerging set of technologies potentially able to address climate change, geoengineering possesses many risk factors that must be taken into policy considerations. From a research perspective, the risk of geoengineering activities most often rests in the uncertainties of the new technology (i.e., the risk of failure, accident, or unintended consequences). However, many observers believe that the greater risk in geoengineering activities may lie in the social, ethical, legal, and political uncertainties associated with deployment. Given these risks, there is an argument that appropriate mechanisms for government oversight should be established before the federal government and its agencies take steps to promote geoengineering technologies and before new geoengineering projects are commenced. Yet, the uncertainty behind the technologies makes it unclear which methods, if any, may ever mature to the point of being deemed sufficiently effective, affordable, safe, and timely as to warrant potential deployment. Some of the more significant risks factors associated with geoengineering are as follows: Technology Control Dilemma. An analytical impasse inherent in all emerging technologies is that potential risks may be foreseen in the design phase but can only be proven and resolved through actual research, development, and demonstration. Ideally, appropriate safeguards are put in place during the early stages of conceptualization and development, but anticipating the evolution of a new technology can be difficult. By the time a technology is widely deployed, it may be impossible to build desirable oversight and risk management provisions without major disruptions to established interests. Flexibility is often required to both support investigative research and constrain potentially harmful deployment. Reversibility. Risk mitigation relies on the ability to cease a technology program and terminate its adverse effects in a short period of time. In principle, all geoengineering options could be abandoned on short notice, with either an instant cessation of direct climate effects or a small time lag after abandonment. However, the issue of reversibility applies to more than just the technologies themselves. Given the importance of internal adjustments and feedbacks in the climate system—still imperfectly understood—it is unlikely that all secondary effects from large-scale deployment would end immediately. Also, choices made regarding geoengineering methods may influence other social, economic, and technological choices regarding climate science. Advancing geoengineering options in lieu of effectively mitigating GHG emissions, for example, could result in a number of adverse effects, including ocean acidification, stresses on biodiversity, climate sensitivity shocks, and other irreversible consequences. Further, investing financially in the physical infrastructure to support geoengineering may create a strong economic resistance to reversing research and deployment activities. Encapsulation. Risk mitigation also relies on whether a technology program is modular and contained or whether it involves the release of materials into the wider environment. The issue can be framed in the context of pollution (i.e., encapsulated technologies are often viewed as more "ethical" in that they are seen as non-polluting). Several geoengineering technologies are demonstrably non-encapsulated, and their release and deployment into the wider environment may lead to technical uncertainties, impacts on non-participants, and complex policy choices. But encapsulated technologies may still have localized environmental impacts, depending on the nature, size, and location of the application. The need for regulatory action may arise as much from the indirect impacts of activities on agro-forestry, species, and habitat as from the direct impacts of released materials in atmospheric or oceanic ecosystems. Commercial Involvement. The role of private-sector engagement in the development and promotion of geoengineering may be debated. Commercial involvement, including competition, may be positive in that it mobilizes innovation and capital investment, which could lead to the development of more effective and less costly technologies at a faster rate than in the public sector. However, commercial involvement could bypass or neglect social, economic, and environmental risk assessments in favor of what one commentator refers to as "irresponsible entrepreneurial behavior." Private-sector engagement would likely require some form of public subsidies or GHG emission pricing to encourage investment, as well as additional considerations including ownership models, intellectual property rights, and trade and transfer mechanisms for the dissemination of the technologies. Public Engagement. The consequences of geoengineering—including both benefits and risks discussed above—could affect people and communities across the world. Public attitudes toward geoengineering, and public engagement in the formation, development, and execution of proposed governance, could have a critical bearing on the future of the technologies. Perceptions of risks, levels of trust, transparency of actions, provisions for liabilities and compensation, and economies of investment could play a significant role in the political feasibility of geoengineering. Public acceptance may require a wider dialogue between scientists, policymakers, and the public. Policy Considerations Since geoengineering activities are intended to affect the climate of the planet, their consequences implicate policy considerations at both the national and international level. Accordingly, whether a country or region deems these activities, and their potential consequences, acceptable will likely depend not only on the scientific and technical underpinnings for the geoengineering technology involved, but also by a range of social, legal, and political factors that vary across countries and cultures. For example, while some may view geoengineering through the lens of religious and ethical concerns about its potential impacts, others may feel that the risk of climate inaction is too great and, therefore, that constraining geoengineering activities is as morally hazardous as promoting and engaging in geoengineering activities. Public opinion on geoengineering is difficult to gauge at this early stage. It is likely to both evolve as more information becomes available and vary depending on the particular technology being discussed. Nevertheless, a 2009 report by the United Kingdom's Royal Society, which is widely considered to be the first comprehensive analysis of geoengineering technologies, has broadly identified three categories of perspectives held within the scientific community about the deployment of geoengineering technologies: Geoengineering is a dangerous manipulation of Earth systems and therefore intrinsically unethical; Geoengineering is strictly an insurance policy against major mitigation failure; and Geoengineering will help buy back time lost during international mitigation negotiations. The following table identifies and explains the scientific underpinnings for many of the perspectives on geoengineering that have been articulated to date. Geoengineering Technologies A wide range of geoengineering technologies have been proposed to address climate change. Geoengineering technologies attempt to mitigate continued warming of the Earth's climate. The technologies vary in complexity from planting trees for carbon sequestration to launching mirrors into space for sunlight reflection. Most of the technologies are not yet proven and are at the theoretical or research phase. Several of the proposed technologies were recently conceived; if they prove feasible and effective, they would require large amounts of funding for full-scale deployment; and currently they generally lack political, scientific, and public support. The two main categories of geoengineering technologies are carbon dioxide removal (CDR) and solar radiation management (SRM) (see Figure 1 ). CDR methods remove CO 2 from the atmosphere. SRM methods increase the reflectivity of the Earth's atmosphere or surface, thus reducing incoming solar radiation. Carbon Dioxide Removal Carbon dioxide is the primary GHG that has been linked to increases in atmospheric temperature. CDR methods remove CO 2 from the atmosphere and are intended to cool the planet by reducing the absorption of heat in the atmosphere. CDR methods involve the uptake and storage of CO 2 by biological, physical, or chemical means. CO 2 may be stored (or sequestered) via afforestation, ocean fertilization, weathering of certain sedimentary rocks, or combining carbon capture and storage technology with the production of biofuels, among other approaches. The duration of carbon storage differs depending on the approach. For instance, carbon storage may last from decades to centuries for ocean fertilization, or thousands of years for weathering of carbonate rock. Although CDR techniques could lower atmospheric CO 2 levels eventually leading to a decrease in temperatures, they would require considerably more time to have an impact on climate change than SRM techniques. Thus, CDR techniques are not ideal methods to deploy if immediate alteration of the climate is necessary. While the impacts of CDR methods could take years to realize, many CDR methods could be governed more easily than SRM methods by existing laws. For example, carbon capture and storage from a biomass power plant could be subject to the same environmental and energy laws as carbon capture and storage from a coal-fired power plant. This section describes some of the better-examined CDR methods: carbon capture and sequestration, ocean fertilization, afforestation, and enhanced weathering. Carbon Capture and Sequestration Carbon capture and sequestration (CCS) is the capture and storage of CO 2 to prevent it from being released to the atmosphere. CCS generally refers to the process of using technology to remove CO 2 released from anthropogenic sources rather than CO 2 that is captured naturally as part of the Earth's carbon cycle. Because CO 2 emissions from anthropogenic sources continue to increase CO 2 levels in the atmosphere, CCS engineering technologies are being pursued for three sources: biomass, bioenergy, and fossil fuels (mainly power generation). CCS technology tends to be labeled a geoengineering technology only if the source is biomass or bioenergy. It is not clear why the distinction of labeling CCS as a geoengineering technology depends on the source from which carbon will be captured, and not its outcome, which is the reduction in the amount of CO 2 released to the atmosphere. According to this view, CCS from fossil fuels may be excluded as a geoengineering technology because fossil fuels are carbon-positive, while bioenergy and biomass are viewed as carbon-neutral or carbon-negative. Additional intervention could increase the amount of CO 2 that is sequestered. Biomass that otherwise would not be used for crops or energy production could be buried in the land or deep ocean to slow the rate at which CO 2 is released to the atmosphere. Carbon can also be sequestered if biomass is pyrolyzed into biochar: a charcoal produced under high temperatures using crop residues, animal manure, or other organic material with the potential to sequester carbon in the soil for hundreds to thousands of years at an estimate. Large-scale carbon capture that uses biomass would require a steady biomass supply and a place to store it. The process to capture CO 2 is relatively well understood compared to sequestering CO 2 permanently in geologic reservoirs. However, CCS technology for fossil fuels for the purposes of permanent sequestration has not been deployed at the commercial scale thus far due to costs, and, until recently, due to the absence of a regulatory requirement to reduce CO 2 emissions. Arguably, the September 2013 rule proposed by EPA to limit CO 2 emissions from new power plants may change the policy incentives for incorporating CCS into new power plant design and construction. Carbon dioxide has been captured on a small scale for commercial applications for a few decades (e.g., for soda production, to enhance oil and gas recovery), but not on a large scale to sequester CO 2 as a long-term climate change mitigation method. Estimates of CO 2 sequestration performance are based partially on oil and gas recovery efforts, which have sequestered CO 2 for approximately 30 years. It may take at least 10-15 years before CCS for fossil fuels is ready for commercial deployment. In addition to crop-based carbon capture, bioenergy generation coupled with CO 2 capture and sequestration (BECS) could sequester carbon. BECS consists of three phases: planting and growing a biomass crop such as switchgrass, harvesting the crop for biofuel production, and capturing and storing the carbon released during this process. BECS is expected to use technology similar to CCS technology used for capturing CO 2 from fossil fuel combustion. When biomass is used to generate electricity, the CO 2 released in the process may be sequestered in geologic formations, in the same way as it would be used in a fossil-fuel generation CCS operation. BECS is an unproven CDR method because no commercial-scale CCS facility exists for either fossil fuels or bioenergy. Many of the lessons learned from CCS in the fossil fuels sector over the next few years should be applicable to BECS. BECS deployment could take as long or longer than fossil-fuel CCS. Some contend that BECS could not be deployed fast enough to have a significant impact on climate change. One of the main challenges to CCS deployment is the lack of a regulatory framework to permit geologic sequestration of CO 2 . An integrated structure would be necessary to deploy CCS at a large scale, whether for fossil fuels or bioenergy. This structure involves identifying who owns the sequestered CO 2 , where to sequester the CO 2 , defining what constitutes leakage, identifying who will be held liable if the sequestered CO 2 leaks, developing a monitoring and maintenance plan, and developing a robust pipeline infrastructure specifically for CO 2 that will be sequestered, among other things. Some contend that if CCS were implemented on a large scale for both fossil fuels and bioenergy, there would be less motivation to reduce the use of fossil fuels. An increase in BECS, however, might not face the same argument. Further, BECS might be considered "carbon-negative" whereas CCS from fossil fuel combustion is at least slightly carbon-positive. Additionally, there is concern that CO 2 storage from fossil fuels, and perhaps bioenergy, may lead to contamination of underground sources of drinking water. In 2010, the U.S. Environmental Protection Agency finalized a rule that sets requirements for geologic sequestration of carbon dioxide, using the authority granted the agency in the 1974 Safe Drinking Water Act. Ocean Fertilization Ocean fertilization is the addition of nutrients such as iron to the ocean to expedite carbon sequestration from phytoplankton. Phytoplankton photosynthesize CO 2 , retaining the carbon in their cells, which then is sequestered as carbon in the deep ocean when they die and settle through the waters. Studies suggest that a ton of iron added to certain parts of the ocean could remove 30,000 to 110,000 tons of carbon from the air. Ocean fertilization is estimated to cost approximately $30 to $300 per ton of carbon sequestered. The ecological, economic, and climatological impacts of ocean fertilization, in both the short term and the long term, are uncertain. Some suggest that ocean fertilization may enhance fish stocks and augment production of dimethylsulfide, a chemical that may cool the atmosphere, but has undesirable characteristics at high concentrations. Others are concerned that ocean fertilization will lead to ocean acidification, additional emissions of potent greenhouse gases, and reduction of oxygen to levels not habitable by certain species. Critics also argue that ocean fertilization is not an effective way to combat climate change because the technique requires widespread long-term implementation on a continual basis. Studies have yet to demonstrate that ocean fertilization will work as a long-term carbon sequestration strategy. Further research is likely needed to answer numerous questions: Will phytoplankton increase in sufficient numbers to sequester significant amounts of CO 2 ? How long will the carbon stay sequestered? What disruptions will occur to marine ecosystems? Currently, there are no analogues to compare what may occur if ocean fertilization is deployed on a large scale. Some envision CO 2 sequestered via ocean fertilization as a potential carbon credit to be sold as a carbon offset or traded within an environmental market. There appear to be no legal frameworks that endorse or reject ocean fertilization for the purpose of acquiring carbon credits. Thus, for the time being, any carbon credits garnered for ocean fertilization would have to be used in a voluntary carbon market. Afforestation Afforestation involves planting tree seedlings on sites that have been without trees for several years, generally a decade or more. The primary climate change benefit of afforestation discussed in scientific and policy literature is carbon sequestration. It is regarded as a prime carbon sequestration strategy because forest communities can store about 10 times more carbon in their vegetation than non-forest communities and for longer time periods (decades to hundreds of years). Other benefits include erosion control, recreational value, wildlife habitat, and production of forest goods. On a large scale, afforestation can modify local climates by increasing humidity, altering cloud and precipitation patterns, and reducing wind speeds. Challenges associated with afforestation include measurement and reporting of carbon storage, landowners' reluctance to grow trees on private land for extensive time periods, and a reduction in runoff that may impact the ecology of the afforested area, among other issues. Potential drawbacks to wide-scale implementation of afforestation include unexpected releases of CO 2 from newly forested lands due to acts of nature (e.g., fire, drought), future changes in land management (e.g., harvesting) that could result in release of the carbon, the potentially significant cost for afforestation, and possible effects on crop production and agricultural commodity prices if significant croplands are afforested. The planting of trees is well known and well practiced; afforestation is an accepted project activity under the Clean Development Mechanism (CDM) of the Kyoto Protocol. The amount and rate at which CO 2 is sequestered depends on the tree species, climate, soil type, management, and other site-specific features. The estimated sequestration potential ranges from 2.2 to 9.5 metric tons of CO 2 per acre per year. It may take at least 20 years to reap the carbon sequestration benefit depending on the growth rate of the trees. Carbon accumulation in the early years of tree growth is slow and increases during the strong growth period; there is controversy whether carbon accumulation continues or peaks when net additional wood growth is minimal. Most afforestation projects occur on marginal croplands. Certain models estimate that a total of 60 million to 65 million acres of U.S. agricultural land could be converted to woodlands by 2050, including 35 million to 50 million acres of cropland. Changes in climate may impact which forestry species are planted at afforestation sites. Therefore, forestry species planted at afforestation projects may not be similar to species found at the site in the past. The cost of an afforestation project can range from approximately $65 to $200 per acre due in part to the previous land use of the site and the terrain. Enhanced Weathering Carbon dioxide is naturally removed from the atmosphere slowly through weathering (or disintegration) of silicate and carbonate rocks. Expediting the weathering process—enhanced weathering—could remove large amounts of CO 2 from the atmosphere. The disintegrated materials containing CO 2 removed from an enhanced weathering project could be stored in the deep ocean or in soils. A paucity of literature exists about how to conduct an enhanced weathering project or its environmental implications. One proposed method is to spread crushed olivine, a type of silicate rock, on agricultural and forested lands to sequester CO 2 and improve soil quality. This technique would require large amounts of rocks to be mined, ground, and transported. The lifecycle carbon benefit has not been calculated. Significant amounts of additional resources, such as energy and water, may be required to conduct an enhanced weathering project. Further research would be needed to assess the potential benefits and drawbacks of this technology. Barriers to enhanced weathering include its scale, cost, energy requirements, and potential environmental consequences. Decisions would need to be made on which landscape to alter, where to dispose of the disintegrated material, and who pays for the project. There may be long-term adverse impacts on air quality, water quality, and aquatic life. Solar Radiation Management Solar radiation management methods work to reduce or divert the amount of incoming solar radiation by making the Earth more reflective (i.e., enhancing albedo) and do not have any effect on GHG emission rates. SRM methods involve modifying albedo via land-based methods such as desert reflectors, cloud-based methods such as cloud whitening, stratosphere-based methods such as aerosol injection, and spaced-based methods such as shields. The effectiveness of an SRM method depends on its geographical location, the altitude at which it is applied (surface, atmosphere, space), and the radiative properties of the atmosphere and surface. If proven effective and desirable, SRM methods could be deployed faster than CDR methods should the need arise to cool the planet quickly. SRM methods have been described, theoretically, as cheap, fast, and imperfect. However, these methods have not been proven on any scale. Some argue the U.S. government should create a research or oversight program potentially with international cooperation that examines SRM technologies prior to a potentially hasty deployment by an individual or country, which could result in an array of unanticipated consequences. Research could improve understanding of the feasibility of different SRM approaches, their opportunities and limitations, and their potential role in climate change mitigation. Other commentators favor constraints on SRM research, given the significant environmental risks posed by these techniques: System failure. If an SRM technique breaks down or is shut down, the climate may warm very quickly, possibly leaving little time for humans and nature to adapt. Changes in regional and seasonal climates. SRM techniques may alter precipitation patterns, which could have consequences for ecosystems and affected societies. Ozone depletion. Under certain circumstances, use of SRM techniques such as sulfate aerosol injection may lead to ozone depletion which would allow harmful UVB rays to reach the Earth. Preservation of non-CO 2 greenhouse gases. SRM techniques applied in the stratosphere or space lessen the amount of ultraviolet radiation striking the Earth's atmosphere, which is likely to extend the atmospheric lifetime of non- CO 2 greenhouse gases that are more potent than CO 2 . Diversion from more permanent solutions. If societies conclude that SRM techniques can provide quick relief, they may invest less in developing and deploying more permanent GHG emission reduction solutions. "Unknown unknowns." The history of the Earth's climate demonstrates that small changes may result in abrupt changes, raising concerns about unknown effects of large-scale geoengineering. The following section explores some of the more widely discussed SRM techniques: enhanced albedo, aerosol injection, and space-based reflectors. Enhanced Albedo (Surface and Cloud) One suggested method to modify the temperature of the planet is to increase the reflectivity, or albedo, of certain surfaces. Increasing surface reflectivity directs more solar radiation back toward space thus limiting temperature increases. Surface types, application areas, and costs for enhanced albedo are all under investigation. One of the most widely discussed targets for enhancing surface albedo is urban areas. Applying enhanced albedo methods in urban areas such as painting roofs and paved areas white on a global basis is estimated to cost several billion dollars for materials and labor, but could save money on energy costs. For example, the U.S. Department of Energy (DOE) National Nuclear Security Administration (NNSA) has reduced building heating and cooling costs by an average of 70% annually on reroofed areas partly due to installing cool roofs. Some drawbacks to increased reflectivity of roofs and paved areas include uncomfortable glare, concern for the aesthetic appeal of the roof or paved area depending on its location, the loss of reflectivity benefits if the roof is poorly maintained, and increased energy costs in colder climates due to reduced beneficial winter time heat gains. Additionally, if enhanced surface albedo for paved areas is pursued aggressively, there may be a decline in the use of asphalt—a petroleum residue. Additional techniques are being considered for enhancing surface albedo. One proposal is to modify plants through genetic engineering to augment albedo with relatively low implementation costs. Some maintain it will take at least a decade for enhanced albedo plant varieties to be available commercially. A second proposal is covering oceans with reflective surfaces to enhance albedo. There are concerns about where an enhanced albedo project would take place in the ocean and what impact it would have on aquatic life. Cloud whitening is another proposed method for enhancing albedo. Cloud whitening is the dispersion of cloud-condensation nuclei (e.g., small particles of sea salt) in clouds in desired areas on a continual basis (see Figure 2 ). Aircraft, ships, or unmanned, radio-controlled seacraft could disperse the nuclei. Satellites have been proposed as a way to measure cloud albedo and determine the amount of cooling needed. Spraying for cloud whitening could be halted quickly if unexpected consequences arose with cloud properties expected to return to normal within a few days. The long-term implications of deploying cloud whitening are not yet fully understood. Depending on the scale of the project, marine ecosystems could be disturbed. Further research is needed for spray generator development, and to assess potential impacts on ocean currents and precipitation patterns. Moreover, the amount of cooling that could take place and at which locations requires greater study. One study identified the west coast of North America, among other locations, as an area where cloud albedo might be effectively enhanced. Aerosol Injection Aerosol injection is the dispersal of aerosols, such as hydrogen sulfide (H 2 S) or sulfur dioxide (SO 2 ), into the stratosphere to direct solar radiation back toward space or absorb heat, thus cooling the Earth. Military aircraft, artillery shells, or stratospheric balloons could be employed to inject the aerosols. The annual cost for sulfur particle injection using airplanes is calculated to be several billion dollars, depending on the amount, location, and type of sulfur particle injected into the stratosphere. However, there has not been any testing to determine whether the theoretical predictions will match reality. Aerosol injection seeks to imitate large volcanic eruptions. Indeed, many studies have based aerosol injection simulations on data gathered and analyzed from the Mount Pinatubo volcanic eruption in the Philippines in 1991, which led to a reduction in global temperatures, though not distributed evenly across regions. Sulfur releases from volcanic eruptions are random, with cooling impacts that have lasted no more than a few years. Aerosol injection would probably have to occur several times over decades or centuries to offset radiative forcing caused by greenhouse gases due to the short effectiveness time frame of aerosol injection. The benefits and risks of aerosol injection would not be evenly distributed around the globe. A potential benefit, in addition to cooling of the planet, could be reduced or reversed sea and land ice melting (as long as the aerosols don't settle on and darken snow and ice). Some risks could be drought in Africa and Asia leading to a loss in agricultural productivity, the GHG impact that would accumulate from transporting the aerosol to the site of injection, stratospheric ozone depletion, weakening of sunlight for solar power, a less blue sky, and obstruction of Earth-based optical astronomy. Space-Based Reflectors Space-based reflectors—a theoretical geoengineering technology proposal—would be shields positioned in space to reduce the amount of incoming solar radiation. The effectiveness of the shield would vary based on its design, material, location, quantity, and maintenance. The types of shield materials that have been suggested are lunar glass, aluminum thread netting, metallic reflecting disks, and refracting disks. Proposed shield locations include the low Earth orbit and Lagrange point 1 (L1). Many aspects of using space-based reflectors require additional study. In particular, further research is needed to assess shield costs; appropriate steps for implementation, including transportation to the desired location; maintenance needs; shield disposal; and ecological impacts. Several questions have yet to be answered: Would the space-based reflectors be deployed to alter the climate at a global or regional level? Is the science behind reflector deployment mature enough to provide guidance on where shield protection would be most needed? It may take several decades to construct and deploy a shield. Should the shield fail or be removed, warmer temperatures would ensue rapidly if CO 2 emission rates continued to rise. One study suggests that launching a shield to fully reverse global warming may cost a few trillion dollars, implemented over a 25-year time frame. The Debate over the Methods of Oversight Geoengineering is an emerging policy area. The decision of policymakers to either pursue or constrain geoengineering research and/or deployment activities may be based on a wide assortment of factors, including social, legal, and political factors as well as scientific and technical ones—not the least of which may be progress on other climate-related policies. The debate over the point at which governments may choose to oversee geoengineering activities as well as the form which potential oversight may take is presented in the following section. The Status Quo One possible governmental response to geoengineering activities is to continue the status quo. While the status quo varies depending on the country and technology being discussed, it can broadly be described as the provision of modest funding for geoengineering research, the limited regulation of particular geoengineering activities, and a lack of a comprehensive system of oversight or technology promotion. Advocates of maintaining this status quo tend to see private industry and commercial development as the best avenue through which to determine the merits of geoengineering research and entrepreneurship and/or to pursue it. They may contend that the commercial sector is structured to promote innovation, and that current and proposed regulation and/or legislation for greenhouse gas emission reductions (or lack thereof) is fully adequate to push the market toward the development of climate engineering, if necessary. Advocates of the status quo may stress that currently funded research in marine and atmospheric science, carbon capture and sequestration, and adaptation strategies can lay sufficient groundwork for technological transformation, and that significant investment in a contingency strategy or an "insurance policy" is economically misplaced. Greater government intervention in geoengineering research and development may stifle fact gathering and agenda setting, incorrectly choose winners and losers, and unnecessarily circumscribe a science still in its infancy. Additionally, those who want to avoid governmental support of geoengineering may consider new methods of support an inappropriate stamp of acceptability on a technology some consider deleterious. As such, further support may be unwarranted because public opinion and civic engagement may have already soured to either the technological uncertainty of the science or the cost considerations of research and regulation. If governments opt to address geoengineering activities without engaging in new law or treaty making, they would essentially endorse the status quo. The arguments for governmental abstention will play a role as governments begin to determine the appropriate thresholds for, types, and extent of government interventions in geoengineering. Threshold for Oversight If policymakers decide to address geoengineering more aggressively or comprehensively, one possible policy proposal will entail creating a system for government oversight of both research and deployment of geoengineering technologies. The question of when governments should intervene to monitor or regulate geoengineering activities will be key for determining an appropriate system of oversight. In other words, policymakers must identify the particular harms or effects that they may wish to monitor or regulate and then determine the de minimis level of geoengineering activity that is likely to cause them. Observers have suggested some criteria for determining the point at which geoengineering activities should become subject to a larger system of oversight or regulation. These criteria include: the extent to which the impacts of geoengineering are transboundary or international in scope ; the extent to which the impacts of geoengineering include the introduction of hazardous material into the environment ; the extent to which the impacts of geoengineering directly intervene in the balance of ecosystems ; and the potential perturbation, reversibility, and duration of the geoengineering activity under discussion. Ultimately, this assessment may require substantial scientific, as well as political, insight. Accordingly, some observers have suggested that governments set up an international panel process, similar to the one used by the National Academy of Science/National Research Council, under which scientific experts would testify and debate the merits of particular issues and approaches with the aim of providing insight to policymakers. However, this suggestion has been criticized for excluding social scientists, ethics analysts, the greater public, and other interested parties. An alternate suggestion is that governments should evaluate research and deployment activities in a manner similar to the one prescribed by the National Environmental Policy Act (NEPA), under which federal agencies prepare environmental impact statements for actions that significantly affect the quality of the human environment. Methods for Oversight Beyond the determination of appropriate threshold levels for public oversight for geoengineering technologies, questions concerning the potential forms of oversight may arise. It is possible that different policies may be required in order to address different concerns about the technologies. These concerns include: the technology is new and unproven, with ongoing and transformative scientific and technical evidence; the impacts of geoengineering activities are uncertain in scope, timing, and intensity; the range of stakeholders potentially affected by geoengineering activities is broad, including most nations, subnational groups, nongovernmental organizations, corporations, and civil societies; the number of actors potentially employing geoengineering activities may be small in comparison to the number of those affected; the global impacts of geoengineering activities—both its benefits and risks—may be unevenly distributed across stakeholders; and the costs of implementing geoengineering activities may be small compared to the economics of their full global impact. As such, different technologies, different stages of the research and deployment cycle, and different environments for research and deployment activities may require different methods for oversight. Different technologies may require different methods for oversight. To the extent that CDR technologies are similar to known and existing ones, their development and implementation may be adequately governed at the domestic level by existing U.S. laws. Air capture technologies are similar to those of carbon capture and sequestration for power generation. Biochar and biomass sequestration face similar life cycle analyses and regulatory issues to biofuels. Ecosystem impacts of enhanced terrestrial weathering would likely be contained within national boundaries. Enhanced weathering in oceans and ocean fertilization techniques, however, are CDR technologies that may not be currently governed by U.S. law and if deployed, could cause non-trivial effects across national boundaries. Similarly, sequestration of CO 2 geologically or in the oceans may not be analogous to regulation of other underground injection or well management. In addition, the scope, dispersions, and interventions of most SRM technologies are very likely to cause significant effects across national boundaries. While land surface albedo modification could potentially be managed under national regulatory frameworks, other technologies may trigger transboundary issues. While some existing treaties address atmosphere and space, their enforcement has rarely been tested. Different stages of the research and deployment cycle may require different methods for oversight. Geoengineering development involves several stages. Regulatory frameworks must be flexible enough to cover the full cycle (from assessment through research, modeling, laboratory trials, field trials, implementation, monitoring, and evaluation). Many scientists stress a difference in regulatory needs between geoengineering research activities and full-scale deployment. But while some contend that the early stages of investigation may require little oversight, transboundary environmental impacts could grow quickly during technological development, and negative social and economic consequences may be felt as early as small-scale field trials. Different environments for potential research or deployment may require different methods for oversight. To the extent that geoengineering technologies are governed by existing laws and treaties, they tend to fall within the provisions of legal instruments designed to regulate the uses of particular environments (e.g., space, atmosphere, ocean, land). Whereas the uses of some of these environments, such as land and the local atmosphere, are amenable to regulation via domestic laws, the uses of others, such as the high seas, transboundary and upper atmosphere, or outer space, cannot be effectively regulated without international cooperation. Moratoriums or Bans A final consideration for potential government oversight may be the imposition of a moratorium or a ban on geoengineering research, deployment, or both for some technologies or practices. In general, advocates of a moratorium or a ban state that (1) the underlying science is too uncertain and too risky and should be avoided as a precaution against adverse effects to the ecosystem; (2) the potential impacts are too uneven, or disproportionately weighted toward vulnerable groups, societies, or developing countries; (3) geoengineering research would distract from the global goal of mitigation, adaptation, and emission reductions (the "moral hazard" argument); (4) geoengineering could be used by governments and industry as a "time buying" strategy to delay mitigation commitments; and (5) geoengineering techniques have the potential of being co-opted by commercial or unethical interests. Others suggest that a moratorium or a ban on geoengineering technologies would be ill-advised. From their perspective, these actions would (1) inhibit research, some of which has been ongoing for decades in the context of marine ecology, oceanographic studies, and atmospheric meteorology; (2) make it difficult to accumulate the information needed to make informed judgments about the feasibility and the acceptability of the proposed technology; and (3) likely deter only those countries, corporations, and individuals who are most likely to develop the technology in a responsible fashion, thus failing to discourage potentially dangerous experimentation by less responsible parties. The Debate over Oversight and Governmental Involvement At present, only a few of the possible geoengineering activities appear to be under the jurisdiction of domestic laws or international treaties, and it is largely unclear how those legal instruments would encourage or constrain these activities in practice. While some continue to debate the merits of government oversight of geoengineering activities, others have suggested that new legal frameworks should be enacted to support coordinated and collaborative research, develop normative standards for enforcement, and/or prevent or minimize the risks in development and deployment. Moreover, whether frameworks are best implemented at a local, national, or international level (perhaps different for different technologies) is uncertain, and debate remains over what agencies or organizations should be tasked with oversight. The following section summarizes three different approaches to government oversight of geoengineering activities: methods of sub-national oversight, methods of national oversight, and methods of international oversight. In doing so, it also summarizes existing laws and treaties that may affect geoengineering research and deployment activities. State Policies Addressing Geoengineering In the United States, one possible method for the governance of geoengineering activities is to let states develop their own policies. A component of U.S. federalism is the potential for states to act as laboratories for regulatory innovation and experimentation. However, the potential impacts of geoengineering activities across state and regional boundaries may necessitate the development of a more comprehensive federal policy. In addition, the likely diversity and plurality of state geoengineering policies may make it difficult for private actors—be they scientific researchers or corporations—who often find it easier to operate under a single uniform set of laws rather than under a multitude of different ones. An examination of current state involvement in geoengineering policy is beyond the scope of this report. National Policies Addressing Geoengineering Efforts by the U.S. government to develop policies addressing the use of emerging technologies are well documented (e.g., nuclear science, molecular biology, and nanotechnology). These efforts may indicate best practices for developing effective policies to address the deployment of geoengineering technologies, which, like prior emerging technologies, are associated with uncertainty and a variety of social, ethical, and environmental risks. From a research standpoint, emerging high-risk technologies (such as geoengineering) often struggle to obtain private sector financing and/or research support during the initial phases of investigation. Reasons for the lack of private sector involvement in geoengineering may include (1) aversion to investing in long-term technical uncertainty; (2) lack of a price mechanism on carbon to incentivize deployment of the technologies; (3) uncertainty over the commercial or private sector use of the technologies beyond large-scale government implementation; and (4) a desire not to engage until certain social, economic, and environmental risks are addressed. Consequently, emerging technologies (such as geoengineering) may require some measure of initial public subsidy to help spur development. Some such subsidies already exist at the federal level in the United States for some technologies (e.g., carbon sequestration, renewable energy). Conversely, from a regulatory standpoint, emerging technologies (such as geoengineering) carry the risk of hazard and unintended consequences. Due to the uncertainties for public health, safety, and welfare, geoengineering activities may require constraints, prohibitions, or bans comparable to the regulatory controls placed on hazardous materials or waste streams. Current U.S. Policies Addressing Geoengineering While no federal law has been enacted with the express purpose of covering geoengineering activities, some legal instruments may currently apply to domestic geoengineering practices and their impacts, depending on the type, location, and sponsor of the activity. The federal government could expand these existing laws to specifically address geoengineering activities or develop new laws. In addition, administrative agencies could interpret their statutory authority to authorize new rules explicitly addressing particular geoengineering activities. Among the geoengineering activities that may already be affected by existing federal laws: Subterranean carbon dioxide sequestration , which may implicate provisions of the Safe Drinking Water Act, 42 U.S.C. 300f et. seq ., and the Clean Air Act, 42 U.S.C. § 7401 et. seq . In July 2008, the U.S. Environmental Protection Agency (EPA) relied on its authority under the Safe Water Drinking Act to issue a draft rule that would regulate CO 2 injection for the purposes of geological sequestration. More recently, the EPA relied on its authority under § 307(d) and § 114 of the Clean Air Act to issue a rule that would require reporting on greenhouse gas emissions from carbon dioxide injection and geologic sequestration. The 111 th Congress considered amending the Clean Air Act to broaden the EPA's authority to promulgate similar regulations relating to geologic sequestration. Ocean fertilization , which may implicate provisions of, inter alia , the Marine Protection, Research and Sanctuaries Act of 1972 (MPRSA), 16 U.S.C. § 1431 et. seq. , 33 U.S.C. § 1401 et. seq. , 33 U.S.C. § 2801 et. seq. Title I of the MPRSA prohibits unpermitted ocean dumping by any U.S. vessel or other vessel sailing from a U.S. port in ocean waters under U.S. jurisdiction. Permits may be issued by the EPA if it determines that the dumping will not unreasonably degrade or endanger human health, welfare, the marine environment, ecological systems, or economic potentialities. MPRSA also authorizes NOAA to conduct general research on ocean resources and the EPA to conduct research specifically related to phasing out ocean disposal activities. Stratospheric aerosol injection , which may implicate the ozone depletion provisions of Title VI of the Clean Air Act Amendments of 1990, 42 U.S.C. § 7401 note. Under those amendments, the Environmental Protection Agency must adjust its phase-out schedules for ozone-depleting substances in accordance with any future changes in Montreal Protocol schedules. The EPA is required to add any substance with an ozone depletion potential (ODP) of 0.2 or greater to the list of Class 1 substances and set a phase-out schedule of no more than seven years. Also, the EPA is required to add any substance that is known or may be reasonably anticipated to harm the stratosphere to the list of Class 2 substances and set a phase-out schedule of no more than ten years. Moreover, in the absence of federal lawmaking, some states have begun developing their own policies to address particular geoengineering activities. Potential Roles for Federal Agencies and Other Federally Funded Entities At this point, federal agencies and other federally funded entities have dedicated minimal efforts and funding to the development and implementation of national geoengineering policies. In testimony before the House Committee on Science and Technology, officials from various interagency bodies coordinating the U.S. response to climate change stated that their offices "(1) have not developed a coordinated research strategy [for geoengineering activities], (2) do not have a position on geoengineering, and (3) do not believe it is necessary to coordinate efforts due to the limited federal investment to date." However, there are numerous potential roles for these entities to play in the development and implementation of national geoengineering policies. In assessing what agencies should be involved and to what extent, policymakers may consider: The advantages or disadvantages of involving multiple agencies and entities; The different legislative authorities and areas of expertise that different agencies and entities offer; The advantages and disadvantages of relying on independent, executive, and/or legislative bodies; and The need to expand or constrict the legislative authority for some federal agencies, so as to give them either more or less jurisdiction over geoengineering activities. There are, broadly speaking, at least six categories of authorized functions that different federal entities can perform to assist the development and implementation of national policies on new technologies. These categories are (1) conducting research on the science or other aspects of geoengineering, (2) facilitating an exchange of information about geoengineering, (3) funding geoengineering activities, (4) monitoring geoengineering projects and their effects, (5) promulgating regulations, and (6) enforcing regulations. Table 2 lists selected agencies and entities that currently have the legislative authority to perform various sets of these different functions. These agencies and entities were selected for inclusion in the table because they may assist in the formulation or implementation of future policies on geoengineering, or, in some instances, have already begun to address geoengineering. However, it appears that, to date, no single federal entity is authorized to address the full range of geoengineering technologies. International Cooperation on Geoengineering When considering forms of international environmental cooperation or oversight, some suggest some form of multilateral agreement that would supplement existing treaties or develop out of ongoing negotiations on other issues of international concern, such as climate change. International agreements have the capacity to codify normative standards for an emerging science on an international level, create institutions for global enforcement and research, and provide a framework under which transparency can be enhanced, development modifications can be made, and future multilateral discussions can occur. The strengths of international treaties, however, may also be their weakness. Treaties are based on a process that is inherently conservative. Nations often negotiate by adjusting their commitments to a level where they are sure that compliance is technically, economically, socially, and politically feasible at the domestic level. If commitments are perceived as being too high, nations may insert vague language to make the agreement more palatable or simply refuse to join. Moreover, it can be difficult, particularly when an international situation is new and evolving, to develop international consensus on a set of norms, let alone commitments, given the cultural, political, environmental, and economic diversity of the world's nations. Consequently, the process of developing these norms may be time-intensive and carry the risk of stalemate. Some fear that, given these obstacles, the only "norm" that countries would be willing to agree to at this early stage in the geoengineering science is a moratorium on research and deployment activities. These individuals suggest that those countries who lack the capacity and political incentive to geoengineer may believe there is little to gain from permitting other countries to experiment. Thirdly, the implementation of international agreements can be difficult to monitor and enforce effectively. On one hand, countries may seek to avoid creating compliance mechanisms and new international institutions on the grounds that they are infringing on a country's sovereignty, and thereby interfering with its ability to experiment with domestic measures that best address local needs and capabilities. On the other, in the absence of such mechanisms, international agreements can be viewed as ineffective if they ultimately fail to change the status quo. Finally, even when international agreements do create new dispute settlement systems, these systems tend to be best equipped to resolve disputes between countries , which are considered the principal actors in international law, and not necessarily between one country and one private actor, or between private actors, especially since private actors may shift locations to suit their interests. Consequently, while countries may see advantages to coordinating a global plan for geoengineering activities, local and national laws might still be needed to address aspects of geoengineering that could not be addressed on an international scale. To date, no multilateral treaty has been proposed with the intent of addressing the full spectrum of possible geoengineering activities. However, principles of customary international law and existing international agreements may be implicated by geoengineering research or deployment projects. Governments would likely draw on these principles if they chose to develop a more comprehensive international approach to geoengineering, either by negotiating a new international agreement or expanding upon an existing one. This section will review many of these principles, but, because geoengineering is an umbrella term for a broad array of methods of global climate adjustment, including some that are largely theoretical, it is very likely that particular projects may be affected by international obligations and principles that are not identified in this report. Principles of Customary International Law Customary international law results from the general and consistent practice by countries which are followed from a sense of legal obligation. Duties established by customary international law are generally deemed binding on countries that have not persistently objected to it. It can be difficult to determine when a widespread "practice" evolves into a "duty" imposed by customary international law. Nevertheless, under customary international law, countries have a duty not to cause significant transboundary harm. Because geoengineering carries with it the potential for transboundary effects, this duty could be implicated by geoengineering research and/or deployment projects. International Agreements with Potential Relevance for Geoengineering In addition to establishing substantive obligations, customary international law also informs the legal significance given by countries to international agreements. As reflected in the Vienna Convention on the Law of Treaties (VCLT), customary international law establishes that signatories of an international agreement must refrain from acts that would defeat the object and purpose of that agreement unless the country makes clear its intent not to ratify the treaty. The VCLT also codifies the customary rule that a treaty may not create rights and obligations for a non-party without its consent. In other words, countries that are not parties to an international agreement may not be bound to adhere to it. The obligations arising from the following treaties and international agreements should be construed in light of these principles of customary international law. The international agreements on climate change are the most likely agreements to have significance for the full spectrum of geoengineering projects because they encourage their parties to implement national policies and mitigation actions to reduce their greenhouse gas emissions. However, these agreements do not currently address geoengineering explicitly. These agreements include: United Nations Framework Convention on Climate Change (UNFCCC) . The UNFCC opened for signature in 1992 and entered into force in 1994. The United States became a party to the UNFCCC in 1992. Under the UNFCCC, parties are required to (1) gather and share information on greenhouse gas (GHG) emissions, national policies, and best practices; (2) launch national strategies for addressing GHG emissions and adapting to expected impacts; and (3) cooperate in preparing for adaptation to the impacts of climate change. Parties are also obligated to cooperate and exchange information on technologies, and potential economic and social consequences of response strategies, as well as to give full consideration to actions to meet the needs and concerns of developing countries that may be adversely affected by, inter alia , the implementation of measures to respond to climate change. Kyoto Protocol (the Protocol). The Kyoto Protocol opened for signature in 1997 and entered into force in 2005. The United States has signed but not become a party to the Kyoto Protocol. The Protocol supplements the UNFCCC by committing its high income parties to legally binding reductions in emissions of greenhouse gases through 2012. Convention on Biological Diversity (CBD) . The CBD opened for signature in June 1992 and entered into force in December 1993. The United States has signed but has not become a party to the CBD. The key principle of the CBD is that countries have both the sovereign right to exploit their own resources pursuant to their own domestic policies and the responsibility to ensure that activities within their control do not cause damage to the environment of other states or to areas beyond the limits of national jurisdiction. In October 2010, the 10 th Conference of the Parties (COP) to the CBD adopted provisions calling for the parties to abstain from geoengineering—including "any technologies that deliberately reduce solar insolution or increase carbon sequestration from the atmosphere on a large scale that may affect biodiversity"—unless the parties have fully considered the risks and impacts of those activities on biodiversity. The COP also affirmed its earlier decision, IX/16C, which acknowledged the work of the London Convention and the London Protocol regarding ocean fertilization and requested that its own Parties ensure that ocean fertilization activities do not take place until either there is adequate scientific basis on which to justify such activities or the activities are small-scale scientific research studies within coastal waters. In addition to the international climate change agreements, the following international agreements may be relevant to the use of CDR technologies. United Nations Convention on the Law of the Sea (UNCLOS) . UNCLOS opened for signature in December 1982 and entered into force on November 16, 1994. Despite participating in the UNCLOS negotiations, the United States declined to sign the final agreement and has not become a party since then, although it views many provisions of UNCLOS as customary international law that it was already obligated to follow. UNCLOS establishes a legal regime governing activities on, over, and under the world's oceans and defines countries' jurisdictions over, and rights of access to, the oceans and their resources. Article 194 of the UNCLOS imposes a duty on its parties to take, individually or jointly, measures that are necessary to prevent, reduce, and control pollution of the marine environment from any source. The UNCLOS defines pollution as any human-driven introduction of substances or energy into the marine environment that results or is likely to result in deleterious effects such as harm to living resources and marine life, hazards to human health, hindrance to marine activities, or impairment of sea water quality. This provision could have significance for a geoengineering project that pollutes the marine environment, by land, sea, or air. In addition to, arguably, mandating that a country not engage in that activity, once a geoengineering project resulted in the pollution of the ocean environment, Article 194 would impose a duty on the member country responsible for that pollution to control and limit its spread. Article 192 of the UNCLOS imposes a general obligation on countries to protect and preserve the marine environment. These provisions could be implicated by ocean fertilization and some other geoengineering activities if they have a negative effect on the marine ecosystem. Large-scale ocean fertilization projects could also implicate several UNCLOS provisions, including Article 56, and 238 through 241 on marine scientific research. London Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter ( London Convention), and London Protocol . The London Convention was opened for signature in December 1972 and entered into force in August 1975. The London Protocol was agreed to in 1996 as a means of modernizing and eventually replacing the London Convention. The United States became a party to the London Convention in 1974, but it has not become a party to the London Protocol. Contracting parties pledge to take all possible steps to prevent the pollution of the sea by the dumping of substances that are liable to create hazards to human health, harm living resources and marine life, or interfere with other legitimate uses of the sea. However, ocean fertilization and other geoengineering projects that entail the deliberate disposal of substances into the sea might not implicate the London Convention's prohibitions on dumping if they are deemed placed into the sea "for a purpose other than the mere disposal thereof, if not contrary to the aim of the Convention." Nevertheless, the parties have recently considered amendments and resolutions to these agreements to address some geoengineering technologies more explicitly. For example, the 2006 amendments to the London Protocol provide guidance on the means by which sub-seabed geological sequestration of carbon dioxide can be conducted, stating that carbon dioxide streams may only be considered for dumping if (1) disposal is into a sub-seabed geological formation; (2) the substances dumped consist overwhelmingly of carbon dioxide; and (3) no other wastes or matter were added to them for the purpose of disposing of them. Two years later, in 2008, the parties adopted Resolution LC-LP.1 , agreeing that ocean fertilization research activities do not to constitute dumping under the London Convention and Protocol. Finally, in addition to the climate change agreements, the use of SRM technologies may implicate the following international agreements: Convention on the Prohibition of Military or Other Hostile Use of Environmental Modification Techniques (ENMOD or the Convention) . ENMOD opened for signature in May 1977 and entered into force on October 5, 1978. The United States became a party to ENMOD in 1979. ENMOD's aim is to prohibit the military or any other hostile use of environmental modification techniques which have widespread, long-lasting, or severe effects as the means of destruction, damage, or injury to any party. The Convention defines the term "environmental modification techniques" as any technique for changing—through the deliberate manipulation of natural processes—the dynamics, composition, or structure of the Earth, including its biota, lithosphere, hydrosphere, atmosphere, or outer space. This definition may encompass certain geoengineering activities. However, the Convention further states that the provisions of the Convention do not hinder the use of environmental modification techniques for peaceful purposes, such that parties to the Convention may undertake to facilitate, and have the right to participate in, the fullest possible exchange of scientific and technological information on the use of environmental modification techniques for peaceful purposes. Convention on Long-Range Transboundary Air Pollution (CLRTAP or the Convention) . CLRTAP opened for signature in 1979 and entered into force on March 16, 1983. The United States became a party to the Convention in 1979. Contracting parties commit themselves to limiting, and to gradually preventing and reducing their discharges of air pollutants and thus to combating the resulting transboundary pollution. Long-range transboundary air pollution is defined by the Convention as the human introduction of substances or energy into the air which have deleterious effects on human health, the environment, or material property in another country, and for which the contribution of individual emission sources or groups of sources cannot be distinguished. It is uncertain which geoengineering activities CLRTAP would regulate, or how such regulation would be implemented. Vienna Convention for the Protection of the Ozone Layer (the Convention) . The Vienna Convention for the Protection of the Ozone Layer was opened for signature in 1985 and entered into force in 1988. The Convention, along with the Montreal Protocol on Substances that Deplete Ozone Layer, which was opened for signature in 1987 and entered into force in 1989, aims to control the production and consumption of the most commercially and environmentally significant ozone-depleting substances. The United States became a party to the Vienna Convention in 1986. It is also a party to the Montreal Protocol (since 1988) and has agreed to all four amendments to the Protocol. Parties to these agreements, within their capabilities, are expected to (1) cooperate to better understand and assess the effects of human activities on the ozone layer and the effects of the modification of the ozone layer; (2) adopt appropriate measures and cooperate in harmonizing appropriate policies to control the activities that are causing the modification of the ozone layer; (3) cooperate in formulating measures for the implementation of the Convention; and (4) cooperate with competent international bodies to implement the Convention. Certain stratospheric aerosol injection technologies for geoengineering, to the extent that they pose a risk to the ozone layer, have the potential to implicate many of the phase-out provisions of the Convention and the protocols. The Relevance and Functions of Various International Bodies At this point, no international organization has a direct mandate to address the full spectrum of possible geoengineering activities. It is possible, however, that existing institutions could fit this purpose if their charters were modified and expanded. Assessing what kinds of institutions would be best suited for this enterprise is difficult, given how little is currently understood about the technical, economic, social, and political components of the technologies. Consequently, there is debate over the ideal structure and framework of an international institution that should have responsibility for geoengineering activities or policies. There are many factors to consider before deciding whether to create a new international body to address geoengineering or to grant jurisdiction over geoengineering to an existing international body or group thereof. Among these factors are: The functions the international body should perform (see Table 2 ); The level of membership and inclusiveness the international body should have; The level of resources and experience on which the international body should be able to draw; The appropriate subject-area jurisdiction, or jurisdictions, that the international body should have; and The voting rules that will best enable the international body to make careful inclusive decisions but still respond with appropriate speed to new issues. Some observers suggest that, because engineering the climate system is a global activity with transboundary effects, only a multilateral body is appropriate for addressing it. This kind of body could be the United Nations, a specialized body or agency contained within it, such as the United Nations Environment Programme (UNEP) or International Maritime Organization (IMO), or an environmental convention secretariat associated with it, such as the secretariat for the United Nations Convention on Climate Change (UNFCCC). Among the advantages of involving this kind of international institution are that it typically has (1) a truly international reach, (2) access to existing budgets and resources, (3) legitimacy and leverage with different countries and stakeholders, and (4) experience in handling and developing consensus around controversial issues on an international scale. However, while a multilateral body may assist in bringing transparency, inclusiveness, and equitability to geoengineering oversight, the U.N. process is slow and complicated by design and may fail to provide a sufficiently rapid response to geoengineering activities. Furthermore, some worry that folding geoengineering into the jurisdiction of a pre-existing multilateral institution might result in mission creep and conflicts of interest. These critics suggest that the institution might be biased against geoengineering because of its primary mission or, alternately, that it might be forced to allocate less of its time and resources to achieving that primary mission. Another type of international organization that could be involved in geoengineering is plurilateral or ad hoc bodies, which are frequently groups of countries with shared characteristics thta might facilitate dialogue and coordination on particular issues. For example, members of groups like the G-20 or Major Economies Forum (MEF) may share similar economic situations, technical abilities, or climate concerns that would enable these groups to coordinate research agendas and facilitate the exchange of information. But, because these groups have limited membership, their involvement might undermine the legitimacy of their response to geoengineering. The countries that are excluded from participating from the plurilateral organization, and therefore from formulating its response to geoengineering, may demand adequate voice and representation. Moreover, the same issues of mission creep and conflict of interest might plague the use of existing plurilateral groups just as they would the use of existing multilateral institutions. A third type of international organization that could be involved is that of the intergovernmental organization, which typically acts a policy advisor to its member countries. The International Energy Association (IEA), for example, has a mandate to coordinate government measures affecting energy security, economic development, and environmental protection. These measures include those related to carbon capture and sequestration, and the IEA has published reports assessing its members' progress towards implementing CCS projects and setting recommendations for next steps. A fourth type of international organization that could be involved is that of the international nongovernmental organization, which is exemplified by the International Organization for Standardization (ISO). The ISO is a network of the national standards institutes of 163 countries, some of which are affiliated with their national governments and others of which are more closely associated with the private sector. The ISO develops an international set of standards in response to a clearly established need by a particular sector or group of stakeholders. Most ISO members have some form of public review procedures so that outside feedback can be incorporated into the draft standard. For that standard to then be accepted as an ISO International Standard, it must be approved by at least two-thirds of the ISO national members. To date, the ISO has not developed a comprehensive set of standards addressing geoengineering activities. However, it has created standards in other potentially related areas including air quality, water quality, and the quantification and reporting of greenhouse gas emissions. Finally, international research consortia represent a fifth type of potentially relevant international body. Research consortia are generally well equipped to (1) set scientific research priorities at the initial stages of an emerging technology; (2) explore and evaluate the feasibility, benefits, risks, and opportunities presented by an emerging technology; (3) coordinate existing research, identify new research agendas, and develop effective and objective assessment frameworks to inform the initial stages of regulation; (4) collaborate with the scientific, policy, commercial, regulatory, and nongovernmental communities to provide independent oversight of evolving regulatory issues for an emerging technology; and (5) formulate, develop, and socialize an international and voluntary code of practice to govern research in an emerging technology to provide guidance and transparency for the public, private, and commercial sectors. Accordingly, loosely coordinated international consortia could support cooperative geoengineering research through transparent and informal consultations on risk assessment, acceptability, and oversight. These collaborations could engage a broad group of experts and stakeholders, from scientists to public policy-makers to civil society and explore the safest and most effective forms of geoengineering while building a community of responsible researchers. International policy norms on geoengineering could then be built from the bottom up, as knowledge and experience regarding geoengineering technologies continued to develop. Interactive links between emerging governance and ongoing scientific and technical research could be the core of this approach. Observers point to similar international collaborations where the science has had potentially hazardous side effects such as the European Organization for Nuclear Research (CERN) and the Human Genome Project. Currently, however, no collaborative mechanism is applicable to geoengineering. Notably, any international body granted jurisdiction over geoengineering will likely lack the authority to fully regulate or enforce its members' compliance with the terms of the body's charter or the underlying international agreement. Even international bodies with dispute settlement mechanisms in place depend, ultimately, on their members' cooperation to conform their measures and actions with the terms of either the international agreement in question or any decision reached pursuant to the dispute settlement process. For example, the International Court of Justice (ICJ) handles disputes between Members of the United Nations and other countries that have either become parties to the Statute of the Court or otherwise accepted the ICJ's jurisdiction. However, if a party to an ICJ dispute fails to act in accordance with the ICJ's judgment, the other party may present the matter to the U.N. Security Council, which may "if it deems necessary, make recommendations or decide upon measures to be taken to give effect to the judgment." Similarly, the World Trade Organization has a dispute settlement process for disputes involving allegations of a Member's non-compliance with the provisions of the General Agreement on Tariffs and Trade (GATT) or one of the WTO agreements. However, it is ultimately up to the WTO Dispute Settlement Body, which is composed of representatives of all WTO Members, to authorize the complaining Member to retaliate (generally by raising tariffs against) the defending Member for non-compliance with a WTO panel or Appellate Body decision. Consequently, while the decisions rendered by the ICJ and the WTO panels and Appellate Body generally persuade countries to comply, international institutions must ultimately rely on international negotiations and diplomacy to ensure universal compliance with the underlying agreements. Conclusion Geoengineering is an emerging field that, like other areas of scientific innovation, requires careful deliberation by policymakers, and possibly, the development or amendment of international agreements, federal laws, or federal regulations. Currently, many geoengineering technologies are at the conceptual and research stages, and their effectiveness at reducing global temperatures has yet to be proven. Very few studies have been published documenting the cost, environmental effects, socio-political impacts, and legal implications of geoengineering. Nevertheless, if geoengineering technologies are deployed, they are expected to have the potential to cause significant transboundary effects. Some foreign governments and private entities have expressed an interest in pursuing geoengineering projects, largely out of concern over the slow progress of greenhouse gas reductions under the international climate change agreements, the possible existence of climate "tipping points," and the apparent political or economic obstacles to pursuing aggressive domestic greenhouse gas mitigation strategies. However, in the United States, there is limited federal involvement in, or oversight of, geoengineering. Consequently, to the extent that some federal agencies and U.S. states have begun addressing geoengineering projects, they are doing so in a largely piecemeal fashion. If the U.S. government opts to address geoengineering at the federal level, there are several approaches that are immediately apparent. First, it may continue to leave geoengineering policy development in the hands of federal agencies and states. Second, it might impose a temporary or permanent moratorium on geoengineering, or on particular geoengineering technologies, out of concern that its risks outweigh its benefits. Third, it might develop a national policy on geoengineering by authoring or amending laws. Fourth, it could work with the international community to craft an international approach to geoengineering by writing or amending international agreements. That the government can play a substantial role in the development of new technologies has been manifested in such areas as nanotechnology, nuclear science, and genetic engineering.

Climate change policies at both the national and international levels have traditionally focused on measures to mitigate greenhouse gas (GHG) emissions and to adapt to the actual or anticipated impacts of changes in the climate. As a participant in several international agreements on climate change, the United States has joined with other nations to express concern about climate change. Some recent technological advances and hypotheses, generally referred to as "geoengineering" technologies, have created alternatives to traditional approaches to mitigating climate change. If deployed, these new technologies could modify the Earth's climate on a large scale. Moreover, these new technologies may become available to foreign governments and entities in the private sector to use unilaterally—without authorization from the United States government or an international treaty—as was done in the summer of 2012 when an American citizen conducted an ocean fertilization experiment off the coast of Canada. The term "geoengineering" describes an array of technologies that aim, through large-scale and deliberate modifications of the Earth's energy balance, to reduce temperatures and counteract anthropogenic climate change. Most of these technologies are at the conceptual and research stages, and their effectiveness at reducing global temperatures has yet to be proven. Moreover, very few studies have been published that document the cost, environmental effects, socio-political impacts, and legal implications of geoengineering. If geoengineering technologies were to be deployed, they are expected to have the potential to cause significant transboundary effects. In general, geoengineering technologies are categorized as either a carbon dioxide removal (CDR) method or a solar radiation management (SRM) method. CDR methods address the warming effects of greenhouse gases by removing carbon dioxide (CO2) from the atmosphere. CDR methods include ocean fertilization, and carbon capture and sequestration. SRM methods address climate change by increasing the reflectivity of the Earth's atmosphere or surface. Aerosol injection and space-based reflectors are examples of SRM methods. SRM methods do not remove greenhouse gases from the atmosphere, but can be deployed faster with relatively immediate global cooling results compared to CDR methods. To date, there is limited federal involvement in, or oversight of, geoengineering. However, some states as well as some federal agencies, notably the Environmental Protection Agency, Department of Energy, Department of Agriculture, and the Department of Defense, have taken actions related to geoengineering research or projects. At the international level, there is no international agreement or organization governing the full spectrum of possible geoengineering activities. Nevertheless, provisions of many international agreements, including those relating to climate change, maritime pollution, and air pollution, would likely inform the types of geoengineering activities that state parties to these agreements might choose to pursue. In 2010, the Convention on Biological Diversity adopted provisions calling for member parties to abstain from geoengineering unless the parties have fully considered the risks and impacts of those activities on biodiversity. With the possibility that geoengineering technologies may be developed and that climate change will remain an issue of global concern, policymakers may determine whether geoengineering warrants attention at either the federal or international level. If so, policymakers will also need to consider whether geoengineering can be effectively addressed by amendments to existing laws and international agreements or, alternatively, whether new laws and international treaties would need to be developed.

Introduction American based companies reported earning $938 billion in profits overseas in 2008 (most recent data). The U.S. will generally defer levying a tax on this income until it is brought back (repatriated) to the United States, although the countries where American companies operate may tax this income at the time it is earned. The United States' method for taxing American based companies gives rise to two principal issues in the international tax debate. First, American companies can use tax deferral and other techniques to avoid or delay taxes by moving profits out of high-tax countries (or out of the U.S.) and into low-tax countries with little corresponding change in business operations, a practice known as "profit shifting." Second, the ability to defer taxes on income earned abroad allows American companies to reinvest earnings in foreign markets and expand business operations alongside foreign counterparts. This report focuses on the profit shifting aspect of international business behavior in response to taxation. Data on the activities of American based companies with overseas operations is analyzed to understand the degree to which, if any, profit shifting may be occurring. The analysis appears to show that American companies report earning profits in tax haven or tax preferred countries that, when compared to more traditional economies, appear to be disproportionate to hiring and capital investment in those countries. Profits reported by American companies also appear to be disproportionate to national output in the tax haven countries, and in some countries, these reported profits actually exceed total economic output. By all indicators examined in this report, profit shifting has generally trended upward overtime. The findings of this report are in agreement with a large body of economic research that has found evidence that American companies are shifting profits in an attempt to reduce their tax liabilities and that U.S. tax revenues suffer as a result. For example, economist Kimberly Clausing has estimated that profit shifting by American companies cost the government between $57 billion and $90 billion in lost revenue in 2008. Economist Martin Sullivan also estimated significant revenue losses, although they were generally less than half of Clausing's estimates for the most recent year analyzed by both researchers, 2004. Employing a different approach than Clausing and Sullivan, professors Charles Christian and Thomas Schultz have estimated that on net $87 billion was shifted out of the U.S. in 2001, which, at a 35% tax rate would imply a revenue loss of about $30 billion. A number of media outlets have also recently published stories which report that companies such as Apple, Cisco, Facebook, Google, and Microsoft may be using sophisticated tax planning techniques to shift profits to low tax countries and lower their U.S. tax liabilities. Policymakers here at home have taken notice of possible profit shifting. For example, the Senate Permanent Subcommittee on Investigations held a hearing in September 2012 on the methods companies use to shift profits and possible options for curbing such behavior. Witnesses included IRS officials, academics, private tax consultants, and executives from the tax departments at two American companies (Hewlett-Packard and Microsoft). Profit shifting has also been the specific target of several bills that were introduced in the 112 th Congress ( H.R. 2669 , S. 1346 , S. 2075 ), as well as part of broader reform proposals in the 112 th Congress, including S. 727 (Senators Wyden, Begich, and Coats), S. 2091 (Senator Enzi), and a House Ways and Means "discussion draft" (Representative Camp). The issue of profit shifting has also attracted the attention of foreign policymakers. Several recent foreign media stories have called attention to what is perceived by some to be tax avoidance by American companies operating abroad. According to those reports, Prime Minister David Cameron and members of the British Parliament have expressed concern over the rather low tax liability of several American companies operating in the United Kingdom. Furthermore, German Finance Minister Wolfgang Schäuble and British Chancellor of the Exchequer George Osborne, in a joint statement, have called on the G20 countries to coordinate efforts to prevent profit shifting by companies of all nationalities and to protect the global corporate tax base. Analysis of American Multinational Companies The Bureau of Economic Analysis (BEA) collects data on where American based companies that operate in foreign markets report profits and various other pieces of business information. These companies, often referred to as U.S. multinational companies (MNCs), are a combination of a U.S. based "parent" company and "affiliates," which are owned by the parent and operate in foreign markets. Because U.S. based parents can have various degrees of ownership, and hence control over their foreign affiliates, the BEA distinguishes between affiliates with a parent that has a majority ownership stake and affiliates with a parent that has any ownership stake. The BEA also distinguishes between bank and nonbank parents and affiliates. This section analyzes the BEA data to determine the extent to which, if any, U.S. MNCs may be shifting profits. To do this, 10 countries, formed into two country groups, are analyzed. The first group consists of the five countries commonly identified as being "tax preferred" or "tax haven" countries, and includes Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland. The second group, which provides a baseline for comparison, consists of the five more traditional economies. This group includes Australia, Canada, Germany, Mexico, and the United Kingdom. The profits reported by foreign affiliates of U.S. MNCs in the two country groups are presented and analyzed. The countries in each respective group were chosen because they consistently ranked among the top places where American companies reported profits. The profits reported by American based companies in the two country groups are then compared with their real economic (business) presence in the country groups. Two measures of the real economic presence of MNCs are considered. The first measure is the share of total foreign affiliate employment in each country group. Foreign affiliate employment represents the number of workers employed by U.S. MNCs outside of the United States. The second measure is foreign affiliate capital expenditures on property, plants, and equipment. Capital expenditures represent investment in physical assets by U.S. MNC affiliates. These two variables were chosen because the BEA data guide describes them as good indicators of the size of U.S.-owned business operations in affiliate countries. It is also likely that these measures are less susceptible to reporting manipulation by firms than say, financial variables, since they involve tangible economic factors. Next, the profits reported in the two country groups are compared with the size of economies that comprise each country group. To measure the size of the economies analyzed, the gross domestic product (GDP) for each country was obtained from the Economist Intelligence Unit . GDP is the value of all final goods and services produced by the citizens and firms in an economy. Alternatively, GDP can be interpreted as the total income earned by the citizens and domestically based companies in a country. Thus, the profits (income) of U.S. MNCs reported in a particular foreign country will not count toward that country's GDP. The GDP figures used in the analysis were adjusted for purchasing power parity (PPP). PPP is the method preferred by economists when making cross-country comparisons. Only U.S. MNCs with a nonbank parent with majority-owned nonbank foreign affiliates were considered in the analysis because the BEA did not start collecting information on firms in the banking and financial industries until 2007, and has only recently begun to collect more information about these firms. The analysis was further limited to majority-owned foreign affiliates because the BEA does not adjust affiliate data for the ownership stake of the parent, which could potentially affect the analysis if affiliates that have a U.S. parent with a minority stake engaged in, or do not engage in, a particular tax strategy. Majority-owned foreign affiliates accounted for 94% of affiliates in 2008. Where Profits Are Reported Figure 1 displays the share of profits that foreign affiliates of American MNCs reported in the tax preferred and traditional country groups between 1999 and 2008. The share of overseas profits reported in tax preferred countries has fluctuated around 40% since 2002 after increasing from a low of 24% in 2000. In the most recent data year available (2008), American MNCs reported earning 43% of their overseas profits in the country group comprised of Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland. In comparison, American MNCs reported 14% of all profits earned abroad in 2008 in Australia, Canada, Germany, Mexico and the United Kingdom. The relatively low share of profits reported in the traditional economy group follows a general decline in profits reported in these countries over the last decade. In 1999, for example, the traditional economies accounted for 35% of profits reported abroad. Viewed another way, profits reported in the five traditional county group economies have decreased approximately 60% over the sample period. The trends displayed in Figure 1 could be explained by economic factors. If companies are shifting real production and business activities, then it should be expected that the location of profits would change as well. At the same time, it could be that the location of reported profits has changed without a corresponding change in real business activities. If this is the case, it could be indicative of profit shifting since, by definition, profit shifting involves a disconnect between where profits are reported and where real business activity occurs. The next two sections analyze this further using three measures of business and economic activity—employment, investment, and GDP. Where Workers Are Hired and Investments Are Made Figure 2 shows the share of workers hired (dashed lines) and investments made (solid lines) by American companies outside the U.S. in both groups of countries. Three features of the data are immediately apparent. First, the amount of investment and hiring in the traditional economy group dwarfs that which occurs in the tax preferred countries. In 2008, for example, American companies hired 40% of their foreign labor from and made 34% of their foreign investments in the country group containing Australia, Canada, Germany, Mexico and the United Kingdom. In comparison, 4% of the workers hired outside the U.S. by American companies and 7% of the investments made abroad were in the country group of Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland. Second, American companies began curtailing employment and investment in the traditional group's economies in the early 2000s. Employment in these countries as a share of hiring abroad has fallen from 48% to 40%, as has investment, which has decreased from 49% to 34%. Because American companies appear to be reducing their real business presence in the traditional country group (relative to the rest of the world), it is perhaps not surprising that profits reported in these countries are also falling. It is not possible, however, to say how much of the reduction in profits reported is due to declining real activity and how much is due to profit shifting. Third, while employment and investment have fallen over time in the traditional economy group, they have remained nearly constant in the tax preferred group at around 4% and 7%, respectively. In spite of the stability of employment in investment, Figure 1 shows that reported profits have increased roughly 60% in the tax preferred countries over the sample period. Such a significant increase in profits without a corresponding increase in employment or investment is suggestive of profit shifting into tax preferred countries. To quantify the discrepancy in reported profits relative to investment and employment that exists between the traditional country group's economies and the tax preferred group's economies, Figure 3 displays two relative profit ratios. The first is the ratio of profits reported per employee in the tax preferred country group relative to profits reported per employee in the traditional country group. This figure shows that at one point (in 2003), American companies were reporting profits of $158 per employee in tax preferred countries for every $1 in profit per employee they were reporting in the traditional economies. In 2008, the latest data year, MNCs in the tax preferred group were reporting $142 per employee for every $1 per employee in the traditional economies. The second ratio displayed in Figure 3 is the ratio of profits reported per investment in the tax preferred country group relative to the ratio of profits reported per investment in the traditional country group. This ratio indicates that at its high, $64 of profit were being reported per investment dollar in tax preferred economies for every $1 of profit per investment dollar that American firms reported in the traditional economies in 2005. The most recent data show that MNCs in the tax preferred country group reported $61 of profit per investment dollar versus $1 of profit per investment dollar in the traditional country group. The two profit ratios in Figure 3 would appear to give an indication that the return to real business activities (hiring and investment) in the tax preferred countries are significantly higher than in the traditional economies. It could be argued, that it would be to the advantage of American MNCs to increase hiring and capital expenditures in the tax preferred economies. But as Figure 2 indicates, the rise in profits reported in these countries is not associated with any increase in employment or investment in Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland. This lack of any such relationship would again seem to support the hypothesis, held by some, that American MNCs are engaged in profit shifting. Profits Relative to GDP Further indication of profit shifting is found from a comparison of the business profits reported by U.S. MNCs in the two country groups as a share of GDP. Figure 4 shows that on average, profits as a share of GDP in the traditional group's economies in aggregate has been between 1% and 2%, and that this average has been relatively constant since 1999. In contrast, average profits, as a share of GDP, in the tax preferred countries has been increasing steadily since the early 2000s, and reached 33% in 2008. All averages displayed in Figure 4 were weighted to account for the relative size of the economies in each group. The weighted averages displayed in Figure 4 mask the increase in reported business profits as a percentage of GDP in the individual tax preferred countries (not displayed in this report). For example, in Bermuda, profits reported by U.S. MNCs affiliates have increased from 260% of GDP in 1999 to over 1000% of GDP in 2008. In Luxembourg, MNC's profits went from 19% of GDP in 1999 to 208% of GDP in 2008. That is to say, American companies are now reporting more business profits in Bermuda and Luxembourg than the reported value of all goods and service these two countries produce in a year. Ireland, the Netherlands, and Switzerland have seen a less dramatic, but still significant increase in profits as a share of GDP—from 5% in 1999 to 20% in 2008 in the case of the Netherlands, from 14% to 42% in the case of Ireland, and from 5% to 15% in the case of Switzerland. Analysis Caveat It is important to highlight a caveat to the analysis of the BEA data on MNCs. The income measure used to compute MNCs' profits includes income from equity investments, which some have argued can lead to double counting if there is a multi-level affiliate ownership structure within companies. Kimberly Clausing addresses this issue using an alternative data series produced by the BEA that does not suffer from the double counting problem. This alternative data series, as Clausing points out, however, suffers from its own problems. Still, Clausing finds similar results using the data series analyzed in this report, and the alternative BEA data. She concludes "while the adjustment for double-counting can make some difference, it is unlikely to be the dominant feature..." Policy Considerations The debate over taxing American MNCs may involve a number of policy considerations. While Congress has expressed an interest in limiting the use of complicated tax strategies that allow American companies to avoid taxation on their overseas operations, there is also concern that attempts to reduce profit shifting that are too stringent could limit access to funding for legitimate business reasons. In the larger context of tax reform, Congress has debated how profit shifting would be affected by a move to a more territorial-type tax system or to a more worldwide-type system for taxation of American companies. There have also been discussions about reducing the corporate tax rate in general, which could change the incentives for companies to move profits to low-tax countries. Congress may also want to consider, as some have suggested, the adoption of formula apportionment, and a wide-scale coordination effort with industrialized counterparts. The remainder of this report discusses these considerations in greater detail. Profit Shifting vs. Funding Access While there appears to be growing evidence that American companies are engaged in profit shifting, some private industry advocates have expressed concern that attempts to limit the practice may have the unintended consequence of raising the cost of investment financing both at home and abroad. If, for example, the U.S. were to enact a policy that required MNCs to pay U.S. tax on income as it were earned by foreign subsidiaries (e.g., repeal deferral), the cost of capital would increase since the pool of financing that money represented would now only be available after tax. This potential problem could be alleviated or at least mitigated if anti-abuse provisions were focused on operations in tax haven or tax preferred countries. The list of countries could be adjusted by the IRS if data suggested the profits reported in particular countries appeared not to be justified by the physical business presence of firms. In contrast to targeting the income earned in specific countries, Congress has previously enacted anti-abuse provisions that target the type of income firms use to shift money to tax havens. This was the intent of subpart F which prevents deferral of highly fungible income that can be more easily shifted. Closely related to deferral and subpart F income is an important temporary exception to subpart F income for "active financing income" that is set to expire at the end of 2013. The active financing exception relates to the income earned by American corporations that operate banking, financing, and insurance lines of business abroad, even if their primary line of business is quite different. On the one hand, there is the argument that there are real economic rationale for keeping this income abroad and that transactions involving active financing income are not necessarily for tax avoidance purposes. On the other hand, it could be argued that passive income is passive income, regardless of the underlying line of business. Nonetheless, active financing income qualifies for deferral and is only taxed when it is repatriated to the United States. Congress could choose to modify the active financing exception or allow it to expire if Congress believes the exception is used more to avoid taxes than to finance real operations. Another option would take a hybrid approach, with the goal of minimizing incentives to shelter money in tax havens but still providing the ability to keep money abroad for real business operations. One variant of this option would impose a minimum tax on income earned in countries with low tax rates. The tax would be applied to deferred income earned in countries with a tax below a particular rate, for example, 20%. Income earned in countries with rates below 20%, thereafter, would be subject to a current U.S. tax of 20%. The income earned in countries with rates above this level would be exempt from U.S. taxation, either entirely or until repatriated. Some have expressed concern that designing such a minimum tax may be too complex. An alternative to this approach, which creates a "cliff" effect by encouraging firms to move investment to countries with tax rates just above the minimum, is to impose an overall minimum tax with a credit for taxes paid. Territorial vs. Worldwide Taxation The U.S. currently taxes MNCs according to what is roughly considered a worldwide based tax system. American companies are generally required to pay U.S. tax on all income, regardless of where it is earned, although they are allowed to defer certain taxes until income is repatriated, and may also claim a limited credit for foreign taxes paid. There is interest from some in Congress to switch to a territorial based tax system. Under a territorial system, the U.S. would forgo (or mostly forgo) taxing income earned outside its borders. In turn, domestic companies competing in foreign markets would face the same (foreign) tax rates as their competitors, possibly enhancing the competitiveness of U.S. firms in foreign markets relative to the current system. There is uncertainty, however, over whether switching to a territorial system would actually increase the competiveness of U.S. firms. The effective U.S. tax burden on foreign earned income is already argued by some analysts to be quite low because of the ability to shift income to low-tax countries, suggesting that the current system may not be preventing American MNCs from competing abroad. Additionally, depending on the specific design of the territorial system adopted, the tax on foreign earned income could actually increase. For example, if the U.S. were to adopt a system like Japan recently instituted, a portion of foreign earned income would be subject to current U.S. taxation if the foreign country's tax rate was less than 20%. In comparison, under the current system U.S. companies can use sophisticated tax planning techniques to lower their effective tax below the statutory 35% rate. At the same time, without the proper anti-abuse provisions in place, it is possible that under a territorial system profit shifting could increase as firms maneuver to attribute more income to operations in low tax countries. Anti-abuse provisions particularly focused on the transfer of intangible assets (patents, intellectual property, etc.) out of the U.S. may be the most useful at curbing profit shifting under a territorial system. For a detailed discussion about profit shifting under a territorial system, see CRS Report R42624, Moving to a Territorial Income Tax: Options and Challenges , by [author name scrubbed]. Reduced Corporate Tax Rates One topic that has been part of nearly every debate regarding corporate tax reform has been the 35% top statutory corporate tax rate. Reducing this rate would decrease the incentive to shift profits by reducing the tax savings such behavior would produce. Companies profit shift to take advantage of the differential between the U.S. tax rate and rates in low-tax countries. By reducing this discrepancy, the incentive to shift profits would be reduced as well. Note, however, that reducing the U.S. tax rate to within the range typically suggested, 25% to 28%, would still leave the U.S. as a high tax country relative to tax havens, implying that the incentive to profit shift would remain. A reduction in the top tax rate may also come at the cost of lost federal revenue on net resulting from lower tax rates being applied to all corporate income. Combining a rate reduction with a broadening of the corporate tax base would help to offset any revenue loss. A reduction in the statutory tax rate is also central to other debates in the international tax policy area, particularly with regards to the debate over the effective (or actual) corporate tax rate and its effect on American companies' ability to compete in the world market. Formula Apportionment Another option that has been suggested that would reduce profit shifting is the adoption of a formula apportionment approach to taxation. The current system effectively allows companies to engage in country by country tax accounting. This provides an incentive to shift as much profit as possible to low-tax country accounts. An alternative to separate accounting is to effectively pool the income earned around the world, and then allow countries to tax a share of total profits. The share each country could tax would be determined by a formula that measures real business activity conducted in each country. For example, if a U.S. company had 60% of its employees located domestically and 40% in Canada, and earned $100 million between the two countries, the U.S. would have the right to tax $60 million of that income, and Canada would have the right to tax $40 million. More realistically, the formula used to apportion profits would depend on more than just employee location, such as the location of assets and sales. Coordination With Other Countries Formula apportionment would likely require coordination with countries around the world. Whether or not formula apportionment is pursued there are indications that other large economies are concerned about profit shifting and are open to some coordinate effort to reduce the behavior. As mentioned at the beginning of this report, German Finance Minister Wolfgang Schäuble and British Chancellor of the Exchequer George Osborne have expressed their interest in a coordinated effort involving the G20 countries to address profit shifting. The U.S. Treasury has also met with European and Asian leaders to discuss coordination on tax avoidance at the individual level. Thus, it appears that coordination on corporate tax avoidance is plausible. Given recent and projected budget shortfalls in the U.S. and in Europe, a coordinated effort to align tax revenue collections with the location of real business activity may be mutually beneficial. Any coordinated effort may, however, require renegotiating existing tax treaties.

This report uses data on the operations of U.S. multinational companies (MNCs) to examine the extent to which, if any, MNCs are moving profits out of high-tax countries (or out of the U.S.) and into low-tax countries with little corresponding change in business operations, a practice known as "profit shifting." To do this, the profits reported by American firms in two groups of countries are compared with measures of real economic activity in those locations. The first group consists of the five countries commonly identified as being "tax preferred" or "tax haven" countries, and includes Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland. The second group, which provides a baseline for comparison, consists of five more traditional economies. This group includes Australia, Canada, Germany, Mexico, and the United Kingdom. Consistent with the findings of existing research, the analysis presented here appear to show that significant shares of profits are being reported in tax preferred countries and that these shares are disproportionate to the location of the firm's business activity as indicated by where they hire workers and make investments. For example, American companies reported earning 43% of overseas profits in Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland in 2008, while hiring 4% of their foreign workforce and making 7% of their foreign investments in those economies. In comparison, the traditional economies of Australia, Canada, Germany, Mexico and the United Kingdom accounted for 14% of American MNCs overseas' profits, but 40% of foreign hired labor and 34% of foreign investment. This report also shows that the discrepancy between where profits are reported and where hiring and investment occurs, as examples of business activity, has increased over time. Additional evidence that profit shifting has increased over time is found from a comparison of business profits with economic output (gross domestic product) in the two country groups. MNC profits as a share of gross domestic product (GDP) in the traditional economies averaged from 1% to 2% between 1999 and 2008, while their profits in the tax preferred countries profits averaged 33% of GDP in 2008, up from 27% in 1999. Individual countries within the tax preferred group displayed more dramatic increases in the ratio of profits to GDP. For example, profits reported in Bermuda have increased from 260% of that country's GDP in 1999 to over 1000% in 2008. In Luxembourg, American business profits went from 19% of that country's GDP in 1999 to 208% of GDP in 2008. This report may be of interest to Members of Congress for at least four reasons. First, profit shifting has been the specific target of recent Congressional action, including a September 2012 hearing held by the Senate Permanent Subcommittee on Investigations, as well as several bills introduced in the 112th Congress. Second, anti-abuse provisions have been included in general tax reform proposals in the 112th Congress. Third, most general tax reform proposals would lower the top corporate rate which would diminish the incentive to shift profits. And fourth, to the extent that profit shifting is reduced, federal tax revenues would increase, although the net effect on federal tax revenues would depend on the existence and magnitude of offsetting revenue changes, which, in turn, would depend on the approach taken to curb profit shifting.

Most Recent Developments On December 21, 2001, President Bush signed into law the District of ColumbiaAppropriations Act for FY2002, P.L. 107-96 (formerly H.R. 2944 ). The House onDecember 6, 2001 and the Senate on December 7, 2001 approved the conference reportaccompanying H.R. 2944 , after resolving significant differences in the generalprovisions of their respective versions of the act. The act as approved by Congress reduces thenumber of general provisions from 67 to 42. P.L. 107-96 appropriates $408 million in specialfederal payments and approves the District's $7.1 billion total budget, including $5.3 billion ingeneral operating funds. The act includes $12.6 million in special federal payments for securityplanning, in the wake of the terrorist attacks on the Pentagon and World Trade Center on September11, 2001. The city also received $3.4 million to cover the cost of security for a World Bank andInternational Monetary Fund (IMF) meeting scheduled for late September 2001. The World Bankand IMF meeting was postponed amid concerns about security following the events of September11. In response to the attacks, Congress appropriated $40 billion in FY2001 emergencysupplemental assistance to address national needs. The costs of providing federal, state, and localpreparedness for mitigating and responding to the attacks, and repairing public facilities andtransportation systems damaged by the attacks, are two of the eligible uses of funds appropriatedunder the act. The Defense Appropriations Act, P.L. 107-117 , signed on January 10, 2002,appropriates $200 million in special federal payments to the District of Columbia and metropolitanarea regional entities to assist the city and region in upgrading and executing emergency responseplans. Table 1. Status of District of Columbia Appropriations, FY2002: P.L.107-96 (formerly H.R. 2944) Background Since the signing of the District of Columbia Appropriations Act for FY2001, P.L. 106-522 , on November 22, 2000, the District of Columbia government hascontinued to make progress in improving the delivery of services and in the city'slong-term financial health. The cooperative efforts of the city's elected leadership,the District of Columbia Financial Responsibility and Management AssistanceAuthority (the Authority) (1) , the Chief FinancialOfficer (CFO), the courts, andCongress have enabled the city to meet the requirements for the return of home rule. The CFO's Comprehensive Annual Financial Report (CAFR), released in January2001, certified that the city had achieved a $241 million budget surplus for FY2000. This achievement satisfied the final requirement of the District of ColumbiaFinancial Responsibility and Management Assistance Act, P.L. 104-8 , for the returnto home rule--four consecutive years of balanced or surplus budgets. The favorablereport means the end of a control period, and the dissolution of the Authority'spowers on September 30, 2001. The city also has met the preconditions for the returnof four city agencies from court-ordered receivership, yet another sign, according tocity leaders, that the District has made progress in addressing government servicedelivery issues. During the last year, the District of Columbia's elected and appointed leadership addressed a number of other governance-related issues, including school reform andmedical services for the uninsured. School reform, according to observers, is awork-in-progress. The new Board of Education faces an $80 million budget deficitand issues surrounding special education services and the certification of charterschools. The debate among city officials on the downsizing of D.C. General Hospitalwas contentious and resulted in fractured relations between the city's appointed andelected leadership. District of Columbia Financial Condition The District of Columbia Financial Responsibility and Management Assistance Act of 1995, P.L. 104-8 , created the Authority and the Office of Chief FinancialOfficer (OCFO). The Authority and the CFO are charged with improving thedelivery of city services and returning the District of Columbia to a position offinancial solvency. Working in concert with the District's elected politicalleadership, the Authority and the CFO have implemented a series of financial andmanagement reforms and have improved tax collection. These reforms, federalassistance, and an improved economy have resulted in four consecutive years ofbudget surpluses. P.L. 104-8 , the act creating the Authority and the CFO, requiresthe District to produce four consecutive years of balanced budgets as a prerequisitefor the termination of the Authority and the return of home rule. The District ended FY1997 with a surplus of $186 million. For FY1998, the city's budget surplus was $445 million. (2) After a13-week delay, the city's CFO reported an FY1999 surplus of $86.4 million after subtracting a $35 million paymentto the retirement of the city's long-term debt. For FY2000, the general fund surpluswas $241 million. On May 19, 2000, Natwar Gandhi, the former deputy CFO to Valerie Holt and Mayor Williams, became the city's third CFO. On January 26, 2001, the CFOreleased the city's Comprehensive Annual Financial Report (CAFR) for FY2000. The report, which is a critical barometer of the city's financial health, showed the cityhad a budget surplus of $241 million. The FY2000 CAFR met the CFO's keyobjectives of producing an unqualified audit opinion and a balanced budget for thefourth consecutive year. This year Congress and the city's elected leadership have considered legislation concerning the future role of the CFO after the restoration of home rule. The Officeof the CFO (OCFO) has played a critical role in the city's success in maintainingbudget discipline and its return to fiscal health. The city has considered legislationthat makes the OCFO a permanent part of the city's governing structure. Withoutsuch legislation, the OCFO will cease to exist beyond September 30, 2001, the endof the control period. (3) In July 2001, a conferencecommittee consideringsupplemental appropriations for the District of Columbia for FY2001 considered, butlater withdrew, a proposal regarding the District's Chief Financial Officer. Theproposal sought to strengthen the powers of the office by giving the CFO subpoenapowers and access to all city agencies' records. Further, the proposal would haveextended the OCFO's independence from the Mayor to FY2006. In addition, theplan would have permitted the mayor to appoint a CFO, and would have given thatofficial control of the agency's $68 million budget, 1,000 employees, legal counsel,and contracts. The proposal was introduced, in part, to fill an oversight void that willbe created by the departing financial control board, which ceases to exist on October1, 2001. The plan was withdrawn during conference committee consideration of thebill in deference to legislation being considered by the city council. On June 19, 2001, the city council held a public hearing on the Independence of the Chief Financial Officer Establishment Act of 2001, B14-0254. The legislationmakes the position of CFO permanent; it provides for the appointment and removalof the CFO by the mayor, with the consent of the city council; and the act transfersto the CFO the responsibility for the management of all executive branch agenciesinvolved in managing the city's finances. The bill was approved by the Council bya voice vote on July 10, 2001 as legislative act 14-089. The act is subject tocongressional review. Congress has 30 legislative days to review the act. Alegislative day is any day in which one or both houses of Congress are in session. Public Benefits Corporation During the past year, city leaders and Congress have attempted to address problems and controversies surrounding the Public Benefits Corporation (PBC), D.C.General Hospital, and the restructuring of the city's health care delivery system foruninsured residents of the city. In November 2000, Congress included a provisionin the District of Columbia Appropriations Act of FY2001, P.L. 106-522 , prohibitingthe PBC from borrowing funds from the District of Columbia government. Inaddition, the act required the mayor, the city council, the Authority, the CFO, and theChair of the Board of Directors of the PBC to develop and approve a restructuringplan for D.C. General Hospital. Reform in the city's delivery of health care to the poor was sought by Congress because of the well-documented problems of the PBC and its mismanagement ofD.C. General Hospital. Since 1997, the PBC amassed $109 million in unbudgetedloans from the city, using its power to borrow from the city's general fund inanticipation of Medicaid reimbursements. These unbudgeted loans were used by thePBC to cover deficit spending and defer mounting debt. However, the hospital dida poor job in seeking reimbursement for treatment. In addition to its poor financialmanagement, the PBC had been the subject of newspaper stories detailingquestionable hiring practices, including the hiring of friends and relatives of citycouncil members and former associates of the Executive Director of the PBC. ThePBC was also the subject of a critical report by health care consultants CambioHealth Solutions. Hired by the PBC in 2000, the consultants criticized the PBC for:(1) a lack of oversight by the PBC's board of directors, (2) poor patient care, (3)undocumented or poorly documented overtime, and (4) the lack of health careexperience among some members of the PBC's management team. The consultants recommended the downsizing and restructuring of the hospital from a 250-bed advance trauma center to a community access hospital or urgent carefacility that treats and releases or transfers patients within 23 hours of admittance. By late August 2000, the downsizing of the hospital staff had begun with theannouncement that 550 employees of the 2,000-person workforce would be laid offbefore the end of the year. In December 2000, the mayor, with the support of the Authority, had formalized a proposal that downsized D.C. General Hospital and provided health care servicesthrough a contract with a group of private health care providers led by GreaterSoutheast Community Hospital. The mayor's proposal was not supported by amajority of the city council. On March 6, 2001, the city council unanimously passeda resolution rejecting the Authority's recommendation for the awarding of a contractfor health care services for the uninsured to Greater Southeast Community Hospital.Several city council members expressed concern that the privatization proposalwould erect new barriers to care for the city's 65,000 uninsured residents. Themajority of the city council preferred keeping D.C. General as a full-service hospital.Their plan involved providing the hospital with $21 million in assistance that wouldhave been used to keep it open until the end of the fiscal year, which was also the endof the control period and the Authority's powers. During this time, the city couldfind a more permanent solution short of downsizing or closing the hospital. After2001, the city council would be in a strong position to override the mayor's vetowithout the threat of the control board negating their veto override. On April 30, 2001, the Authority used its veto power to negate a city council 's override of a mayoral veto of the $21 million city council proposal that would havekept D.C. General Hospital open until September 30, 2001, the end of the 2001 fiscalyear. In addition, the Authority voted to dissolve the PBC and transferred itsresponsibilities to the city's Department of Health. The Authority signed anagreement with Greater Southeast Community Hospital Corporation and theHealthcare Alliance to provide health care services to the city's uninsured residents. The Authority's actions were controversial and represented a departure from its morerecent efforts to allow the city's elected officials--the mayor and the city council--towork out their policy differences. The action was taken after the city council rejectedthe mayor's proposal for revamping the city's health care service delivery system andvoted on April 27, 2001, to override a mayoral veto and provide $21 million inFY2001 supplemental assistance to the PBC. The control board's constitutional authority to exercise such power was challenged in court by two members of the city council and several unionsrepresenting hospital employees. On April 30, 2001, city council members KevinChavous and David Cantania filed suit in the United States District Court for theDistrict of Columbia challenging the Authority's powers to award the contract forhealth care services and to dissolve the PBC. The council members' suit argues thatthe control board acted without statutory authority and over the objection of the citycouncil, which on March 6, 2001, unanimously passed a resolution rejecting theAuthority's recommendation for the awarding of a contract for health care servicesfor the uninsured to Greater Southeast Community Hospital. The court, which issuedits opinion on August 6, 2001, found that only the council members had standing tobring suit against the Authority. The court further found that although the councilmembers had standing to bring suit, the Authority acted within the powers grantedit by Congress under P.L. 104-8 when it overrode the city council and awarded thecontract. School Reform In June 2000, voters approved by referendum an amendment to the city's home rule charter. The referendum changed the structure of the Board of Education. Itabolished the 11-member board comprising one person elected from each of thecity's eight wards, and three--including the chair--elected at-large. Thecomposition of the new nine-member Board of Education includes four memberselected to represent four school districts, an elected chair of the board, and fourmembers appointed by the mayor. This new structure gives the mayor a significantvoice in determining the direction of public education, and it makes him moreaccountable, by way of his appointments, for the future success or failure of the city'spublic schools. In November 2000, voters elected a chair and four members to the new Board of Education, and the mayor subsequently appointed four others. The city's newnine-member school board began its oversight of the school system in January 2001. Earlier this summer, the Board announced a three-year contract extension withSuperintendent Paul Vance. The move was applauded by parents, city officials, andcongressional leaders. The reform-minded Board of Education and superintendentface several challenges, including improving special education, raising academicachievement, and improving the physical facilities. The board also faces issuesconcerning its oversight of charter schools and skepticism about the effectiveness ofa school board composed of appointed and elected members, and its ability to avoidthe pitfalls that have confronted other school reform efforts. A November 22, 2000 report by the District's Inspector General was critical of the school system's inability to provide adequate transportation services for specialeducation students. In 1999, a District court assigned a special master to monitor thesituation. In addition, an unreleased draft report by the City Council Special CouncilCommittee on Special Education (4) has detailedproblems in the District's delivery ofother special education services. The draft report is critical of District of ColumbiaPublic Schools' (DCPS) past operation of special education programs and theprocess for the evaluation of student needs for special services. Among therecommendations contained in the draft report are the following: (1) that the DCPSstrengthen its commitment to provide adequate and qualified staff in the deliveryof special education services; (2) that the DCPS improve its management oftransportation costs and the dependability of transportation services; and (3) that theDCPS improve the process used to assess and place students with special needs. Students' performance on standardized reading and math tests again has disappointed school administrators, remaining stagnant for the second consecutiveyear. Despite this lack of progress, Superintendent Paul Vance remains optimisticthat improvement will be made in the coming years. The DCPS has hired at least 29new principals and has begun to implement its strategic plan which includes effortsto improve the DCPS's interaction with other city agencies. The plan also holdsprincipals accountable for school performance. The lack of progress in improving academic performance in the public schools has fueled the growth of public charter schools. Nearly 10,000 students--one inevery 10 students--are enrolled in one of the approximately 34 public charter schoolsin the District. At least 17 of these schools were chartered by the Board ofEducation, with the remainder receiving charters from the Public Charter SchoolBoard, which was created by Congress when its passed charter school legislation in1996. The lack of consistency between the two governing bodies charged with granting and overseeing charter schools, and the increased costs of regulating charterschools are two of the concerns about the existence of two chartering authorities. (Foradditional information on charter schools in the District of Columbia see the DCAppleseed Center Report entitled Charter Schools in the District of Columbia:Improving Systems for Accountability, Autonomy, and Competition , April 2001.) On September 6, 2001, city and school officials announced an $80 million budget deficit for FY2001. The overspending, mostly cost overruns in specialeducation and the failure to document properly special education expenses submittedfor Medicaid reimbursement, will be offset by hiring freezes, fund transfers, andunanticipated growth in tax revenue. Though the deficit does not jeopardize thecity's return to home rule, the unanticipated overspending was a source ofembarrassment for school officials, the CFO, and the city's elected leaders. In orderto deal with the deficit, school board officials announced that they were consideringshortening the school year by 7 days. The school board reconsidered after the ideawas criticized by congressional members and the city's elected leadership, and aftercity leaders provided an additional $10 million in funding for the remaining schoolyear. Receiverships During the past year the District government successfully removed four agencies from control by court-appointed receivers. In September 2000, the District'sHousing Authority and the District of Columbia Jail Medical Services were returnedto District control. Working with the courts and advocacy groups, Mayor Williamsand his administration were able to negotiate the return of the Mental Health Servicesand Child and Family Services to District control. Although the return of thedepartments was a major accomplishment for the mayor, the inability of the twocourt-appointed receivers to make significant progress in the delivery of services alsoplayed a role in the court's willingness to return administrative control to the Districtgovernment. On October 23, 2000, District Court Judge Thomas Hogan approved a plan forreturning the Child and Family Services agency to District control by the summer of2001. The agency had been under receivership since August 1995, followingfindings in LaShawn v. Williams that the agency failed to provide adequatesupervision of children under its care, and that children under its care were abusedand neglected. The judge's consent decree of October 23, 2000, established 26preconditions and a six-month probationary period before the agency could return toDistrict control. The conditions imposed by the consent decree included: prohibitingbudget cuts and layoffs; increasing the number of home visits by social workers;passing legislation that would place the responsibility for investigating abuse andneglect cases with Child and Family Services rather than splitting the duty betweenthe police and the agency; developing licensing standards for foster care and grouphomes; and elevating the agency to cabinet-level status. The Child and Family Services Agency Establishment Act of 2001 was passed on April 4, 2001, elevating the agency to cabinet-level status and fulfilling one of thefinal requirements for termination of the receivership. On May 21, 2001, JudgeHogan entered an order terminating the receivership, effective July 15, 2001. In addition, Congress is considering legislation that would amend and restructure the family court division of the District of Columbia Superior Court. TheHouse bill ( H.R. 2657 ) and the Senate bill ( S. 1382 ) wouldincrease to 15 the number of judges assigned to Family Court; and would requirejudges assigned to Family Court to have expertise in family law, agree to participatein ongoing training, and serve for a minimum term of three to five years. Congressional interest in reforming family court can be traced to the tragic death ofa 23-month-old child, Briana Blackmon, who was beaten to death after a family courtjudge ordered that the child be returned to her mentally unstable mother. In May 2001, the city council passed The Department of Mental Health Establishment Emergency Amendment Act of 2001. Passage of the act was one ofthe requirements for the transfer of the Commission on Mental Health Services backto District government control. The agency had been under the control of acourt-appointed receiver since 1997. Much of the support for returning the agencyto city control centered on the receiver's inability to manage the agency adequately. A newspaper series chronicled the agency's problems, including the deaths of 24 mentally retarded or developmentally disabled group home residents since 1999. Future Role of the Authority and the CFO The District of Columbia Financial Responsibility and Management Assistance Act, P.L. 104-8 , identified four conditions for the ending of a control period and thereturn to home rule. The District must demonstrate that: (1) all obligations arising from the Authority's issuance of bonds, notes, or other obligations have been discharged; (2) all borrowing by the District from the United States Treasury has been repaid; (3) the District government has adequate access to short and long-term credit markets at reasonable rates to meet itsborrowing needs; and (4) the District has achieved balanced or surplus budgets for four consecutive fiscal years. On February 14, 2001, the Authority announced that the District of Columbia had met the fourth and final precondition for the return of home rule to the city's electedleadership and the suspension of the Authority's oversight and management powers. Congress has held hearings to explore the future role of the CFO and the Authorityfollowing the end of the control period. In addition, the District's city council passedthe Independence of the Chief Financial Officer Establishment Act of 2001, whichauthorizes the mayor to appoint a CFO, with the advice and consent of the citycouncil, to a five-year term. The legislation transfers to the CFO the responsibilityfor the management of all executive branch agencies involved in managing the city'sfinances. It requires the CFO to perform many of the functions authorized by thefederal legislation P.L. 104-8 . Budget Request Emergency Terrorism and Disaster Recovery SupplementalAppropriations On September 11, 2001, the Pentagon and World Trade Center were the targets of terrorist attacks. In response to the attacks, Congress appropriated $40 billion inFY2001 emergency supplemental assistance ( P.L. 107-38 ). The costs of providingfederal, state, and local preparedness for mitigating and responding to the attacks, andrepairing public facilities and transportation systems damaged by the attacks, are twoof the eligible uses of funds appropriated under the act. According to press reports,the District requested $13 million to reimburse the District government for costincurred in responding to the attack on the Pentagon. The Bush Administration has reimbursed the District $6 million for the cost associated with responding to theSeptember 11, 2001, attacks. Additional funds may be directed to the District andthe surrounding region to assist them in upgrading and executing their emergencyresponse. The District government has been criticized for its poor execution of theemergency management response to the attack on the Pentagon. The mayorannounced that the city will accelerate work on a coordinated regional plan forterrorist attacks, and the city has rewritten a basic city emergency plan to anticipatespecific problems that may be caused by any future attacks. On October 9, 2001, the District government forwarded a request for additional funds for emergency preparedness and economic recovery to the Office ofManagement and Budget. The mayor requested $249 million for emergency planningand response activities and $512.9 million for economic recovery activities, includingsmall business loans, unemployment compensation, and revenue lost. Additionally,the mayor's request included $182 million in economic stimulus assistance. Thisincluded assistance for street resurfacing, technology modernization, and schoolrepairs. The final disposition of the District's budget request has not yet beenannounced. However, there is an emerging concern about the use of funds foreconomic stimulus. Some members of Congress believe that economic stimulusprovided to cities affected by the events of September 11, 2001, should be part of alarger and separate economic stimulus package. Supplemental Appropriations for FY2001 On July 24, 2001, the President signed P.L. 107-20 , the Supplemental Appropriations Act for FY2001. The act includes $107 million in additional FY2001appropriations. The primary source of the additional appropriations will be localfunds drawn from the city's surplus or reserves and used to cover cost overruns ofvarious agencies or new initiatives. The act includes a rescission of $131,000 fortaxicab inspectors and a $250,000 rescission budgeted for activities related to thesimplification of employee compensation systems, and transfers the funds to publiceducation budget function for use under the Excel Institute Adult Education Program. The act requires the mayor to report to Congress, within 45 days of the passage of the act, on the specific authority necessary to carry out certain responsibilitiestransferred to the CFO in a non-control year and certain responsibilities relating tothe transition of responsibilities under the District of Columbia FinancialResponsibility and Management Assistance Act of 1995. Table 2. District of Columbia FY2001 Supplemental Budget Request Included in P.L.107-20 (in millions ofdollars) FY2002: The President's Budget Request On April 9, 2001, the Bush Administration released its FY2002 budget recommendations. The Administration's proposed budget included $342.5 millionin federal payments to the District of Columbia. An overwhelming percentage of thePresident's proposed federal payments and assistance to the District involved thecourts and criminal justice system. This included $147.3 million for the CourtServices and Offender Supervision Agency for the District of Columbia, anindependent federal agency that has assumed management responsibility for theDistrict's pretrial services, adult probation, and parole supervision functions. Inaddition, the Administration requested $111.2 million in support of court operations,and $32.7 million for the trustee appointed to oversee the District's correctionssystem, including the closing of the Lorton Correctional Facility and the transfer ofits inmates into the federal prison system. These four functions (prisonadministration, court operations, defender services, and offender supervision)represent $325.5 million, or 95%, of the President's proposed $342.5 million infederal payments to the District of Columbia (see Table 3 ). FY2002: District's Budget Request On May 25, 2001, District officials transmitted the city's $5.3 billion budget for FY2002 to Congress for review and approval. The city's budget included a $150million reserve fund mandated by the District of Columbia Appropriations Act of1999, P.L. 105-277 . In addition, the budget sought to increase funding for publiceducation by $107 million, for human support services by $207 million, and forgeneral government support by $88.8 million. The budget must be approved byCongress (see Table 4 ). FY2002: Section 302(b) Suballocation Section 302(a) of the Congressional Budget Act requires that the House and Senate pass a concurrent budget resolution establishing an aggregate spending ceiling(budget authority and outlays) for each fiscal year. These ceilings are used by Houseand Senate appropriators as a blueprint for allocating funds. Section 302(b) of theCongressional Budget Act of 1974 requires appropriations committees in the Houseand Senate to subdivide their Section 302(a) allocation of budget authority andoutlays among the 13 appropriations subcommittees. On June 21, 2001, the Senate Appropriations Committee approved a revised 302(b) suballocation for the District of $392 million. The House AppropriationsCommittee approved a Section 302(b) suballocation of $382 million in budgetauthority for FY2002 for the District of Columbia. On September 20, 2001, theHouse revised its Section 302(b) allocation for the District of ColumbiaAppropriations to $399 million. Congressional Action on the Budget Congress not only appropriates federal payments to the District to fund certain activities, but also reviews the District's entire budget, including the expenditure oflocal funds. The District subcommittees of both the House and Senate AppropriationsCommittees must approve--and may modify--the District's budget. House andSenate versions of the District budget are reconciled in a joint conference committeeand must be passed by the House and the Senate. After this final action, theDistrict's budget is forwarded to the President, who can sign it into law or veto it. Table 3. District of Columbia General and Special Federal Payment Funds: Proposed FY2002 Appropriations (inmillions of dollars) a Funds provided under a separate heading--Defender Services for the District ofColumbia Courts. The transfer is based on the Courts misuse of funds appropriatedfor such activities in previous years. b Funds provided under a separate heading--Defender Services for the District ofColumbia Courts. The transfer is based on the Courts misuse of funds appropriatedfor such activities in previous years. c In previous years, funds would be provided as part of District of Columbia courtoperations. Congress created a separate appropriation to ensure payment of attorneysrepresenting indigent persons, guardianship, and abused and neglected children incourt proceedings. d The $5 million made available for FY2001 is a carryover of unobligated fundsappropriated in FY2000. This amount is not included in total special federalpayments for FY2001. e Allows courts to reallocate not more than $1 million among activities funded underthis heading. f Certified as a federal agency on August 14, 2000. g Funds were originally targeted to cover the costs associated with providing securityfor a World Bank and International Monetary Fund meeting scheduled of lateSeptember 2001. The meeting was cancelled following the terrorist attacks on thePentagon and World Trade Center. H.R. 2944, House Version. On September 25, 2001, the House approved the Districtof Columbia Appropriations Act for FY2001, H.R. 2944 , by a vote of327 to 88. The bill included $398 million in special federal payments andcontributions to the District. The majority of these funds were to be used for court,prisons, and offender supervision-related activities. The House bill allocatedapproximately 95% of the $398 million in special federal payments to theseactivities. In addition, the House bill included $16 million for emergency planning.The House Appropriations Committee originally recommended that the funds beused for costs associated with security for a World Bank and International MonetaryFund meeting that was scheduled for the end of September 2001, but was postponedbecause of the September 11, 2001 terrorist attacks on the Pentagon and World TradeCenter. On September 20, 2001, the House Appropriations Committee reported out the District of Columbia Appropriations Act for FY2002 ( H.Rept. 107-216 ). TheCommittee's markup and reporting of the District Appropriations Act for FY2002,which was scheduled for September 13, 2001, was delayed following the September11, 2001 terrorist attacks on the Pentagon and World Trade Center. On September6, 2001, the House Subcommittee on the District of Columbia Appropriationscompleted its markup of an unnumbered bill containing its budget recommendationsfor FY2002 for the District of Columbia to the Appropriations Committee. FY2002 General Provisions, House Bill. In a change from previous years, House and Senateappropriations committees pledged to review the general provisions of the Districtof Columbia with the aim of reducing the number by eliminating redundant,irrelevant, inappropriate, or arcane provisions. District officials have sought, inprevious years, to reduce the number of provisions, but without success. Theseofficials have been particularly critical of the number of social riders that have beenincluded in previous appropriations acts. These provisions have includedprohibitions on the use of federal and city funds for abortions, the use of marijuanafor medical purposes, limitations on the distribution of hypodermic needles to illegaldrug users, and domestic partners health insurance coverage. During its consideration of the bill, the House Appropriations Committee approved an amendment, offered by Representatives Kolbe and Moran, that wouldremove the prohibition on the use of District funds for costs associated withimplementing the District's Health Care Benefits Expansion Act of 1992. The Act would allow unrelated couples to register as domestic partners, and would allow anyDistrict employee so registered to include his or her domestic partner under the samehealth insurance plan. The District employee would be responsible for paying theadditional premium for coverage of the domestic partner not employed by the Districtgovernment. For a review of the general provisions contained in H.R. 2944 , see CRS Report RL31159(pdf) , District of Columbia Appropriations Act forFY2002: Comparison of General Provisions of P.L. 106-522 , and House, Senate, andConference Versions of H.R. 2944 , by [author name scrubbed]. H.R. 2944, Senate Version (formerly S. 1543). On November 7, 2001, the Senate approved itsversion of H.R. 2944 , substituting the language contained in S. 1543 . The bill included $408 million in special federal payments andcontributions to the District. The majority of the funds were to be used for courts,including funds for a new family court division; prisons; and offendersupervision-related activities. The Senate bill also included funds for emergencyplanning activities in response to the September 11, 2001 terrorist attacks. Inaddition, the Senate bill included $1.4 million for mobile wireless interoperationallinks between the city's Chief Technology Office and three federal law enforcementagencies--the Secret Service, the Park Police, and the Capitol Hill Police. FY2002 General Provisions, Senate Bill. During its consideration of the bill, the Senate AppropriationsCommittee included a provision that would remove the prohibition on the use ofDistrict funds for costs associated with implementing the District's Health CareBenefits Expansion Act of 1992, which would allow unrelated couples to be coveredunder the same health insurance plan. The Committee also reduced the number ofgeneral provisions included in the bill to 36. It retained a number of provisions thatDistrict officials wanted eliminated or modified, including those related to medicalmarijuana, abortion, and needle exchange programs. During the full Senate's consideration of the bill, several amendments were offered. The Senate defeated an amendment offered by Senator Allen that wouldhave reinstated the prohibition on the use of District funds to support needleexchange programs. The vote was 53 to 47. The Senate considered and approvedan amendment offered by Senator Hutchison of Texas that would increase the cap onfunding for attorneys' fees to represent students seeking special education services. The Hutchison amendment, which was approved by a vote of 51 to 49, caps theamount of funds payable to such attorneys at no more than $150 per hour and $3,000per case. The Senate approved two related amendments. One, introduced bySenators Durbin and Boxer, exempts from the cap any attorney representing studentsin one of three categories when challenging special education placement under theIndividuals with Disabilities Education Act: the student's family has an income of less than $17,600 per year; or at least one of the student's parents is a disabled veteran;or the court has determined the student is the victim of abuse orneglect. The Durbin/Boxer amendment was approved by a vote of 73 to 26. The Senate also approved a related amendment introduced by Senator Landrieu, the floor manager ofthe bill. The amendment, which was approved by voice vote, directs the GeneralAccounting Office to submit to the Congress by January 2, 2002, a report detailingthe awards in judgment rendered by the courts that were in excess of the caps on theallowable fees an attorney may charge when challenging special education placementin the District of Columbia. For a review of the general provisions contained inHouse and Senate versions of H.R. 2944 , see CRS Report RL31159(pdf) , District of Columbia Appropriations Act for FY2002: Comparison of GeneralProvisions of P.L. 106-522 , and House, Senate, and Conference Versions of H.R. 2944 , by [author name scrubbed]. H.R. 2944, Conference Version. On December 5, 2001, a House and Senate conferencecommittee reported out the District of Columbia Appropriations Act for FY2002( H.Rept. 107-321 ). On December 6, 2001, the House approved the conferencereport by a vote of 302 to 84, while the Senate approved the act by a vote of 79 to 20one day later. The act allocates approximately 85% of the $408 million in specialfederal payments for court, prisons, and offender supervision-related activities,including $24 million for a new Family Court Division. In addition, the act includes$16 million for emergency planning in response to the September 11, 2001 terroristattacks. It reduces funding for the Correction's Trustee from $134 million in FY2001to $30 million for FY2002. The reduction is a result of the closing of the LortonCorrectional Facility and the transfer of District felons to the federal prison system. FY2002 General Provisions, Conference Bill. As discussed above, in a change from previous years, Houseand Senate conferees agreed to reduced the number of general provisions includedin the act, focusing on arcane, redundant, or irrelevant provisions. In the past cityofficials have sought to reduce the number of social riders that have been includedin previous appropriations acts, but without success. These provisions have includedprohibitions on the use of federal and city funds for abortions, the use of marijuanafor medical purposes, domestic partners health insurance coverage, and lobbying forvoting representation in Congress, and limitations on the distribution of hypodermicneedles to illegal drug users. The final version of the act removes the restriction on the placement of needle exchange programs near school facilities. The conference bill also removes theprohibition on the use of District funds to implement the District's Health CareBenefits Expansion Act of 1992. In approving the conference report, both chambersof Congress left intact restrictions and prohibitions on the use of federal and Districtfunds for a needle program, lobbying for voting representation in Congress, andmedical marijuana. The act also directs the GAO to report to Congress by March 31,2002, on cost issues related to the payment of legal fees to attorneys representing theschool system and special needs children in cases involving the Individuals withDisabilities Education Act. The Congress directed GAO to undertake the study afterissues were raised during appropriation and oversight hearings concerning theaccuracy of the school system's estimate of the cost of fees paid to attorneysrepresenting special needs children in proceeding against the school system. The actwas signed by the President on December 21, 2001, as P.L. 107-96 . Table 4. District of Columbia General Funds (in millions of dollars) Note: Brackets indicate projected saving to be achieved and not actual expenditure. a Bill established two reserve funds: a "contingency reserve fund" into which themayor may deposit at least 3% of the total fiscal year operating budget; and an"emergency cash reserve fund" into which the mayor may deposit at least 4% of thetotal fiscal year operating budget. These reserve funds are to be established over amulti-year period and would augment the present reserve fund of $150 million. Key Policy Issues Needle Exchange The continuation of a needle exchange program funded with federal or District funds is one of several key policy issues that Congress considered when approvingthe District's appropriations act for FY2002. The controversy surrounding fundinga needle exchange program touched on issues of home rule, public health policy, andgovernment sanctioning and facilitating the use of illegal drugs. Proponents of aneedle exchange program contend that such programs reduce the spread of HIVamong illegal drug users by reducing the incidence of shared needles. Opponents ofthese efforts contend that such programs amount to government sanctioning of illegaldrugs by supplying drug-addicted persons with the tools to use them. In addition,they content that public health concerns raised about the spread of AIDS and HIVthrough shared contaminated needles should be addressed through drug treatment andrehabilitation programs. Another view in the debate focuses on the issue of homerule and the city's ability to use local funds to institute such programs free fromcongressional actions. The prohibition on the use of federal and District funds for a needle exchange program was first approved by Congress as Section 170 of the District of ColumbiaAppropriations Act for FY1999, P.L. 105-277 . The 1999 Act did allow privatefunding of needle exchange programs. The District of Columbia Appropriations Actfor FY2001, P.L. 106-522 , continued the prohibition on the use of federal andDistrict funds for a needle exchange program, and restricted where privately fundedneedle exchange activities could take place. Section 150 of the District of ColumbiaAppropriations Act for FY2001 makes it unlawful to distribute any needle or syringefor the hypodermic injection of any illegal drug in any area in the city that is within1,000 feet of a public elementary or secondary school, including any public charterschool. Provisions contained in an earlier House version of the District of ColumbiaAppropriations Act for FY2000 ( H.R. 3194 ) would have prohibited anyorganization that received federal or District funds from funding a needle exchangeprogram with private funds. This prohibition was dropped during conferenceconsideration of the bill, which was signed by the President on November 29, 1999. Presently, only one entity, Prevention Works, a private nonprofit AIDS awarenessand education program, operates a privately funded needle exchange program. At a minimum, District officials were seeking to remove restrictions on needle exchange activities, and to lift the prohibition on the use of District funds for needleexchange programs. The final version of the act , P.L. 107-96 , lifts the restrictionthat prohibits the operation of needle exchange programs within 1,000 feet of publicelementary and secondary schools, including public charter schools. It also maintainsthe restriction on the use of federal and District funds for needle exchange programs.The bill as initially approved by the House would have continued the prohibition onthe use of federal and local government funding of needle exchange programs. TheSenate bill would have allowed the use of local government funds for needleexchange programs, but would have maintained the prohibition on the use of federalfunds. Medical Marijuana The medical marijuana initiative provision in the District of Columbia appropriations legislation is another issue that engenders controversy. The Districtof Columbia Appropriations Act for FY1999, P.L. 105-277 , included a provision thatprohibited the city from counting ballots of a voter-approved initiative that wouldhave allowed the medical use of marijuana to assist persons suffering debilitatinghealth conditions and diseases including cancer and HIV infection. Congress's power prohibiting the counting of a medical marijuana ballot initiative was challenged in a suit filed by the D.C. Chapter of the American CivilLiberties Union (ACLU). On September 17, 1999, District Court Judge RichardRoberts ruled that Congress, despite its unique legislative responsibility for theDistrict under Article I, Section 8 of the Constitution, did not possess the power tostifle or prevent political speech, which included the ballot initiative. This rulingallowed the city to tally the votes on the November 1998 ballot initiative. To preventthe implementation of the initiative, Congress had 30 days to pass a resolution ofdisapproval from the date the medical marijuana ballot initiative (Initiative 59) wascertified by the Board of Elections and Ethics. Language prohibiting theimplementation of the initiative was included in P.L. 106-113 , the District ofColumbia Appropriations Act for FY2000. Opponents of the provision contend thatit and similar actions undercut the concept of home rule. The District of Columbia Appropriations Act for FY2002, P.L. 107-96 , includes a provision that continues to prohibit the District government from implementing the initiative. Abortion Provision The public funding of abortion services for District of Columbia residents is a perennial issue debated by Congress during its annual deliberations on the Districtof Columbia appropriations. District officials cite the prohibition on the use ofDistrict funds as just another example of congressional intrusion into local matters. The District of Columbia Appropriations Act for FY2001, P.L. 106-522 , includes aprovision prohibiting the use of federal or District funds for abortion services exceptin cases where the life of the mother is endangered or the pregnancy is the result ofrape or incest. This prohibition has been in place since 1995, when Congressapproved the District of Columbia Act for FY1996, P.L. 104-134 . Since 1979, with the passage of the District of Columbia Appropriations Act of 1980, P.L. 96-93 , Congress has placed some limitation or prohibition on the use ofpublic funds for abortion services for District residents. From 1979 to 1988,Congress restricted the use of federal funds for abortion services to cases where themother's life would be endangered or the pregnancy resulted from rape and incest. The District was free to use District funds for abortion services. When Congress passed the District of Columbia Appropriations Act for FY1989, P.L. 100-462 , it restricted the use of District and federal funds for abortionservices to cases where the mother's life would be endangered if the pregnancy wastaken to term. The inclusion of District funds, and the elimination of rape or incestas qualifying conditions for public funding of abortion services, was endorsed byPresident Reagan, who threatened to veto the District's appropriations act if theabortion provision was not modified. In 1989, President Bush twice vetoed theDistrict's FY1990 appropriations act over the abortion issue. He signed P.L. 101-168 after insisting that Congress include language prohibiting the use of District revenuesto pay for abortion services except in cases where the mother's life was endangered. The District successfully fought for the removal of the provision limiting District funding of abortion services when Congress considered and passed theDistrict of Columbia Appropriations Act for FY1994, P.L. 103-127 . The FY1994 Actalso reinstated rape and incest as qualifying circumstances allowing for the publicfunding of abortion services. The District's success was short lived. The District ofColumbia Appropriations Act for FY1996, P.L. 104-134 , and subsequent District ofColumbia appropriations acts, limited the use of District and federal funds forabortion services to cases where the mother's life is endangered or cases where thepregnancy was the result of rape or incest. The prohibition on the use of District and federal funds is included in the House, Senate, and conference versions of the District of Columbia Appropriations Act forFY2002, P.L. 107-96 . District of Columbia Anti-Terrorism Appropriations The FY2002 District of Columbia Appropriations bill as approved by the Senate Appropriations Committee on October 11, 2001, and the House on September 25,2001, included $16 million in funding for emergency planning. The District's initialFY2002 budget request included a $16 million federal payment specifically for costsassociated with security support--including counter-terrorism and crowd control--for the IMF/World Bank meeting that was scheduled for late September 2001. Themeeting, which has been postponed to a date to be determined, also was scheduledto receive $17 million in funding from the IMF and World Bank for security support. P.L. 107-96 includes a provision that reallocates the $16 million special federal payment to emergency security planning activities in response to the September 11,2001 terrorist attacks. The act allocates $3.4 million as reimbursement to theDistrict for costs associated with security planning for the World Bank/IMF meeting. Three additional budget items include funding that may be used to combat or respondto terrorist acts. However, funds for these operations are derived from local revenuesources: the Metropolitan Police Department; District of Columbia National Guard;and the District of Columbia Emergency Management Agency. Budget requests forthese operations are identified in the following table. In addition, Congressappropriated $1.4 billion in a special federal payment for the development anddeployment of a wireless telecommunication system linking the District government,the U.S. Capitol Police, the U.S. Park Service Police, and the Secret Service. Table 5. District of Columbia Federal and LocalAppropriations That May Be Used to Respond to TerrorismThreats Congress provided additional assistance for emergency preparedness and terrorism response activities in the Department of Defense Appropriations forFY2002, P.L. 107-117 . The act includes $200 million in special federal paymentsto District of Columbia and selected regional agencies, including the WashingtonCouncil of Governments and the Washington Metropolitan Transit Authority, foremergency response-related activities. The Defense Appropriations Act for FY2002was signed by the President on January 10, 2002. Table 6. FY 2002 Defense Appropriations Act, P.L.107-117: District of Columbia Emergency Preparedness Funds Health Care Benefits Expansion Act (Domestic Partners Program) P.L. 107-96 includes a provision lifting the congressional prohibition on the use of District funds to implement the Helath Care Benefits Expansion Act. OnSeptember 20, 2001, the House Appropriations Committee approved, by a vote of 28to 21, an amendment introduced by Representatives Kolbe and Moran that wouldremove the congressional prohibition on the use of District funds for theimplementation of the city's Health Care Benefits Expansion Act. The Act, whichwas approved by the city's elected leadership in 1992, has not been implementedbecause of a congressional prohibition first included in the general provisions ofDistrict of Columbia Appropriations Act for FY1994. The city's health care expansion act would allow two unmarried and unrelated individuals to register as domestic partners with the District for the purpose ofsecuring certain health and family related benefits, including hospital visitationrights. Under the law, District government employees enrolled in the District ofColumbia Employees Health Benefits Program would be allowed to purchase familyhealth insurance coverage that would cover the employee's family members,including domestic partners. In addition, a District employee registered as a domesticpartner would assume the additional cost of the family health insurance coverage forfamily members, which would include the employee's domestic partner. Opponents of the act believe that it is an assault on the institution of marriage, and that the act grants unmarried gay and heterosexual couples the same standing asmarried couples. Congressional proponents of lifting the ban on the use of Districtfunds argue that the implementation of the act is a question of home rule and localautonomy. Supporters of the amendment noted that at least 115 local governments,and more than 4,000 companies offer benefits to domestic partners. On September 25, 2001, during House consideration of H.R. 2944 , Representative Weldon offered an amendment ( H.Amdt. 310 ) thatwould have reaffirmed the band on the use of District funds to implement the healthcare expansion program. The Weldon amendment failed by a vote of 194 to 226. TheSenate bill also included a provision that allows the District to use city, but notfederal, funds to implement the District of Columbia Employees Health BenefitsProgram. Budget Reserves Congress passed legislation in 1999 that required the District to create a $150 million reserve fund to guard against unexpected expenditures undermining cityfinances. (5) Reserve funds may only be expendedunder three conditions: Expenditures must be based on criteria established by the Chief Financial Officer and approved by the mayor, the city council, and the control board(during a control year); but in no case may funds be expended before all other surplusfunds have been used. The funds may not be used for agencies under court-ordered receivership. Funds may not be for shortfalls in projected productivity savings and management reforms. In 2000, (6) and in addition to the budget reserve fund, Congress required theDistrict to establish two additional funds: an emergency reserve fund; and acontingency reserve fund. These funds total 7% of the District's operating revenue,or about $250 million, by 2007. The emergency reserve fund requires a 4% positivefund balance above the projected general fund expenditure level for the followingyear. The contingency fund would set aside up to 3% of each year's operating budgetfor unforeseen or nonrecurring needs such as natural disasters, federal mandates, andrevenue shortfalls. The District government requested that Congress eliminate the $150 million budget reserve. A plan to abolish the fund was endorsed by the SenateAppropriations subcommittee on the District in June 2001. Consistent with theprovisions found in the Senate-passed measure, the final--conference--version ofact includes a provision that requires the District to maintain a budget reserve of $120million in FY2002, and $70 million in FY2003. P.L. 107-96 also requires theDistrict to maintain a cumulative cash reserve of $50 million for FY2004 andFY2005.

On December 21, 2001, President Bush signed into law the District of Columbia Appropriations Act for FY2002, P.L. 107-96 (formerly H.R. 2944 ). Two weeks earlier, the House onDecember 6, 2001, and the Senate on December 7, 2001, approved the conference reportaccompanying H.R. 2944 , after resolving significant differences in the generalprovisions of their respective versions of the act. The act, which appropriates $408 million in specialfederal payments, includes $16 million for reimbursement to the District for the cost of providingsecurity for a cancelled World Bank and International Monetary Fund meeting, and for securityplanning in the wake of the attacks on the Pentagon and World Trade Center on September 11, 2001. In addition, the act approves the city's $5.3 billion operating budget for the current fiscal year. Theact lifts the ban on the use of District funds for a domestic partners health insurance act approvedby the city council and signed by the mayor in 1992. Congress has maintained the prohibition onthe use of federal and District funds for needle exchange programs, rejecting a Senate provision thatwould have lifted the prohibition on the use of District funds for such activities. The act lifts therestriction on the location of such activities near public and charter schools. The act, as passed byCongress, requires the District of Columbia public schools to submit to Congress a report thatidentifies all judgments against the DC public schools under the Individuals with DisabilitiesEducation Act. The District's FY2002 budget request was submitted to Congress on May 25, 2001. The city budget request included $199 million in federal payments to the District of Columbia. The city'sbudget proposal included $5.3 billion in general operating fund expenditures, and $611 million inenterprise funds. The budget also included $78 million in funding for the newly created Health CareSafety Net Administration, which replaced the city's discredited Public Benefits Corporation. Earlier in 2001, House and Senate District of Columbia Appropriations Subcommittees held hearings that focused on child and family services, and proposed reforms of the family division ofthe District of Columbia Superior Court. P.L. 107-96 includes $24 million for a new Family CourtDivision of the District's Superior Court, including $500,000 for the Child and Family ServicesAgency. The committees also held hearings on the courts, corrections, the fiscal condition of thecity, and the future role of the Chief Financial Officer. On April 30, 2001, the control board, which was created by Congress to address the city's fiscal and governance problems, approved a resolution that abolished the Public Benefits Corporation andtransferred responsibility for the administration of health care services to the Health Care Safety NetAdministration. The Authority also awarded a contract for health care services to Greater SoutheastCommunity Hospital and the Health Care Alliance. Key Policy Staff Division abbreviations: G&F = Government and Finance Division; DSP = Domestic Social Policy Division

Introduction The President is responsible for appointing individuals to positions throughout the federal government. In some instances, the President makes these appointments using authorities granted by law to the President alone. Other appointments are made with the advice and consent of the Senate via the nomination and confirmation of appoin tees. Presidential appointments with Senate confirmation are often referred to with the abbreviation PAS. This report identifies, for the 114 th Congress, all nominations submitted to the Senate for executive-level full-time positions in the 15 executive departments for which the Senate provides advice and consent. It excludes appointments to regulatory boards and commissions as well as to independent and other agencies, which are covered in other Congressional Research Service (CRS) reports. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) at http://www.lis.gov/nomis/ , the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents , telephone discussions with agency officials, agency websites, the United States Code , and the 2016 Plum Book ( United States Government Policy and Supporting Positions ). Related CRS reports regarding the presidential appointments process, nomination activity for other executive branch positions, recess appointments, and other appointment-related matters may be found at http://www.crs.gov . Appointments During the 114th Congress Table 1 summarizes appointment activity, during the 114 th Congress, related to full-time PAS positions in the 15 executive departments. President Barack H. Obama submitted 102 nominations to the Senate for full-time positions in executive departments. Of these 102 nominations, 64 were confirmed; 8 were withdrawn; and 30 were returned to the President under the provisions of Senate rules. Length of Time to Confirm a Nomination The length of time a given nomination may be pending in the Senate has varied widely. Some nominations were confirmed within a few days, others were confirmed within several months, and some were never confirmed. This report provides, for each executive department nomination confirmed in the 114 th Congress, the number of days between nomination and confirmation ("days to confirm"). Under Senate Rules, nominations not acted on by the Senate at the end of a session of Congress (or before a recess of 30 days) are returned to the President. The Senate, by unanimous consent, often waives this rule—although not always. In cases where the President resubmits a returned nomination, this report measures the days to confirm from the date of receipt of the resubmitted nomination, not the original. For executive department nominations confirmed in the 114 th Congress, a mean of 156.1 days elapsed between nomination and confirmation. The median number of days elapsed was 125.5. Organization of this Report Executive Department Profiles Each of the 15 executive department profiles provided in this report is divided into two parts. The first table lists the titles and pay levels of all the department's full-time PAS positions as of the end of the 114 th Congress. For most presidentially appointed positions requiring Senate confirmation, pay levels fall under the Executive Schedule. As of the end of the 114 th Congress, these pay levels range from level I ($205,700) for Cabinet-level offices to level V ($150,200) for lower-ranked positions. The second table lists appointment action for vacant positions during the 114 th Congress in chronological order. This table provides the name of the nominee, position title, date of nomination or appointment, date of confirmation, and number of days between receipt of a nomination and confirmation, and notes relevant actions other than confirmation (e.g., nominations returned to or withdrawn by the President). When more than one nominee has had appointment action, the second table also provides statistics on the length of time between nomination and confirmation. The average days to confirm are provided in two ways: mean and median. The mean is a more familiar measure, though it may be influenced by outliers in the data. The median, by contrast, does not tend to be influenced by outliers. In other words, a nomination that took an extraordinarily long time to be confirmed might cause a significant change in the mean, but the median would be unaffected. Examining both numbers offers more information with which to assess the central tendency of the data. For a small number of positions within a department, the two tables may contain slightly different titles for the same position. This is because the title used in the nomination the White House submits to the Senate, the title of the position as established by statute, and the title of the position used by the department itself are not always identical. The first table listing incumbents at the end of the 114 th Congress uses data provided by the department itself. The second table listing nomination action within each department relies primarily upon the LIS database of Senate nominations. This information is based upon nominations sent to the Senate by the White House. Any inconsistency in position titles between the two tables is noted following each appointment table. Additional Appointment Information Appendix A provides two tables. Table A-1 relists all appointment action identified in this report and is organized alphabetically by the appointee's last name. Table entries identify the agency to which each individual was appointed, position title, nomination date, date confirmed or other final action, and duration count for confirmed nominations. The table also includes the mean and median values for the "days to confirm" column. Table A-2 provides summary data for each of the 15 executive departments identified in this report. The table summarizes the number of positions, nominations submitted, individual nominees, confirmations, nominations returned, and nominations withdrawn for each department. It also provides the mean and median values for the numbers of days taken to confirm nominations within each department. A list of department abbreviations can be found in Appendix B . Department of Agriculture Department of Commerce Department of Defense Department of Education Department of Energy Department of Health and Human Services Department of Homeland Security Department of Housing and Urban Development Department of the Interior Department of Justice Department of Labor Department of State Department of Transportation Department of the Treasury Department of Veterans Affairs Appendix A. Presidential Nominations, 114 th Congress Appendix B. Abbreviations of Departments

The President makes appointments to positions within the federal government, either using the authorities granted by law to the President alone, or with the advice and consent of the Senate. There are some 350 full-time leadership positions in the 15 executive departments for which the Senate provides advice and consent. This report identifies all nominations submitted to the Senate during the 114th Congress for full-time positions in these 15 executive departments. Information for each department is presented in tables. The tables include full-time positions confirmed by the Senate, pay levels for these positions, and appointment action within each executive department. Additional summary information across all 15 executive departments appears in the Appendix. During the 114th Congress, the President submitted 102 nominations to the Senate for full-time positions in executive departments. Of these 102 nominations, 64 were confirmed, 8 were withdrawn, and 30 were returned to him in accordance with Senate rules. For those nominations that were confirmed, a mean (average) of 156.1 days elapsed between nomination and confirmation. The median number of days elapsed was 125.5. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) at http://www.lis.gov/nomis/, the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents, telephone discussions with agency officials, agency websites, the United States Code, and the 2016 Plum Book (United States Government Policy and Supporting Positions). This report will not be updated.

Introduction Congress views the stability of Haiti with great concern and commitment to improving conditions there. Both Congress and the international community have invested significant resources in the political, economic, and social development of Haiti, and closely monitored the conduct of the 2010-2011 elections as a prelude to the next steps in Haiti's development. Haiti has been struggling to build and strengthen democratic institutions for 25 years, ever since massive popular protests and international pressure forced dictator Jean-Claude Duvalier to abandon his rule and flee the country in 1986. Known as "Baby Doc," Duvalier came to power in 1971, succeeding his father, Francois "Papa Doc" Duvalier, who had ruled since 1957. Their 29-year dictatorship was marked by repression and corruption. Hoping to reverse almost 200 years of mostly violent and authoritarian rule, Haitians overwhelmingly approved a new constitution creating a democratic government in 1987. De facto military rule, coups and thwarted attempts at democratic elections continued until a provisional civilian government conducted what was widely heralded as Haiti's first free and fair elections in 1990, in which Jean-Bertrand Aristide, a former Catholic priest, was elected President. In the short term, elections have usually been a source of increased political tensions and instability in Haiti. In the long term, elections in Haiti have contributed to the slow strengthening of government capacity and transparency. Elected governments have developed long-term development plans resulting in international technical and financial assistance. They have developed national budgets and made them public. The number of employees in bloated state enterprises has been reduced. The government carried out the fiscal management and transparency reforms necessary to qualify for debt relief from multilateral and some bilateral creditors under the Enhanced Heavily Indebted Poor Countries Initiative in 2009. Human rights violations have been drastically reduced. Despite controversy over some aspects of the 2006 elections, Préval was accepted as the legitimate head of state by Haitians and the world community, and oversaw a period of economic growth and relative internal political stability before a devastating earthquake struck the nation in January 2010. There is still much to be accomplished. Some parts of the government are not fully independent, the judicial system is weak, and corruption and political violence still threaten the nation's stability. Haitian governance capacities, already limited, were considerably diminished by the earthquake. Poverty is massive and deep, and there is extreme economic disparity between a small privileged class and the majority of the population. The United States and other members of the international community continue to support efforts to hold free and fair elections in Haiti in the belief that in the long run they will contribute to improved governance and, eventually, improved services to Haitian citizens and greater stability which will allow for increased development. Congress has given bipartisan support to this policy approach. Background to the Recent Elections The road to democratic development has been bumpy, and the international community became increasingly involved in trying to keep Haiti on that road. Aristide was overthrown in a military coup eight months after he was inaugurated. For three years, the coup leaders resisted international demands that Aristide be restored to office. Only when faced with a U.S. military intervention did the regime relent. Aristide returned in 1994 under the protection of some 20,000 U.S. troops, who transferred responsibility to a United Nations mission in 1995. With U.S. assistance, President Aristide disbanded the army and began to train a professional civilian police force. In 1996 Haitians saw their first transfer of power between two democratically elected presidents when Aristide was succeeded by Rene Préval. Subsequent elections held under Presidents Aristide and Préval, both of whom served two non-consecutive terms, were marred by alleged irregularities, low voter turnout, and opposition boycotts. Some election conflicts left Haiti without a fully functioning government, as when most of the legislators' terms expired in 1999 without elections being held to replace them. President Préval then ruled by decree for the remaining two years of his first term. The international community, including an OAS mission, tried in vain for several years to mediate negotiations between the Aristide government and the opposition over the elections in which Aristide was reelected in 2000. Tension and political violence continued throughout Aristide's second term, culminating in his flight into exile in 2004, after the refusal of the opposition to negotiate, an armed rebellion, and loss of international support. There were numerous allegations that Aristide was involved in drug trafficking and other corrupt activities. An interim civilian government was formed and oversaw elections in 2006 in which Préval, after a dispute over the vote calculation, was elected to a new term. Since the earthquake that ravaged the Haitian capital of Port-au-Prince and surrounding areas on January 12, 2010, political stability has been especially uncertain, due to the loss of many political figures and government officials, massive damage to government infrastructure, and mounting frustrations at what is widely perceived as slow progress in reconstruction and distribution of over $9 billion in pledged international assistance. An outbreak of cholera has further complicated the situation. At stake in the recent election process were the offices of President, the entire 99-member Chamber of Deputies, and 11 of 30 Senators. The newly elected officials will be responsible for directing reconstruction efforts. Many observers therefore believe that it was especially important that these elections be conducted fairly, so that the new government be accepted as legitimate by both the Haitian public and international donors, including the United States, who are providing technical and financial support to the election process. The Obama Administration, which considers Haiti its top priority in the Latin American and Caribbean region, provided $16 million in election support through the U.S. Agency for International Development (USAID). (See Appendix A for details on U.S. elections assistance to Haiti.) The UN Stabilization Mission for Haiti (MINUSTAH) provided security and technical support for the process. Parliamentary elections had originally been scheduled for February 28, 2010, but were postponed because of the earthquake. The terms of all of the Chamber of Deputies and of one-third of the Senate expired on May 10, 2010. Because elections were not held before then, the legislature ceased to function as a whole. Normally, the legislature must approve federal procurement contracts and authorize spending. Before it adjourned, however, the legislature passed a State of Emergency law in April 2010 giving the executive branch those and other broad powers for 18 months, to October 2011. The date mandated in the constitution for any president's inauguration is February 7 (the anniversary of Duvalier's flight into exile). Because of the delays caused by the earthquake, and the difficulty of organizing elections following such a disaster, the legislature also authorized the extension of Préval's term to May 14, if necessary. The President, Senators, and Deputies are elected to serve five-year terms. The constitution limits presidents to two non-consecutive terms. There are no term limits for the legislature, although turnover for its members has been high. The first round of both the presidential and legislative elections took place on November 28, 2010. According to the Haitian constitution, if no candidate receives an absolute majority of the vote, a runoff vote between the top two candidates is held for presidential and Chamber of Deputy seats. For Senate seats, candidates who lack an absolute majority but have at least 20% more votes than the next candidate are declared the winner. The Presidential Race President Préval was completing his second non-consecutive term, the maximum allowed by the Haitian constitution. Nineteen candidates vied to succeed him in the first round. Like most previous elections in Haiti, this one centered around personalities more than parties or issues. A group of Haitian journalists, the Public Policy Intervention Group, with the support of the National Democratic Institute and the Commission on Presidential Debates, tried to encourage more substantive discussions among the presidential candidates by holding a series of debates that were broadcast nationwide. All 19 presidential candidates participated. The first round produced contested results and politically motivated violence. After the Haitian government accepted the recommendations of international observers, the dispute was resolved and the vote went to a second round. Michel Martelly was declared the winner and was inaugurated on May 14. The First Round of Voting The top three candidates, according to polls before the first round, were Mirlande Manigat, Jude Celestin, and Michel "Sweet Micky" Martelly. Manigat is a Vice Rector and professor of constitutional law at the private Université Quisqueya in Port-au-Prince. She is a former Senator and First Lady—her husband Leslie Manigat was elected in 1988 in elections held under a military regime, and overthrown four months later. Mirlande Manigat describes herself and her Rassemblement des Democrates Nationaux (RDNP , Assembly of Progressive National Democrats) party as center-left, or as "capitalist with a human face," in the tradition of Brazil's moderate leftist President Lula da Silva. Some other analysts regard her as more of a conservative. Jude Celestin, a technocrat, was little known before Préval chose him to run as his successor on the ticket of the Inite (Unity) party created by the President. As Director of the National Equipment Center, Celestin oversaw the construction of hundreds of miles of roads that made remote villages and farmlands accessible. He was reportedly described by many as an extremely focused workaholic. Questions had arisen about his background: he claimed an engineering degree from the Swiss Ecole Polytechnique de Lausanne, which reportedly has no records of his attendance or graduation, and he has four properties in Florida in foreclosure. Polling at a distant third was Michel Martelly, a famous Haitian kompa dance musician, known for his bawdy performances, and popular with young voters. He acknowledges his political inexperience, but said he would seek expert international advice to guide him in developing foreign investments and tourism to stimulate the economy. Martelly, also a businessman, has personal financial issues. He defaulted on over $1 million in loans and had three properties in Florida go into foreclosure, raising questions about his financial management skills. Of the 16 remaining candidates, eight were former government officials. Most prominent among them were: Jacques-Edouard Alexis, prime minister under Préval who was dismissed in 2008 by the legislature following violent protests over high food and cost-of-living prices; Yvon Neptune, prime minister under former President Jean-Bertrand Aristide; and Leslie Voltaire, an urban planner who has served as Minister of Education, and of Haitians Living Abroad, as Chief of Staff to Aristide, advisor to Préval, and a coordinator for the government's reconstruction planning. Both international and domestic election observers said that November's election day was "marred by disorganization, dysfunction, various types of irregularities, ballot stuffing and incidents of intimidation, vandalism of polling stations and violence." These problems were reported throughout the country, but were most prevalent in the capital of Port-au-Prince. According to the OAS observation team, More subversive of the process was the toxic atmosphere created by the allegations of "massive fraud". The JEOM [OAS /Caribbean Community Joint Election Observation Mission]observed instances where even before the voting started, any inconvenience or small problem led to the immediate cry of fraud. Such conduct continued during the day. The Joint Election Observation Mission concluded that the irregularities, "serious as they were," did not necessarily invalidate the electoral process. Several Haitian civil society groups and election observation groups presented their reports to the OAS mission; although they gave a "scathing indictment of the shortcomings, irregularities and fraud that tarnished" the elections, they did not call for the elections to be cancelled. (See "Election Monitoring" below for further information on the observation process.) Some critics, including some Members of Congress, called for the elections to be annulled and new elections to be held, and criticized the OAS electoral mission for having a pro-government bias. Some critics continued to charge that former President Aristide's Lavalas party had been excluded from the current elections, although according to the Provisional Electoral Council (CEP), the Haitian government body responsible for organizing the elections, and the OAS, no Lavalas faction submitted the document required to register its legislative candidates as the ones authorized to represent the Lavalas party. Furthermore, no faction of Lavalas submitted any candidate for the presidential elections. Many former Lavalas members ran under other parties' banners. Contested Results And An Impasse On December 7, 2010, the CEP announced preliminary results. Voter turnout was a historically low 22.8% of registered voters. The reported tally for President was 31.37% of votes cast for Mirlande Manigat, 22.48% for Jude Celestin, and 21.84% for Michel Martelly. Although it appeared that all but one legislative race would need to proceed to a second round as well, the most controversy surrounded the presidential results. The U.S. Embassy stated that it was "concerned" by official preliminary results that were "inconsistent with the published results" of various domestic and international observers. The CEP's announcement was followed by three days of violent protests, with Martelly supporters charging that fraud had put Celestin ahead, and that their candidate should have placed second. Tensions continued, as various actors called for action across a range of options, including but not limited to, accepting the preliminary results, sending the top three candidates to a run-off (although the constitution calls for only the top two candidates to proceed), holding new elections, or re-counting the ballots. Investigations And Revised Results Negotiations between the OAS and the Haitian government ensued, resulting in the OAS sending a team of election experts to Haiti on December 30, 2010, to verify the results of the presidential election. The team conducted a statistical analysis of a national random sample of the vote count, finding that as voter participation rates rose above the national average of about 23%, so also rose the probability of serious irregularities. The expert mission then reviewed the result sheets from all polling places where participation rate was 50% or higher and a single candidate garnered 150 votes or more, and from all polling places where the participation rate was greater than 100%. Using criteria established in Haitian electoral law, the expert mission recommended that votes from some of these polling places be excluded from the final tally. Some votes for all the candidates were excluded because of irregularities; the top three candidates had by far the most votes excluded. The revised tally reversed the second and third place candidates, giving Martelly 22.2%, and Celestin 21.9% of the vote, still less than one percent difference between the two. Manigat remained in first place with 31.6% of the vote. Although the expert mission said that, "By any measure, these were problematic elections," it ruled out the option of conducting a new national election. Because the irregularities most affected the top three candidates, the mission concluded that "a new election would involve more contests and candidacies than the evidence warranted." The mission made recommendations for improving the process in the second round, including improving poll worker training, creating a more transparent and consistent verification process at the central vote tabulation center, and replacing poll workers at locations where irregularities occurred. The expert verification mission submitted its report to then-President Préval on January 13, 2011. Préval was reported to be displeased with some of the team's methodology, what was seen as its usurping of the CEP's role, and that the report had been leaked. Some advocacy groups and other critics also objected to their methodology. Other long-time Haiti observers said that there was "no reason to question its impartiality and seriousness of purpose." Worried that Préval would insist on his candidate advancing to the second round, the United States and other major donors applied pressure on the Préval Administration to accept the OAS recommendations. The State Department revoked some Haitian officials' visas, and warned it might review U.S. aid to Haiti if the recommendations were ignored. Secretary of State Hillary Clinton traveled to Haiti January 30, saying that the U.S. was not about to cut off aid, but she pressed President Préval to accept the OAS recommendations. Préval sent the report to the CEP on January 18 for implementation. The CEP said that it would implement the technical recommendations for improving the second round, and take the recommendation regarding the second and third place candidates into consideration as it resumed the dispute resolution phase of the electoral process that had been suspended during the verification process. Tension continued as observers wondered whether the CEP would accept or reject the OAS recommendations. A second OAS team of legal experts accompanied the CEP's disputes and challenges phase and the adjudication of complaints. Concluding that phase, the CEP released the final presidential and legislative election results on February 3, accepting that Mirlande Manigat and Michel Martelly would proceed to the second round of presidential elections. The public response was calm. The candidates resumed campaigning on February 17. The Final Round of Voting The final round of voting for president and the legislature was held on March 20, 2011. Mirlande Manigat was still the frontrunner in early March, although a poll by Haiti's private sector showed Michel Martelly pulling ahead by March 9. The extremely popular Haitian-born hip-hop musician Wyclef Jean, who was ruled ineligible to run for president himself because he did not meet Haitian residency requirements, threw his support behind Martelly. Political tensions had initially decreased following the announcement of the second-round presidential candidates. On March 8, however, three men putting up posters in support of Manigat were found dead, showing signs of mutilation, suggesting that political tensions could still erupt at any moment. Asked what her priorities were, Mirlande Manigat echoed a common feeling that "everything is a priority." She went on to say that her immediate priorities would be solving the cholera problem and addressing the situation of displaced Haitians living in camps. In terms of long-term development, she said that education is key as a tool for development and for reducing frustration among Haiti's youth. She also said that Haiti's "very unacceptable" social inequalities required profound changes to reduce social volatility. Opponents disparage her age (she is 70) and criticize her for being more comfortable speaking in French than Creole and for being removed from Haiti's impoverished masses. In her later campaign stops, she addressed Haitian crowds and press in Creole, and appeared in a Port-au-Prince slum. Michel Martelly, age 50, also emphasizes education, along with agricultural production and the importance of family. He said his campaign was "to bring joy, to bring music, to bring love, to bring peace, prosperity, development and change in every corner of the country of Haiti." Critics raised concern about his lack of education (he does not have a college degree) and lack of political or institutional management experience, and his personal financial problems. Martelly, who often performs in outlandish costumes, was trying to shift his image, and started wearing three-piece suits. He also hired a Spanish public relations firm to handle his campaign. The OAS-CARICOM electoral observation mission reported that the second round of elections were "quite an improvement in many ways on the first round ," characterizing them as more peaceful and better organized. The mission acknowledged that were still problems and some violence, but said that the Provisional Electoral Council had taken effective measures to correct problems, and the Haitian National Police had coordinated more closely with MINUSTAH and taken more actions to prevent violent disruptions of the process. Preliminary results were expected by March 31, but the CEP said it delayed their release until April 4 because of irregularities. The CEP announced final results April 16 and declared Martelly the winner. Martelly received almost 68% of the votes cast to Manigat's 32%. The presidential election results were accepted without dispute, unlike the legislative results (see below for more details). Voter turnout was even lower than the first round's 22.8%, however, so the 716,989 votes cast for Martelly constitute only 15% of the 4.7 million registered voters. Both previous presidents were elected with stronger mandates. Aristide received over 1 million votes in 1990, and Préval received almost 1 million votes in 1995, when the pool of registered voters was only 3.5 million. The Legislative Race19 The legislative offices up for election included the entire 99-member Chamber of Deputies, and 11 of 30 Senate seats. The First Round While some critics charged that fraud had been used to advance Inite legislative candidates in the first round, the mandate of the OAS election expert mission brought in to help resolve the first round dispute was only to examine the presidential results, not the legislative ones. The CEP handled legislative disputes and challenges and the adjudication of complaints, and was accompanied during this phase by the second OAS team of legal experts. The legal expert mission "observed with satisfaction" that legislative candidates submitted a large number of complaints, "demonstrating that grievances can be effectively addressed by rule of the law procedures." In the Senate, four races were determined by the first round, seating three Inite and one Altenativ candidate. Seven contests proceeded to a second round, with seven Inite candidates facing candidates from three other parties. In the Chamber of Deputies, Préval's party won or proceeded to runoffs in 68 of the 99 races. The Final Round of Voting: Amid Controversy an Incomplete Legislature is Sworn In The results of the second round of voting for legislative seats were contentious. Charges of fraud led to violent demonstrations across the country and resulting in the deaths of at least two people, including the director of a hospital that was set on fire. The legislature sworn in on April 25 was incomplete: the results in 19 districts were challenged. International observers reported that the final results released by the CEP for those districts had been changed to favor candidates associated with Préval's Inite coalition, and demanded that all 19 results be annulled. The CEP reviewed the cases and endorsed 15 of the 19 original results, the government published the official results, and the legislators were able to take their seats. Four seats in the chamber of deputies are still to be decided. President Martelly has said he will address the issue once his cabinet is in place. Local Elections Still to be Held Local elections for municipal councils, town delegates, and other posts are due to be held as well. USAID's post-disaster election assessment suggested they be held in mid-2011. So far there is no date scheduled to hold them. The Newly Elected Government President Martelly Michel Martelly was sworn into office as Haiti's new President on May 14, 2011. When outgoing President Rene Préval gave him the presidential sash it was the first time in Haitian history that a peaceful, democratic transfer of power occurred between Presidents of opposing parties. Martelly's lack of political or management experience causes concern among many observers about the former carnival performer's ability to carry out his promises of free and compulsory education, job creation, agricultural development, and strengthened rule of law. Martelly's close connections to supporters of the Duvalier dictatorship (1957-1986) and perpetrators of the 1991 military coup that overthrew Haiti's first democratically elected president raise concerns among some critics that he may have autocratic leanings. Some Haitians said they saw a vote for him as a rejection of the traditional political class and of what they viewed as Préval's lackluster approach to reconstruction after the earthquake. Before he was sworn in, President-elect Martelly met with Secretary of State Hillary Clinton in Washington. Clinton endorsed Martelly, and made suggestions as to how his government could speed the pace of reconstruction. These included simplifying the transfer the ownership of state-owned land for affordable housing, and streamlining the currently cumbersome process of starting a new business in Haiti. Martelly called the reconstruction process "despairingly slow" and asked for a restructuring of foreign aid. Martelly is having difficulty forming his new government. The parliament rejected his first nominee for prime minister, an economist and businessman named Daniel Rouzier. The President has proposed another candidate, but is not faring well with that choice, either. Martelly's second nominee is Bernard Gousse, who was justice minister under the interim government that followed the violent ouster of then-President Jean-Bertrand Aristide in 2004. Human rights groups accused Gousse of persecuting Aristide supporters during his tenure. Concern over his record led 16 of 30 senators to petition Martelly to rescind Gousse's nomination, with some alleging that several sitting members of both houses of parliament were victims of Gousse's arbitrary arrests and detentions. A Haitian law firm subsequently asked the legislature to investigate Gousse, alleging he is also guilty of being "an accomplice to murder" while he was justice minister. Martelly is still finalizing the list of other cabinet ministers. The Legislature The new legislature began to work three weeks before Martelly was sworn in, as winners of the uncontested legislative races were sworn in and convened on April 25. The legislature immediately considered constitutional reforms that had been passed under the previous legislature, so that they could go into effect this year. Constitutional amendments passed by two consecutive legislatures go into effect when the next president takes office. Both chambers approved an amendment allowing dual citizenship, a big issue among the Haitian expatriate community, some of whom were ruled ineligible to run for office by the previous prohibition against dual citizenship. Other amendments passed include provisions providing for an increase in women's representation in public administration, and creating a Constitutional Council to review the constitutionality of laws. Controversy has arisen around the status of these amendments, which Martelly has said he will also address once his government is formed. Haitian political parties tend to be platforms more for individuals than for clear agendas, leading to a proliferation of many, often short-lived parties. This is reflected in the distribution of parties within each chamber. There are seven parties in the Senate, which has 30 seats, and 17 parties in the Chamber of Deputies, which has 99 seats. (See Appendix B for the distribution of seats among parties in the legislature.) The Inite coalition captured a majority in both houses of the legislature, so President Martelly will have to negotiate with them to get his proposals passed. The nature of Haitian political parties also contributes to the low re-election rate in the Haitian parliament. Of the 99 contested seats in the Chamber of Deputies, about 25 went to incumbents. One former Deputy won a seat in the Senate. The leaders of the two chambers have varying amounts of previous legislative experience. The President of the Chamber of Deputies, Sorel Jacinthe, is serving his third term in the lower chamber. He immigrated to New York in 1979; he began college studies at the University Maryland, and finished them in Haiti when he returned there in the late 1980s. The President of the Senate, Jean Rodolphe Joazile, was a member of the Senate in 2000, and served as Treasurer, but resigned in 2001. He was a captain in the Haitian army, and, according to the State Department, studied at the former U.S. Army School of the Americas in Fort Benning, Georgia. Since the flurry of activity passing amendments between their installation and that of the president, the legislature has focused primarily on consideration of a new prime minister. Issues and Concerns Regarding Elections and Post-Election Governance The concerns over this particular election cycle in Haiti are shared by the international donor community, Congress, and the Obama Administration. Each group is deeply concerned about the political stability of the government, its ability to move forward with a clearly defined plan for the reconstruction and development of post-earthquake Haitian society, and the effectiveness of the foreign aid each provides. In the long term, elections in Haiti have contibuted to the slow strengthening of government capacity and transparency. In the short term, elections have usually been a source of increased political tensions and instability. Short-term Issues Election Monitoring The Organization of American States (OAS) /Caribbean Community (CARICOM) Joint Election Observation Mission was the only major international monitor of the recent election process. The mission had long-term observers on the ground since August 3, 2010. By November 19, 2010, it had 68 observers dispersed across Haiti's 10 departments (political subdivisions). It deployed more observers the week leading up to and on the November 28 election day, when there were 118 observers. The joint mission has been observing the various phases of the electoral process, and will continue to do so until all official results of the second round elections are finalized. The mission has met regularly with the Provisional Electoral Council, making suggestions based on its observations. It has also met with political parties, passing on their concerns to the CEP as well. Some people believed there should have been more long-term international observers, but donors thought that given the difficulty in logistics posed by post-earthquake conditions, and Haiti's relatively small size, the single, smaller mission would suffice. The OAS deployed 200 observers for the March 20 second round elections. Some observers criticized the mission for not questioning the validity of the elections earlier in the process. Others criticized the mission for being both part of the process, through its technical assistance to the office providing identity cards, and judge of that same process. Other smaller organizations and diplomatic missions, including the U.S. and Canadian embassies, and about 6,000 nonpartisan domestic election observers monitored voting on election day across the country during the first round. Many of these groups observed the March 20 th round as well. Concerns about the Electoral Process The OAS/CARICOM observation mission expressed ongoing concerns about election security. Some opposition candidates alleged during the first round of voting that candidates and supporters of the ruling Inite party distributed weapons. The OAS mission asked those making accusations to present evidence so that investigations could be carried out. In November the OAS/CARICOM election monitoring team expressed concern about election-related violence, and asked candidates to "carry out their campaigning in a calm atmosphere and to display tolerance, friendliness and mutual respect." Almost up to the last moment, observers worried that the eruption of violence or political unrest could possibly cause a postponement before, or trouble after, the elections. Angered by rumors that UN troops may have introduced cholera to Haiti, Haitians attacked UN soldiers in late 2010. Any further attacks against UN troops could have been particularly problematic, as MINUSTAH was responsible for providing security for the election process, as well as transportation of ballots and other election material. There are 9,000 MINUSTAH security personnel, and 3,500 Haitian National Police (PNH) providing security. UN officials revised security plans for the second round. An early assessment of the elections issued a reminder that MINUSTAH's mandate is mostly to observe and support the PNH, not to handle situations directly. After the first-round elections, the U.S. State Department issued a new travel warning strongly urging U.S. citizens to avoid non-essential travel to Haiti in part because of "continued high crime, the cholera outbreak, frequent disturbances in Port-au-Prince and in provincial cities, and limited police protection" and because "travel within Haiti is hazardous." Since the first-round elections, there have been violent protests resulting in deaths. Once the final results were announced, the atmosphere was calmer. Nonetheless, the situation remained volatile. Observers of the electoral process also voiced concern about the level of voter participation because it affects the legitimacy of the election's results. In April and June 2009, voter turnout for partial Senate elections was a meager 11% of the electorate. Turnout is usually much higher for presidential elections, however, and the observation mission viewed active campaigning and large numbers of voters going to verification centers as signs that turnout would be healthy. Although turnout was higher than in 2009, it was only about 22% in the first round of the current election process. Some observers wonder if fear of cholera and of violent protests might have suppressed voter turnout. In the joint observation mission's November 11 statement, it repeated its concern over the use of state resources during the recent campaign season. The mission appealed "to the political parties to adhere to the provisions aimed at guaranteeing the fairness of the election race," and said that the "state authorities must ... ensure that agents of the state are not involved in activities related to campaigning." The OAS/CARICOM mission's October report expressed concern about several technical aspects of the electoral process. The distribution of voter identification cards seemed to be the greatest issue. About 400,000 new cards were printed but distribution was slow. About 4.7 million people have registered to vote, an estimated 95% of the adult population. The report estimated that about 6% of those listed in the voter registry are deceased. This was attributed mostly to the listing of people who died during the earthquake, for most of whom there are no death certificates, which are needed to remove someone's name from the registry. The report noted that safeguards such as photos on the electoral list, the need for a voter identification card, and indelible ink indicating votes had been cast, had been put in place to prevent multiple voting. Registering the internally displaced appeared not to have been as big a problem as some thought it would be, as not that many internally displaced requested replacement identity cards. The majority of displaced people in temporary camps appear to live near their former residences and polling stations, so that few additional polling places for them were needed, according to U.S. officials familiar with election preparations. The Provisional Electoral Council Negative perceptions regarding the Provisional Electoral Council are widespread and contributed to questions regarding the elections' credibility both before and after the voting took place. In late 2009, President Préval cut ties to the Lespwa movement that elected him in 2006, and formed a new movement, Inite (Unity). Opposition groups accused the presidentially appointed electoral council of bias in favor of the President's new movement. The electoral council disqualified without explanation about 15 rival political groups, which included members of Lespwa who did not join Préval's new party. An assessment of the feasibility of organizing elections after the earthquake stated that the operational branch of the CEP was technically capable of organizing elections, but warned that the lack of credibility of the council as a whole posed a major problem. The report recommended replacing the commission, but the Preval administration chose not to do so. The OAS/CARICOM mission's October report acknowledged that "the widespread mistrust of the CEP is perhaps by far the major obstacle to the credibility and legitimacy of the elections." But the mission suggested that the CEP may be being blamed for some of the shortcomings of previous CEPs and of the Préval administration as well. For example, the previous CEP caused controversy by barring former President Jean-Bertrand Aristide's Fanmi Lavalas party from participating in legislative elections in April 2009 for mostly technical reasons. Part of the problem was that three rival factions within Lavalas submitted separate lists of candidates. The council rejected all three lists because none of the factions had documents signed by the party's head, Aristide. Aristide lives in exile in South Africa. Although technically correct, some observers felt the decision had a politically motivated element, to prevent the once powerful Lavalas from gaining more seats in the National Assembly. No faction ever produced the required document, however, and so remained ineligible to register legislative candidates. No faction of Fanmi Lavalas tried to register a presidential candidate with the current CEP for the 2010 elections. The observation mission's October report notes that the current CEP has been responsive to criticism, improving the transparency of its actions, and communicating more openly with the public, political parties, and civil society organizations. The CEP began to implement some of the improvements recommended by the OAS and other observer missions as soon as they were received following the first round. About 500 poll workers and supervisors at voting centers where fraud and irregularities were high wre fired; education requirements for poll workers were raised to a 12 th grade equivalent; and officials continued to clean up the voter lists. Following the second round, the OAS/CARICOM mission reported that the CEP's efforts had "positive results," and that problems related to the electoral registers and voters finding their polling place "were far less prevalent" than they had been in the first round. The mission said that incidents of ballot stuffing and voter intimidation were isolated. Concerns about fraud in the CEP's tabulation process soon emerged, however. As mentioned above, after the CEP announced results for the legislative elections, with final tallies that changed the outcome for 19 districts in favor of the ruling Inite coalition, the OAS/CARICOM mission demanded that those results be annulled. The CEP reverted the outcomes to the original tally in 15 cases; four seats in the chamber of deputies are still to be resolved. Legitimacy An immediate concern for all involved was that the elections, carried out with $16 million in U.S. assistance, was that they be sufficiently free and fair to produce a government considered legitimate in the eyes of the Haitian public and the international community. The United States and other donors were also concerned that the level of irregularities, fraud and violence evident in the first round be addressed and reduced during the last round. The voting process in the second round did show improvements over the first. The CEP's calculation of legislative election results, however, once again called their integrity into question. It remains to be seen how well Haitian authorities resolve the dispute over the remaining contested legislative seats, and how willing they are to prevent such fraud in the future. The ability of the Haitian government to carry out election processes in an acceptable manner is a key test that can influence the political tone in Haiti for several years afterward. Long-term Issues Reconstruction and the Management of Foreign Assistance In the longer term, the United States and the international community are concerned about the ability of the newly elected government to manage the billions of dollars of international aid. Like his opponent, Martelly expressed nationalistic views during the campaign, leading to concerns about whether his administration will continue to work within the current framework of the Interim Haitian Recovery Commission (IHRC). The IHRC, formed in late 2010, was designed to last 18 months, at which time the commission would become the Haitian-run Haitian Development Authority. While there has been criticism that the IHRC is not approving and distributing aid effectively, there is also widespread concern that the Haitian government is not ready to assume full control of the process either. The government's nascent institutions, which had limited capacity before the earthquake, were set back severely by the earthquake's destruction. Gross mismanagement of funds by this or any subsequent Haitian administration could prompt donors to impose conditions, reconsider further funding of programs, or return to directing aid solely through non-governmental organizations. Martelly pledged to make Haiti less dependent on foreign assistance, but was not clear on how he would do so. There are also concerns about the effect either candidate will have on relations with the United States and with other major donors and international organizations. Donors worry about whether either candidate will try to change dramatically current development and recovery plans. President Martelly has been vague on specific policy plans. If his government wants to be assured of continued donor assistance, it will face difficulty straying far from the current strategy, which was agreed upon by the Haitian government and international donors at the April 2010 donors conference, and upon which foreign assistance programs are based. Security and Human Rights Political violence continued to erupt throughout the electoral process. The U.S. and other international donors support reform and capacity building in the Haitian National Police as a means to continuing to improve citizen security. In terms of security proposals, Martelly has proposed recreating the Haitian army, which overthrew Aristide shortly after he became Haiti's first elected president, and was disbanded by Aristide after he was restored to office by the international community. At a debate before the second round of voting, both candidates supported establishing a national security force as a way of creating jobs. Martelly said the military should replace MINUSTAH, while Manigat said that MINUSTAH could be phased out eventually, but that it would not have been a priority for her administration. The proposal to reconstitute the Haitian army raises alarm not only about diverting funds from current development and reconstruction programs, but also about respect for human rights. The army was an instrument of state repression under the Duvalier regime, along with the Duvaliers' secret police, the Tontons Macoutes, and under the de facto military regimes that followed Duvalier's and Aristide's ousters. Both security forces committed gross violations of human rights over decades, according to numerous reports by the State Department, the OAS Inter-American Human Rights Commission, Amnesty International, and others. Both candidates in the final round had some association with de facto military regimes. As noted earlier, Manigat's husband, Leslie Manigat, was elected president in 1988 in elections run by the military. His term lasted less than six months, however: when Manigat tried to introduce reform and reduce corruption, the military overthrew him. Martelly was "once a favorite of the thugs who worked on behalf of the hated Duvalier family dictatorship," according to the Washington Post , and was "closely identified with sympathizers of the 1991 military coup that ousted Pres[ident] Jean-Bertrand Aristide," according to the Miami Herald . One of Martelly's advisors, Gervais Charles, is currently Jean-Claude Duvalier's lawyer. Stability and the Return of Former Leaders In addition to electoral political tensions, another destabilizing factor is the reappearance on the scene of two of Haiti's most divisive leaders. Jean-Claude "Baby Doc" Duvalier returned unexpectedly from 25 years in exile on January 16, 2011. Two days later, the Haitian government formally charged him with corruption and embezzlement. Private citizens have filed charges of human rights violations against Duvalier for abuses they allege they suffered under his regime. Former President Jean-Bertrand Aristide, in exile since his government collapsed in the face of political conflict in 2001, then said that he would also like to return, and the Haitian government issued him a new passport. The Obama Administration cautioned that Aristide's return before the elections would be an "unfortunate distraction." Aristide returned to Haiti two days before the second round elections. He was reportedly greeted by thousands of supporters. Upon landing, he made a speech in which he complained that Lavalas was not represented in the elections, and seemed to make vague references to both presidential candidates, but did not directly support either one. He then kept a low profile through election day. Préval has long said Aristide was free to return, but that he should be prepared to face corruption and other charges as well. Both Duvalier and Aristide are seen as highly polarizing figures able to stir up unrest. It is a significant accomplishment that Haiti, long characterized by impunity for its leaders, has brought charges against its former dictator. Duvalier is currently not allowed to leave the country, while a judge determines whether there is sufficient evidence to proceed with a trial. Trying Duvalier and/or Aristide, however, would be a severe strain on Haiti's weak judicial system. The U.N. High Commissioner for Human Rights has offered to help Haitian authorities prosecute crimes committed during Duvalier's rule. U.N. Secretary General Ban Ki-Moon called on the international community to continue to work with the Haitian government to bring about systemic rule-of-law reform, saying that …the return of Jean-Claude Duvalier has brought the country's turbulent history of State-sponsored violence to the fore. It is of vital importance that the Haitian authorities pursue all legal and judicial avenues in this matter. The prosecution of those responsible for crimes against their own people will deliver a clear message to the people of Haiti that there can be no impunity. It will also be incumbent upon the incoming Administration to build on the achievements of the Préval presidency, which put an end to State-sponsored political violence and allowed Haitians to enjoy freedom of association and expression. Because the judicial system is not fully independent, the attitudes of the new president could have a large impact on any judicial process. Candidate Martelly called for clemency for former leaders, saying that, "If I come to power, I would like all the former presidents to become my advisors in order to profit from their experience." He also said he was "ready" to work with officials who had served under the Duvalier regimes. As an argument in favor of clemency for Haiti's former leaders, Martelly cited a need for national reconciliation. The U.N.'s Deputy High Commissioner for Human Rights, Kyung-wha Kang, in a visit to Port-au-Prince in July 2011, urged the creation of a truth commission, which she said would help promote national reconciliation in Haiti. Outlook In proximity to the United States, and with such a chronically unstable political environment and fragile economy, Haiti has been a constant policy issue for the United States. Congress views the stability of the nation with great concern and commitment to improving conditions there. State Department and USAID officials say that the Obama Administration regards Haiti as its number one priority in the Latin America and Caribbean region. The main priorities for U.S. policy regarding Haiti are to strengthen fragile democratic processes, continue to improve security, and promote economic development. Other concerns include the cost and effectiveness of U.S. aid; protecting human rights; combating narcotics, arms, and human trafficking; addressing Haitian migration; and alleviating poverty. Congress has monitored Haiti closely, and has established a number of conditions on assistance over the years. Congressional priorities for assistance to Haiti have included "aggressive action to support the Haitian National Police;" ensuring that elections are free and fair; developing indigenous human rights monitoring capacity; facilitating more privatization of state-owned enterprises; promoting a sustainable agricultural development program; and establishing an economic development fund to encourage U.S. investment in Haiti. Haiti's national election process has been closely watched by the international community as well as by Congress. Over the past decade, the United States and other international donors have been politically, economically, and militarily involved in Haiti, investing significant resources both in the attempt to build and strengthen Haiti's democracy and political stability and in providing significant amounts of development, humanitarian, and other assistance. Congress and other bilateral donors have again provided another financial stake in Haiti's long-term development by providing funds for this election cycle and will continue to closely monitor the conduct of the entire election process until the conclusion of all electoral disputes as a prelude to the next steps in Haiti's development. Appendix A. U.S. Elections Assistance The United Nations and other international donors provided technical and financial support of the recent elections process. The United States provided $16 million in election support through the U.S. Agency for International Development (USAID). This aid, which encompassed support for both the first and second round voting process, included: An assessment of the feasibility of organizing free and fair elections; Support to the Provisional Electoral Council (CEP) for election organization and administration. This includes training for voting center staff; technical assistance for nationwide civic and voter education campaigns; technical assistance to improve the CEP's ability to communicate with the public and the press; and the establishment of a call-in information center through which voters can find out where to vote; Support to a national network of nonpartisan community action groups to organize election-related civic education and get-out-the-vote activities; Technical assistance to political parties to help them compete more effectively in the 2010-2011 elections, increase the chance that they will accept election results, and reduce the potential for political conflict. Activities include training in poll watching, participation in candidate debates, and election dispute resolution; Support of domestic and international electoral observation to monitor the entire election period, to increase the confidence and participation of voters and political parties; Support for the organization of presidential debates to provide the electorate with greater access to information about candidates and issues; Support for procurement of elections material, such as ballots and ballot boxes, through a contribution to the elections trust fund managed by the United Nations Development Program; and After the elections, programs to build broad national support for electoral reform, including the establishment of an independent, permanent electoral council. USAID expected relatively minor additional costs involved in making improvements for the second round based on recommendations from domestic, OAS, and other observers of the first round. These included additional staff and training for voting centers, increasing the hours and capabilities of the voter information center, and adding enough international observers to conduct a parallel vote count. The UNDP and OAS sought additional funding from other donors as well. Appendix B. Make-up of the Parliament

In proximity to the United States, and with such a chronically unstable political environment and fragile economy, Haiti has been a constant policy issue for the United States. Congress views the stability of the nation with great concern and commitment to improving conditions there. The Obama Administration considers Haiti its top priority in the Latin American and Caribbean region. Both Congress and the international community have invested significant resources in the political, economic, and social development of Haiti, and have closely monitored the election process as a prelude to the next steps in Haiti's development. For the past 25 years, Haiti has been making the transition from a legacy of authoritarian rule to a democratic government. Elections are a part of that process. In the short term, elections have usually been a source of increased political tensions and instability in Haiti. In the long term, elected governments in Haiti have contributed to the gradual strengthening of government capacity and transparency. Haiti has concluded its latest election cycle, although it is still finalizing the results of a few legislative seats. The United States provided $16 million in election support through the U.S. Agency for International Development (USAID). Like many of the previous Haitian elections, the recent process has been riddled with political tensions, violence, allegations of irregularities, and low voter turnout. The first round of voting for president and the legislature, held on November 28, 2010, was marred by opposition charges of fraud, especially in the presidential race. The Haitian government asked the Organization of American States (OAS) for help and delayed releasing final results, while the OAS team of international elections experts investigated and verified the process. On February 3, following the OAS team's recommendations, the Haitian Provisional Electoral Council (CEP) reversed their original finding by eliminating Jude Celestin, the governing party's candidate, from the race by a narrow margin. Instead, Michel "Sweet Micky" Martelly, a popular singer, proceeded to the run-off race against Mirlande Manigat, a constitutional lawyer and university administrator. After months of dispute, the second round of elections took place on March 20. The OAS electoral observation mission reported that the second round was more organized, transparent, and peaceful than the first. When final results were announced, controversy again erupted, this time over legislative races. The CEP's final tallies changed the outcome in favor of the ruling Inite party for 19 legislative districts. Under pressure from the public and the OAS mission, the CEP eventually reverted to 15 of the 19 original results; four seats in the chamber of deputies are still to be decided. The outcome of the presidential race was not challenged, and Michel Martelly was sworn into office peacefully on May 14. Local elections are due to be held, but haven't yet been scheduled. President Martelly is having difficulty forming his administration. The legislature passed several constitutional amendments in a flurry of activity in its first three weeks. Since then it has focused on the selection of a prime minister. The majority Inite parliament blocked Martelly's first choice, and over half of the Senate asked him to rescind his second candidate. In addition to ongoing issues regarding the legitimacy of the March 20 elections, other questions have raised concerns within the international community and Congress. These include the destabilizing presence of former dictator Jean-Claude "Baby Doc" Duvalier and former President Jean-Bertrand Aristide, and the newly elected government's ability to handle the complex post-earthquake reconstruction process and its relationship with the donor community.

Introduction The Railroad Rehabilitation and Improvement Financing (RRIF) program offers long-term, low-interest loans to railroad operators for improving rail infrastructure. The program is intended to operate at no cost to the government and does not receive an annual appropriation. Congress has authorized $35 billion in loan a uthority for the program, but freight railroads have been relatively unenthusiastic. Since 2000, RRIF has made 37 loans to 29 operators for a total of $5.4 billion, representing $5.9 billion in 2018 dollars. From 2000 through 2015, private railroads' total investment in structures and equipment was approximately $154 billion ($174 billion in 2016 dollars). RRIF supplied less than 1% of freight railroads' capital expenditures for track and other structures over that period. In recent years, sponsors of intercity passenger rail projects have shown increasing interest in the program. About 85% of the RRIF program's nominal loan amount has gone to government-controlled entities for passenger rail projects rather than to freight operators; loans to Amtrak, the national intercity passenger rail provider, alone represent almost 60% of the total nominal loan amount. Part of this activity may be explained by a growing interest in passenger rail services at the state and local level and the scarcity of other funding assistance for such projects, which tend to be extremely costly. The Fixing America's Surface Transportation Act (FAST Act; P.L. 114-94 ), enacted in December 2015, included changes intended to make the RRIF program more attractive to potential applicants, though one change—elimination of the requirement that the U.S. Department of Transportation (DOT), which administers the program, refund borrowers' credit risk premiums—may make the program less attractive. Some of the changes may make the program more useful for funding passenger rail and transit-related projects. The prospect of large loans for private intercity passenger rail and transit-related projects raises questions about potential risks to the RRIF program, because such projects may have no source of earnings until and unless they are completed and, even then, may not be able to generate sufficient revenue to service their loans. Railroad Industry Background The railroad industry has changed significantly since Congress created a forerunner of RRIF in 1976. At that time, the nation's railroads were in great financial difficulty, investment in infrastructure and equipment had lagged, and there were questions about the future viability of the industry. Subsequently, Congress significantly deregulated the railroad industry, making it easier for carriers to consolidate and to shed less profitable routes. Since that time, mergers have reduced a large number of regional railroads to a handful of companies that operate across many states (known as Class I carriers). Deregulation allowed the large railroads to focus their construction and maintenance efforts on heavily trafficked main lines and to stop service on routes that were not profitable. Some of this lightly used trackage was sold to smaller operators, which believed they could build business by working closely with shippers that used or might use the line. These smaller railroads, collectively known as short line railroads, are classified by the Federal Railroad Administration (FRA) as Class II and Class III carriers. Although there are now only seven Class I railroads operating in the United States, there are more than 560 short line railroads. The Class I freight railroads—large, profitable commercial entities—are able to finance improvements out of their considerable revenues, as well as by issuing stock and by borrowing in the commercial market. Class II and Class III railroads have fewer financing options. Their revenues are smaller, their lines of business typically are more limited than those of the Class I railroads, and their creditworthiness generally is lower. However, nearly half of the nation's short line railroads have come under the control of 27 holding companies, potentially offering them easier access to private financing. In addition, a number of short line railroads are terminal switching, port, or harbor rail lines that have a relationship with a Class I railroad, which may help them obtain financing, and some short line railroads are owned by states. These entities typically have easier access to the financial markets than do stand-alone short line railroads. Amtrak operates at a loss and relies on federal grants appropriated annually to continue operations. Amtrak's primary service corridor is the Northeast Corridor (NEC), a rail line running from Washington, DC, through New York City to Boston. This line also is used heavily by commuter rail operations and also hosts freight service. There is an estimated backlog of $38 billion in capital investment needed to restore the aging NEC infrastructure to a state of good repair. In July 2017 DOT published a proposal for expanded and faster service on the NEC, with a capital cost estimate of $121-$153 billion. RRIF Program Congress created the RRIF program in 1998 and revised it in 2005, 2008, and 2015. The program allows DOT to provide credit assistance for rail infrastructure by making low-cost direct loans or providing loan guarantees to project sponsors. Eligible recipients of this assistance include railroads, state and local governments, government-sponsored corporations, and joint ventures that include at least one railroad. The RRIF program replaced a railroad financing program that Congress created in 1976. The original program allowed DOT to provide financial assistance for rail infrastructure by purchasing preference shares or issuing loan guarantees. The authorization to purchase preference shares expired in 1996. In the 1998 revision that renamed the program, Congress authorized DOT to make direct loans as well as loan guarantees, set an overall cap of $3.5 billion on the total amount of outstanding debt that the program could have at any one time, and reserved almost 30% of that ($1 billion) for projects benefiting short line railroads. In 2005, Congress increased the limit on outstanding debt to $35 billion and increased the amount reserved for smaller freight railroads to $7 billion. The increase was not due to demand for the program—the program had issued a total of less than $1 billion in loans at that point—but in hopes of boosting interest in the program. In 2012, Congress provided that applicants could use future dedicated revenues as security for a RRIF loan. In 2015, it added new types of security that applicants could use to reduce the amount of their credit risk premium, and moved the administration of the program from the FRA to a newly created Build America Bureau. Projects eligible for RRIF assistance include acquiring, improving, and rehabilitating track, bridges, rail yards, buildings, and shops (or refinancing existing debt that was incurred for these purposes); preconstruction activities; positive train control; transit-oriented development projects; and new rail or intermodal facilities. Loans can be for up to 100% of the project cost, with repayment periods up to 35 years. The RRIF program is designed to operate at no cost to the government. Applicants are charged a fee of 0.5% of the amount requested to cover the cost of processing their applications. Borrowers are charged another fee (the credit risk premium) at the time a loan is issued to cover the potential cost to the government of the loan not being repaid. The amount of the credit risk premium is based on several factors, including the financial condition of the applicant and the amount of collateral securing the loan. This no-cost-to-the-government structure is why it was not controversial for Congress to raise the maximum outstanding loan amount from $3.5 billion to $35 billion in 2005. But the up-front costs of a RRIF loan may deter would-be applicants. By contrast, the other major DOT credit assistance program, established in the Transportation Infrastructure Finance and Innovation Act (TIFIA), covers the cost of the credit risk premium for loan recipients (known as TIFIA's subsidy cost). For private loans, the processing costs and credit risk premium typically are folded into the loan repayment schedule rather than being charged up front. Program Overview The RRIF program is one of four credit programs run by DOT. RRIF loan applications are reviewed by the Build America Bureau, independent financial analysts hired by the Bureau, and DOT's Office of Credit and Finance. The Secretary of Transportation has final authority over loan approval. The appeal of the RRIF program is that the recipient is able to borrow money at the lowest rate available (that paid by the federal government itself) and for a longer period of time than most other types of loans would permit. RRIF borrowers can also ask to defer loan repayment for a period of six years (though interest accrues during this period). Alternatively, the Build America Bureau can guarantee a private loan extended at a rate DOT determines to be reasonable; to date, no loan guarantees have been provided through the program. Congress has imposed certain other restrictions on the program. For example, for FY2017, as in previous years, appropriations legislation prohibited the use of any federal funds to pay the credit risk premium on a RRIF loan. Congress has specified that in evaluating RRIF applications, the Build America Bureau should favor projects that enhance public safety (including installation of positive train control); promote economic development; enhance the environment; enable U.S. companies to be more competitive in international markets; are endorsed by the plans prepared under Section 135 of Title 23 by the state or states in which they are located; improve railroad stations and passenger facilities and increase transit-oriented development; preserve or enhance rail or intermodal service to small communities or rural areas; enhance service and capacity in the national rail system; and materially alleviate rail capacity problems that degrade the provision of service to shippers and fulfill a need in the national transportation system. Program Performance The RRIF program has used relatively little of its lending authority. RRIF may have a maximum of $35 billion of outstanding loans and loan guarantees. It currently has about 11% of this amount committed. From its inception through January 2018, the RRIF program issued 37 loans for a total amount of $5.4 billion (see Table 1 ). The loans ranged in amounts from $53,000 to $2.45 billion. Twenty-one of the 37 loans have been repaid in full. One loan is in default. The total amount of RRIF loans outstanding as of January 2018 was $4.02 billion. Of the 37 loans made, two-thirds were executed prior to 2008; four have been approved since 2012 (see Figure 1 ). The Build America Bureau reports that as of January 2018 it was evaluating five applications totaling $5.5 billion. (By comparison, FRA was evaluating 13 applications totaling $10 billion in February 2014, suggesting that several applications were withdrawn between 2014 and 2018). DOT may approve a loan for less than the amount requested; in the case of a 2007 loan, the Dakota, Minnesota & Eastern Railroad applied for $2.5 billion and received a loan of $48 million. Public-sector entities have emerged as the largest borrowers under the RRIF program, representing some 85% of the amount loaned. Most loans to public-sector entities have been intended for passenger rail projects. However, one, an $83.7 million loan to the Alameda Corridor Transportation Authority in 2012, was to support a freight project. RRIF Program Issues and Options Need for Program The policy rationales for the RRIF program are that railroad companies, especially short line companies too small to raise money in the bond market, need better access to long-term, low-cost financing to maintain and expand their networks, and that the safety and efficiency of their networks is a public concern. However, it is not clear that railroads, even short line railroads, have significant difficulty financing the maintenance and expansion of their networks. FRA looked at the safety record of short line railroads, taking accident rates as a proxy for the condition of the infrastructure (that is, if the infrastructure were deteriorating, the accident rate likely would increase). FRA found that the number of infrastructure-related accidents per million train-miles on short line railroads declined significantly between 2001 and 2013, from more than eight accidents per million train-miles to fewer than four accidents per million train-miles. FRA stated that "the positive trend, illustrated by a decreasing accident rate, suggests improving maintenance and investment.... " Another measure of the condition of short line railroad infrastructure is its capability to handle 286,000-pound rail cars. Since the late 1980s, Class I railroads have moved from maximum car weights of 263,000 pounds to 286,000 pounds. Track and bridges must be strengthened to handle these heavier loads. According to the Association of Short Line Railroads, 39% of short line route-miles were able to handle the 286,000-pound cars in 2002, whereas 57% of a larger number of total route-miles could handle the heavier cars in 2010. FRA stated, after examining both the safety and capacity numbers, that "these data points and trends illustrate that these carriers in aggregate are maintaining their systems and enhancing infrastructure to meet their customer needs." On the basis of a 2013 survey of Class II and Class III railroads' estimated spending requirements for infrastructure and equipment, FRA estimated that the total investment needs of short line railroads would be $6.9 billion over the five-year period from 2013 to 2017. The survey respondents anticipated that they would be able to cover about 70% to 75% of their estimated spending needs for infrastructure and equipment during that period, with most of the funding coming from their revenues; they expected about a quarter of the funding to come from other sources, chiefly state (9%) and federal (8%) grants and loans. The survey results suggested an estimated gap of around $265 million per year between the available funding and the amount short lines felt was needed. Alternatives to RRIF RRIF is only one of several federal and state programs available to reduce the cost of railroads' investment in infrastructure. Others include the following. Section 45G Tax Credit This tax credit, first enacted in 2004, allows Class II and Class III railroads to reduce their taxes by 50% of the cost of track maintenance expenses incurred in a year, up to a limit established by multiplying the railroad's track mileage by $3,500. The cost to the federal government in forgone tax revenue is estimated at $165 million to $202 million per year, which represents investments of roughly $300-$400 million annually. In contrast to the RRIF program, this tax credit is targeted exclusively to short line railroads. It does not require the recipient to undertake an uncertain loan application process, with its attendant costs, or to comply with requirements for RRIF loans, such as the National Environmental Policy Act (NEPA) and the RRIF program's Buy America policy. The tax credit expired on December 31, 2016. Legislation to extend the credit has been introduced in the 115 th Congress ( H.R. 721 ; S. 407 ; S. 2256 ). TIGER Grant Program Congress created a National Infrastructure Investment discretionary grant program within the Office of the Secretary of Transportation in 2009. This program, popularly known as the Transportation Investment Generating Economic Recovery (TIGER) grant program, made over $5 billion in grants through FY2017. Grants require a 20% match in urbanized areas; in rural areas, no local match is required. Although only governmental entities are eligible to receive grants, applications may represent public-private partnerships. Passenger and freight rail infrastructure projects are eligible uses of TIGER funds. Freight rail projects (including port improvement projects with a rail component) have received nearly $810 million in grants; short line railroad improvement projects have received more than $270 million. The program is very competitive, with several times as much funding requested each year as the $500 million typically available for grants. TIFIA Loan Program The TIFIA loan program, like the RRIF program, was authorized by Congress in 1998. As of the end of calendar year 2016, the program had assisted 56 projects with a total value of over $82 billion; the federal value of credit assistance provided was more than $20 billion, at a direct cost of more than $1 billion (representing the cost of the credit risk premium and the administrative costs of processing applications). Eligible projects include "rail projects involving the design and construction of intercity passenger rail facilities or the procurement of intercity passenger rail vehicles" and "intermodal freight transfer facilities." Although five intermodal projects involving rail freight have received assistance, no TIFIA loans have been approved for pure rail projects. Congress appropriates funding to cover the credit risk premium cost of TIFIA loans, reducing the cost of loans to recipients. See Table 2 for a summary of differences between the RRIF and TIFIA programs. In the FAST Act, the 2015 surface transportation authorization legislation, Congress authorized $1.435 billion through FY2020 to administer the program and cover the credit risk premium. Since DOT assumes a loss ratio of around 10%, the $1.435 billion available after administrative costs gave it the capacity to provide about $14 billion in TIFIA loans or loan guarantees from FY2016 through FY2020. State Programs A number of states have established grant, loan, and tax benefit programs to help short line railroads finance infrastructure or equipment purchases. In its report on Class II and Class III railroad capital needs and funding sources, FRA reported that, in a survey of how short line railroads expected to fund their needs in the near future, respondents expected to get a greater percentage of funding for infrastructure and equipment investments from state programs (9%) than from federal programs (8%). Supportive Policy Options The primary competition for short line and regional railroads is the trucking industry. The degree of competition is affected by the extent of regulation and taxation on the rail and truck sectors. Trucks operate over publicly provided infrastructure (the highway network), whereas railroads are financially responsible for their own infrastructure. Although federal and state taxes on diesel fuel contribute to maintaining the highway infrastructure, studies indicate that heavy trucks cause much more damage to highways than they pay in fuel taxes. This problem is exacerbated by exemptions Congress has provided to limits on truck weights, which raise the productivity of trucking vis-à-vis railroads while increasing the amount of damage the trucks cause to the highway infrastructure. Congress could aid the short line and regional railroads by, for example, increasing the amount of fuel tax paid by heavy trucks to a level commensurate with the damage they cause to the highway infrastructure and limiting exemptions to truck weight restrictions. Such changes also would benefit the Class I railroads. However, these changes could increase the cost of shipping goods by truck, adversely affecting trucking industry employment. In addition, higher truck rates could affect rail shippers by giving railroads room to raise their own rates. Program Effectiveness There are many possible ways of evaluating the effectiveness of the RRIF program. By one measure on which Congress has focused—the extent to which railroads have made use of RRIF loans—the program has not been very effective, considering that less than $6 billion of the $35 billion in loan authority has been used. However, the $35 billion limit appears to have been set somewhat arbitrarily, rather than reflecting an analysis of railroad investment needs that could not be met by other means. The fact that the RRIF program has lent far less than the amount Congress authorized, particularly to private-sector borrowers, may indicate that freight railroads' ability to finance their investment needs without recourse to government support is greater than Congress believed. Congress has expressed a desire that the program be used more heavily, especially by short line railroads, and has identified two aspects of the program that may be reducing its attractiveness: the uncertain length of the loan review process and the cost to the applicant of the loan. A third aspect that may be reducing the program's attractiveness is the requirement that loan recipients comply with the requirements of the National Environmental Protection Act, various "Buy America" requirements, and federal prevailing wage and employee protection requirements. Length of Review Process By statute, a RRIF loan application is supposed to be approved or disapproved within 90 days. But that 90-day clock does not begin until a loan application is considered complete. In a 2014 audit of the program, the DOT Office of Inspector General found that unclear program information resulted in incomplete loan applications that required FRA to work with applicants on completing the applications. The Inspector General determined that due to the extensive loan review process, which involved FRA, outside reviewers, DOT's Office of Credit Oversight and Risk Management, and its Credit Council, the loan application process took a long time and had an uncertain outcome, discouraging potential applicants. Management of the program was subsequently transferred to the Build America Bureau. The Bureau published a guide to its credit programs (covering both RRIF and TIFIA) in January 2017. The Bureau had five loan applications under review as of January 1, 2018; all were draft applications (after review, an applicant may or may not be invited to submit a final application). The length of time since the draft applications had been submitted was 19 months, 14 months, 10 months, 8 months, and 5 months, suggesting that in spite of the publication of the program guide and other changes made to shorten the review process, it may still be quite lengthy. Loan Costs Federal law requires that federal credit programs operate at no cost to the government. The government faces two primary costs for loan assistance and guarantee programs: that of administering the program, including evaluating applicants, and that of a borrower failing to repay its loan. To cover the cost of administering the program (including evaluating loan applications), the RRIF program charges loan applicants a nonrefundable fee of up to 0.5% of the loan amount. To protect against the possibility of defaults, federal law requires that loan programs keep enough money in reserve to cover the estimated cost to the government of defaults on the loans made. This reserve amount, which in the case of the RRIF program is paid by the borrower, is referred to as a credit risk premium. A credit risk premium is calculated for each loan, based primarily on the financial soundness of the borrower and the amount of collateral pledged by the borrower. Credit risk premiums for the RRIF program generally have been between 0% and 5% of the loan amount. For example, Amtrak paid a 4.424% credit risk premium for its 2011 RRIF loan and 5.8% for its 2016 RRIF loan. If collateral of sufficient value is pledged, no credit risk premium may be required. The 2014 audit of the RRIF program noted that some short line railroads had pointed to the credit risk premium as discouraging them from applying to the program. In response, FRA stated that it has no discretion to subsidize the credit risk premium for applicants. Such a step would require congressional action. As noted above, for several years Congress has included in DOT appropriations bills a provision barring the use of federal funds to pay the credit risk premium. Prior to the FAST Act, DOT was required to refund the credit risk premium to borrowers after all the loans in their cohort of loans had been repaid. DOT had originally been instructed to establish cohorts of loans for this purpose, with the intent of both maintaining "sufficient balances of credit risk premiums to adequately protect the Federal Government from risk of default, while minimizing the length of time the Government retains possession of those balances." However, as of January 2018, DOT has not issued a formal definition of a "cohort of loans." As a result, while 21 RRIF loans have been repaid, DOT has not yet returned any credit risk premiums to their borrowers. In Section 11607 of the FAST Act ( P.L. 114-94 ), Congress repealed the language requiring DOT to repay the credit risk premium for future loans, leaving the decision about repayment to the discretion of DOT. DOT has reportedly decided that credit risk premiums paid for loans made after enactment of the FAST Act will not be repaid. With respect to loans made prior to passage of the FAST Act, the conference committee report accompanying the FAST Act directed DOT to refund credit risk premiums to borrowers that had repaid their RRIF loans, "regardless of whether the loan is or was included in a cohort. The intent of this provision is for the Secretary to pay back such credit risk premium, with interest, as soon as feasible but not later than three months after the date of enactment." As noted, more than two years after adoption of this report DOT has yet to repay any credit risk premiums to borrowers that have repaid their loans. Project Requirements To qualify for a loan, an applicant must comply with a variety of federal laws, including NEPA, various "Buy America" requirements, and federal prevailing wage and employee protection requirements. NEPA requires that FRA review a project's environmental impact. The Buy America Act requires that a project receiving a government loan use steel, iron, and other manufactured goods produced in the United States, unless the project sponsor receives a waiver from FRA. Loans to Passenger Rail Projects Growth in Lending to Passenger Rail Projects The RRIF program was created primarily to support freight rail service, particularly that of small ("short line") railroads. But a significant portion of RRIF assistance has gone to passenger rail service, especially since 2008. The recipients of the greatest amount of assistance have been Amtrak (three loans totaling $3.1 billion) and the New York City Metropolitan Transportation Administration (one loan for $967 million). As of January 2018, just over four-fifths of the total assistance provided by the program has gone to passenger rail projects (see Table 3 ). One cause of much larger loan amounts for passenger projects is that the short line railroads that borrow from RRIF typically have small and thus relatively inexpensive projects; the Class I railroads that might be undertaking larger projects have not made use of RRIF funding. Another cause may be the lack of alternative funding sources for intercity passenger rail projects. In calendar year 2009, Congress appropriated $10.5 billion (later reduced to $10.1 billion through a rescission of appropriated funding) for grants for high-speed and intercity passenger rail projects. The availability of that funding generated significant interest on the part of states to establish or expand passenger rail service; FRA reported receiving applications for a total of more than $75 billion. Congress provided virtually no funding for intercity passenger rail service expansion from 2010 until 2017, so organizations interested in passenger rail services may have turned to RRIF as an alternative or supplemental source of funding. Unique Risks Lending to intercity passenger rail projects creates some unique challenges for RRIF. Passenger rail projects often fail to make an operating profit, and few of them anywhere in the world generate sufficient operating profit to cover their capital costs. Amtrak, the federally owned intercity passenger railroad operator, has received more than half of all funds loaned by the RRIF program. Amtrak has repaid two of the loans; it does not have to begin repaying the 2016 loan until 2022. Amtrak states that it will service this loan with revenue from its Northeast Corridor operations. However, while Amtrak earns an operating profit on its Northeast Corridor operations, it loses money overall and relies on an annual appropriation of approximately $1.4 billion from Congress to continue operating. Thus, the railroad's ability to repay its RRIF loan depends on the receipt of other federal funds. In 2010, RRIF extended a $155 million loan to the Denver Union Station Project Authority for the reconstruction of Denver Union Station as an intermodal passenger station. The loan was serviced from the proceeds of tax-increment revenue from development around the station, with a backstop commitment from the City and County of Denver. The project repaid both its RRIF and TIFIA loans in February 2017. Several private entities seeking to build and operate passenger rail projects have expressed interest in RRIF loans in recent years. Privately owned companies operate passenger rail services in many countries, but they typically pay only a portion of the cost of building and maintaining rail infrastructure, which usually receives some form of government support. One entity that began operating passenger rail service in 2018, All Aboard Florida (which has branded its trains as Brightline), reportedly applied for a $1.87 billion RRIF loan to develop 110-mile per hour passenger service between Miami and Orlando. The company later told the press it was seeking other financing instead of a RRIF loan, and was issued $1.75 billion in private activity bonds by the Florida Development Finance Corporation. The company is using $600 million to pay for upgrades to the line between Miami and West Palm Beach (Phase I), and $1.15 billion to pay for the new high-speed line from its coastal line (at West Palm Beach) to Orlando. XpressWest, a proposed privately funded high-speed rail line between Las Vegas and Southern California, reportedly applied for a $5.5 billion RRIF loan in December 2010. The chairs of the House and Senate Budget Committees sent a letter to the Secretary of DOT on March 6, 2013, opposing the loan as being too risky; on June 28, 2013, DOT issued a letter saying it had suspended review of the XpressWest loan application due to the applicant's difficulties in satisfying Buy America requirements and providing documentation for the loan request. A subsequent venture with a Chinese rail company to build the line was terminated, reportedly also due to difficulties in satisfying the Buy America requirements of the RRIF program. The Texas Central Railway, a private group proposing to build a high-speed line between Dallas and Houston, has said that it is considering seeking a loan from the RRIF or TIFIA programs but that it presently is not eligible to apply. To date, FRA has approved no RRIF loans to private passenger rail operators. If such loans are extended, they are likely to be quite large relative to the loans RRIF has extended for freight projects and may pose different risks. RRIF loans for freight projects typically are for the purpose of improving an operating railroad that already generates revenue from customers. Those existing facilities may serve as collateral for the loans. Some of the private passenger rail projects now under development, by contrast, involve provision of new services on trackage that has yet to be built, potentially leaving the RRIF program with a significant risk of loss if the project is not completed.

Congress created the Railroad Rehabilitation and Improvement Financing (RRIF) program to offer long-term, low-cost loans to railroad operators, with particular attention to small freight railroads, to help them finance improvements to infrastructure and investments in equipment. The program is intended to operate at no cost to the government, and it does not receive an annual appropriation. Since 2000, the RRIF program has made 37 loans totaling $5.4 billion (valued at $5.9 billion in 2018 dollars). The program, which is administered by the Build America Bureau within the Office of the Secretary of Transportation, has approved only four loans since 2012. Congress has authorized $35 billion in loan authority for the RRIF program and repeatedly has urged the Department of Transportation (DOT) to increase the number of loans the program makes. Reports suggest the uncertain length and outcome of the RRIF loan application process and the up-front costs to prospective borrowers are among the elements of the program that have reduced its appeal compared with other financing options available to railroads. By statute, the Build America Bureau has 90 days from the time a completed application is submitted to render a decision on the application. This timeline becomes uncertain due to the Bureau's discretion in determining when a loan application is "complete." A 2014 audit indicated that some loan applications had been in process for more than a year. Unlike DOT's other prominent loan assistance program, the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, RRIF requires loan recipients to pay a credit risk premium, which is intended to offset the risk of a default on their loan. The credit risk premium helps the program comply with a congressional requirement that federal loan assistance programs operate at no cost to the federal government. However, it may make RRIF loans less attractive to borrowers than other types of federal, state, or private financing. Several RRIF loans have been made to government-run intercity passenger rail projects. A number of private companies seeking to build intercity passenger rail lines also have expressed interest in RRIF loans. Changes made by Congress in the Fixing America's Surface Transportation Act (P.L. 114-94), enacted in December 2015, may lead to even greater use of the RRIF program by sponsors of passenger rail and transit-related projects, as opposed to small freight railroads. Such loans likely would be quite large relative to those RRIF typically extends to small freight railroads, raising questions about the risk to the federal government if the projects are not completed or if they fail to generate sufficient revenue to service the loans.

Procedure for Filling Vacancies in Congress Vacancies in Congress occur when a Senator or Representative dies, resigns, declines to serve, or is expelled orexcluded by either house. The Constitution requires that vacancies in both houses be filled by special election; butinthe case of the Senate, it empowers the state legislatures to provide for temporary appointments to the Senate by thegovernor until special elections can be scheduled. (1) Senate. Prevailing practice for Senate vacancies is for state governors to fill them by appointment, with the appointee serving until a special election can be held. The winnerofthe special election then serves for the balance of the term. In the event that the seat becomes vacant between thetimeof a statewide election and the expiration of the term, the appointee usually serves the remainder of the term. Oregonand Wisconsin are the only states that do not provide for gubernatorial appointments; their Senate vacancies canonlybe filled by election. House of Representatives. All House vacancies are filled by special election. Scheduling for special elections is largely dependent upon the amount of time remaining beforethenext regular elections for the House. When a vacancy occurs during the first session of Congress, a special electionisalways scheduled for the earliest possible time, preferably to coincide with elections regularly scheduled for otherpurposes in the district. If, however, a seat becomes vacant within six months of the end of a Congress, some states hold a special election forthe balance of the congressional term on the same day as the regular election. Winners of special elections in thesecases are sometimes not sworn in immediately as Members of the House, Congress having often adjourned sine die before election day. They are, however, accorded the status of incumbent Representatives for the purposes ofseniority, office selection, and staffing. Other states do not provide for a special election in these circumstances,andthe seat remains vacant for the balance of that particular Congress. For additional information, see CRS Report 97-1009(pdf) , House and Senate Vacancies: How Are They Filled? by Sula P.Richardson and [author name scrubbed]. Table 1. Special Elections in the U.S. House of Representatives: 108th Congress(2003-2004) a In California, Rep. Robert T. Matsui died on Jan. 1, 2005, three days before the convening of the 109th Congress, towhich he had been reelected. A special primary election to fill the vacancy will be held on Mar. 8, 2005. The namesof all candidates, regardless of party affiliation, will appear on the March ballot. If no candidate receives a majorityofvotes, the top vote-getters from each party will advance to a special runoff election on May 3, 2005. b Three days before the 108th Congress convened on January 7, 2003, a special election was held to fill the vacancycaused during the 107th Congress by the death of Rep. Patsy Mink, who had been re-elected posthumously to the 108thCongress. (Rep. Patsy Mink died two days after the deadline for replacing her name on the ballot for re-electionto the108th Congress.) On January 4, 2003, Ed Case defeated 43 other candidates in a special election tofill that vacancy. The other candidates in the open special election were: Kabba Anand (N), Whitney T. Anderson, Paul Britos (D),John S. (Mahina) Carroll (R), Brian G. Cole (D), Charles (Lucky) Collins (D), Doug Fairhurst (R), Frank F. Fasi(R),Michael Gagne (D), Alan Gano (N), Carolyn Martinez Golojuch (R), G. Goodwin (G), Richard H. Haake (R), ChrisHalford (R), Colleen Hanabusa (D), S. J. Harlan (N), Herbert Jensen (D), Kekoa D. Kaapu (D), MoanaKeaulana-Dyball (N), Kimo Kaloi (R), Jeff Mallan (L), Barbara C. Marumoto (R), Sophie Mataafa (N), MattMatsunaga (D), Bob McDermott (R), Mark McNett (N), Nick Nikhilananda (G), Richard (Rich)Payne (R), John(Jack) Randall (N), Jim Rath (R), Mike Rethman (N), Art P. Reyes (D), Pat Rocco (D), Bartle Lee Rowland (N),BillRussell (N), John L. Sabey (R), Nelson J. Secretario (R), Steve Sparks (N), Steve Tataii (D), Marshall (Koo Koo)Turner (N), Dan Vierra (N), Clarence H. Weatherwax (R), and Solomon (Kolomona) Wong (N). Prior to winningtheJanuary 4, 2003 special election, Mr. Case had also won the special election that had been held on November 30,2002, to fill the remainder of Rep. Mink's term for the 107th Congress. He was not sworn in,however, as the 107thCongress was not in session. (For further information on the 107th Congress vacancy and specialelection see CRS Report RS20814(pdf) , Vacancies and Special Elections: 107th Congress .) c In Kentucky, Rep. Ernie Fletcher resigned from the House on December 9, 2003, and was sworn in as Governor ofKentucky. A special election to fill the vacancy caused by Rep. Fletcher's resignation was held on February 17,2004,at which time the House was in recess until Feb. 24, 2004. Representative Albert Benjamin "Ben" Chandler wassworn in on Feb. 24, 2004. d In Nebraska, no special election was held to fill the seat vacated by Rep. Doug Bereuter, who resigned from theHouse on Aug. 31, 2004. The vacancy continued throughout the remainder of the 108th Congress. e In North Carolina, a special election to fill the vacancy in the 1st congressional district was held on July 20, 2004, tocoincide with the state's primary elections. f In South Dakota, a special election to fill the vacancy in the at-large district was held on June 1, 2004, to coincidewith the state's primary elections. g In Texas for the special election, which was held on May 3, 2003, the names of 17 candidates (regardless of party)appeared on a single ballot and the voters could choose any of these candidates: Richard Bartlett (R), John D. Bell(R), Jamie Berryhill (R) William M. (Bill) Christian (R), Mike Conaway (R), Thomas Flournoy (C), Kaye Gaddy(D),E.L. "Ed" Hicks (I), Carl H. Isett (R), David R. Langston (D), Donald May (R), Randy Neugebauer (R), JuliaPenelope (G), Richard (Chip) Peterson (L), Jerri Simmons-Asmussen (D), Vickie Sutton (R), and Stace Williams(R). A candidate who received a majority of the votes would have been elected to the office. Because no candidatereceived a majority of the votes, a special runoff election was held on June 3, 2003, and the names of the two topvotegetters were on that ballot. Key to Abbreviations for Party Affiliation C Constitution D Democratic G Green I Independent L Libertarian N Nonpartisan R Republican

There were seven vacancies in the 108th Congress, all in the House. One,in the 2nd District of Hawaii, was caused by the death of the incumbent, who had been re-electedposthumously to the108th Congress. Five other vacancies were caused by the resignation of the incumbent in the19th District of Texas, the6th District of Kentucky, the at-large district of South Dakota, the 1st District of NorthCarolina, and the 1st District ofNebraska. The seventh vacancy, in the 5th District of California, was caused by the death of theincumbent three daysbefore the 109th Congress, to which he had been reelected, convened. The first vacancy was filled byspecial electionon January 4, 2003, three days before the 108th Congress convened. For further information, see CRS Report RS20814(pdf), Vacancies and Special Elections: 107th Congress. The second vacancy wasfilled by special election onJune 3, 2003. The third vacancy was filled by special election on February 17, 2004. The fourth vacancy was filledby special election on June 1, 2004. The fifth vacancy was filled by special election on July 20, 2004. The vacancyin the 1st District of Nebraska continued throughout the remainder of the 108th Congress. A special primary election tofill the vacancy in the 5th District of California for the 109th Congress will be held onMarch 8, 2005. If no candidatereceives a majority of votes, a special runoff election will be held on May 3, 2005. This report records vacanciesinthe offices of U.S. Representative and Senator that occurred during the 108th Congress. It providesinformation on theformer incumbents, the process by which these vacancies are filled, and the names of Members who filled the vacantseats. This report will not be updated. For additional information, see CRS Report 97-1009(pdf), House andSenateVacancies: How Are They Filled?

Most Recent Developments President Bush announced on June 18, 2008, that he would like to open areas of the Outer Continental Shelf (OCS) for oil and gas development currently under presidential and congressional moratoria (discussed in more detail below). However, the President stated that he would lift the executive branch moratoria only after Congress did so legislatively. But, on July 14, 2008, President Bush reversed his position and lifted the executive ban on the OCS imposed in 1990 by President George H.W. Bush. Congressional action approving the Continuing Appropriations Act for FY2009 ( P.L. 110 - 329 , enacted September 30, 2008), 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. The permanent appropriations law ( P.L. 111-8 ) does not contain the OCS moratoria. Those areas may now be made available for preleasing, leasing, and related activity that could lead to oil and gas development. The moratorium, however, is still in place for most of the Eastern Gulf of Mexico which was placed off-limits statutorily until 2022 under the Gulf of Mexico Energy Security Act of 2006 (GOMESA) ( P.L. 109 - 432 ). There are some indications in the 111 th Congress that a total OCS ban is unlikely, but the question may be, how much of the OCS remains open and available for oil and gas drilling. Separate legislation ( H.R. 1696 ) has been introduced to place MMS planning areas in the North Atlantic and Mid-Atlantic permanently off-limits to oil and gas leasing and development. Further, the Administration began planning its next five-year leasing program in August 2008 that would, if approved, be implemented as early as 2010 - two years ahead of schedule. The proposed new five-year program, introduced in January 2009, would supersede the current five-year leasing program from 2007-2012. A new five-year lease program, beginning in 2010, would allow the newly opened OCS areas to be offered in a lease sale sooner than if they remained on their current schedule. The Obama Administration extended the comment period on the proposed five-year leasing program 180 days beyond its required 60 days to assess the information they have on the OCS for energy development, including renewable energy development. There are some in Congress, along with interest groups (e.g., environmentalists), however, that oppose keeping open many of the offshore areas previously offlimits. They argue that there are still several million acres leased onshore and offshore but not yet producing and that production from these areas could increase U.S. oil and gas supply. How much oil or gas that could be brought into production in the short-term (from non-producing leased lands or those under the moratoria) and its impact on price is uncertain. Since the President lifted the executive ban and during the 110 th Congress, members of Congress had introduced legislation, also in the 110 th Congress, that would have lifted the congressional prohibition (in part or completely) against leasing and development of oil and natural gas in the OCS. The legislation section of this report summarizes several of those bills and proposals, including House-passed H.R. 6899 . Other action in the 110 th Congress included an attempt to lift the offshore moratoria with an amendment to the FY2009 Interior, Environment, and Related Agencies Appropriations bill but was defeated during the House subcommittee markup by a vote of 6-9. Another measure ( H.R. 6251 ) that would have increased rental fees on non-producing oil and gas leases, and denied new federal leases to those not diligently developing the leases they have was defeated in the House. Background and Analysis Oil and gas leasing has been prohibited on most of the outer continental shelf (OCS) since the 1980s. Congress has enacted OCS leasing moratoria for each of fiscal years 1982-2008 in the annual Interior and Related Agencies Appropriations bill (now the Interior and Environment and Related Agencies Appropriations bill), allowing leasing only in the Gulf of Mexico (except near Florida) and parts of Alaska. President George H.W. Bush in 1990 issued a presidential directive ordering the Department of the Interior (DOI) not to conduct offshore leasing or preleasing activity in areas covered by the annual legislative moratoria until 2000. In 1998, President Clinton extended the offshore leasing prohibition until 2012. President George W. Bush lifted the executive branch moratoria on July 14, 2008. Congress allowed the ban to expire by not including it in the FY2009 appropriation law. Both branches of government had to remove the ban in order for oil and gas leasing and development to occur in the moratoria areas. Proponents of the moratoria contend that offshore drilling would pose unacceptable environmental risks and threaten coastal tourism industries, whereas supporters of expanded offshore leasing counter that more domestic oil and gas production is vital for the nation's energy security. The possibility of oil and gas production in offshore areas covered by the moratoria has sparked sharp debate in Congress. A proposal to require the DOI to conduct a comprehensive inventory of OCS oil and natural gas resources drew heated opposition, although it was ultimately included in the Energy Policy Act of 2005 ( P.L. 109 - 58 , Section 357). The Department of the Interior's Minerals Management Service (MMS) completed the OCS inventory Report to Congress in February 2006 as requested but without the authorized three-dimensional (3-D) seismic study. Congress has yet to fund the 3-D seismic study. Offshore Leasing System The Outer Continental Shelf Lands Act (OCSLA) of 1953, as amended, provides for the leasing of OCS lands in a manner that protects the environment and returns revenues to the federal government in the form of bonus bids, rents, and royalties. OCSLA requires the Secretary of the Interior to submit five-year leasing programs that specify the time, location, and size of the areas to be offered. Each five-year leasing program entails a lengthy multistep process that includes environmental impact statements. After a public comment period, a final proposed plan is submitted to the President and Congress. The offshore leasing program is administered by the Minerals Management Service (MMS), an agency within the DOI. The MMS conducted 16 OCS oil and natural gas lease sales during its previous five-year program from 2002-2007. Nine of those sales were in the western or central Gulf of Mexico (GOM), two in the Eastern GOM and the remainder were around Alaska. Alaska's lease sales were held in the Beaufort Sea, Norton Basin, Cook Inlet, and the Chukchi Sea/Hope Basin (see Figure 1 ). Two Alaskan lease sales that were not held in the scheduled 2002-2007 leasing program (sales 193 and 203) will be superseded by lease sales in the 2007-2012 leasing program. Sale 193 (Chukchi Sea, Alaska) took place on February 6, 2008. During the summer of 2005, the MMS introduced its proposed five-year leasing program for 2007-2012. Public hearings on the leasing program have been held, and states and interest groups are filing comments on future lease sale areas for the 2007-2012 leasing program. On April 30, 2007, the Secretary of the Interior announced its Proposed Final Program. Areas along the Atlantic coast (i.e., Virginia, currently covered by OCS moratoria), the North Aleutian Basin (Alaska), and the central GOM are included in the final leasing program. A small area would be offered for lease in the eastern GOM planning area, which has been redrawn to provide for more accuracy in boundaries between states and planning areas. The new five-year leasing program began July 1, 2007. Nineteen lease sales are scheduled for the 2007-2012 leasing program. Seven lease sales have occurred to date. Two lease sales were held in 2007 (sales 204 and 205), lease sale 193 in February 2008, lease sales 206 and 224 took place in March 2008. Lease sale 207 was held in August 2008 and lease sale 208 was held in March 2009. Revenues from lease sale 224 will be shared with coastal states (Mississippi, Alabama, Texas and Louisiana) as required by the Gulf of Mexico Energy Security Act of 2006 (GOMESA) ( P.L. 109 - 432 ) (discussed further in the Appendix of this report). Thirteen of the 348 tracts bid on in lease sale 207 (located in sale area "181 South") also fall under the revenue sharing agreement in GOMESA. Lease sales are conducted through a competitive, sealed bonus bidding process, and leases are awarded to the highest bidder. Successful bidders make an up-front cash payment, called a bonus bid, to secure a lease. A minimum acceptable bonus bid is determined for each tract offered. During the past 13 years, annual bonus revenues have ranged from $85 million in 1992 to $1.4 billion in 1997. Bidding on deepwater tracts in the mid-1990s led to a surge in bonus revenue. Offshore bonus bids totaled $374 million in FY2007. But as a result of high oil and natural gas prices and the significant possible resources in the Central Gulf of Mexico, record setting bonus bids of $3.7 billion were accepted by the MMS at leases sale 206 held in March 2008. In addition to the cash bonus bid, a royalty rate of 12.5% or 16.7% is imposed on the value of production, depending on location factors, or the royalty is received "in-kind." The rate could be higher than 16.7% depending on the lease sale. For instance, lease sale 224 will require a royalty rate of 18.75% in all water depths. According to MMS Congressional Affairs representatives, this higher rate (18.75%) is likely to remain in place for future lease sales. Annual rents are $5-$9.50 per acre, with lease sizes generally ranging from 2,500-5,760 acres. However, annual rental rates for the March 2009 sale in the Central Gulf of Mexico begin at $11 per acre for leases in water depths over 200 meters. Initial lease terms of 5-10 years are standard, and leases continue as long as commercial quantities of hydrocarbons are being produced. Bonding requirements are $50,000 per lease and as much as $3 million for an entire area. The Secretary of the Interior may reduce or eliminate the royalty established by the lease in order to promote increased recovery. Federal Distribution of OCS Revenues Federal revenues from offshore leases were estimated at $18.0 billion in FY2008 by the MMS. During the previous 10 years (1998-2007), revenues from federal OCS leases reached as high as $7.6 billion in FY2006. Revenues were as low as $3.2 billion in 1999. Higher prices for oil and gas are the most significant factors in the revenue swings. Of the $18.0 billion offshore revenue in FY2008, $8.3 billion was from royalties and $9.5 billion came from bonus bids. These revenues are split among various government accounts. Revenues from the offshore leases are statutorily allocated among the coastal states, the Land and Water Conservation Fund, the National Historic Preservation Fund, and the U.S. Treasury. For distribution of all revenue from federal leases, see Figure 2 . States receive 27% of OCS receipts closest to state offshore lands (drainage tracts) under section 8(g) of the OCSLA amendments of 1985 ( P.L. 99 - 272 ). In FY2008, this share was over $100 million compared with the $2.5 billion in total state on-shore receipts. A dispute over what was meant by a "fair and equitable" division of the 8(g) receipts was settled by the 1985 OCSLA amendments. Revenue-sharing provisions in S. 3711 ( P.L. 109 - 432 ) allow selected Gulf States to receive 37.5% of the revenue generated from specified federal oil and gas leases off their coasts. Most of the proposed legislation in the 110 th Congress that would have opened moratoria areas of the OCS included similar revenue sharing provisions for the states. On April 2, 2009, in the 111 th Congress, the Senate defeated (37-60) an OCS revenue sharing amendment to the Senate Budget resolution ( S.Con.Res. 13 ). The amendment (#931) would have provided up to 50% of OCS leasing revenues to be either distributed among the coastal states producing energy and/or allocated for alternative energy research and development; and parks and wildlife. For onshore public domain leases, states generally receive 50% of rents, bonuses, and royalties collected. Alaska, however, receives 90% of all revenues collected on public domain leases. Coastal Impact Assistance States with energy development off their shores in federal waters have been seeking a larger portion of the federal revenues generated in those areas. They particularly want more assistance for coastal areas that may be most affected by onshore and near-shore activities that support offshore energy development. Proponents of these proposals look to the rates at which funds are given to jurisdictions where onshore energy development occurs within those jurisdictions on federal lands. Coastal destruction has received more attention in Louisiana, where many square miles of wetlands are being lost to the ocean each year. One of the causes of this loss is thought to be widespread energy-related development. Currently, the affected states receive revenue indirectly from offshore oil and gas leases in federal waters. This is in contrast to the direct revenues to states that have onshore federal leases within their boundaries, as noted above. On the other hand, opponents point out the budget implications as a result of the loss of federal revenues. There are two fundamental purposes for revenue sharing programs, according to the Coastal Impact Assistance Working Group (an MMS advisory group): (1) to fund projects that will mitigate the environmental and economic impact of OCS energy development, including the need for infrastructure and public services, and (2) to help sustain development of nonrenewable energy sources. Two federal revenue sharing programs addressed coastal impacts from OCS energy development: (1) the now-expired Coastal Energy Impact Program (CEIP), established as an amendment to the Coastal Zone Management Act, and (2) the Section "8(g)" zone program, established under OCSLA. A third program, the Land and Water Conservation Fund, has also provided state funding from the OCS revenue stream, but the distribution of those revenues has no connection with OCS activities. Even the CEIP program was not considered a true revenue-sharing program because its funding levels were not based on the amount of leasing activity in the OCS. A new Coastal Impact Assistance Program (CIAP) is established under section 384 of the Energy Policy Act of 2005 (EPAct '05) ( P.L. 109 - 58 ) as an amendment to Section 31 of the OCSLA (43 U.S.C. 1356a). Under this program, the Secretary of the Interior is to disburse (revenue from OCS lease activity), without further appropriation, $250 million per year during FY2007-FY2010 to producing states and political subdivisions according to specified allocations. The states must submit plans on how they will spend these funds for approval by the Secretary of the Interior. Among other things, the funds are designated for the restoration of coastal areas, mitigation of damage to natural resources, the implementation of federally approved conservation management plans, and for infrastructure projects. Eligible oil- and gas-producing coastal states include Alabama, Mississippi, Texas, Louisiana, California, and Alaska. On April 16, 2007, MMS announced allocation amounts available to eligible states for fiscal years 2007 and 2008. Before allocations are disbursed, states were required to submit a plan to MMS for approval not later than July 1, 2008, according to the MMS. Based on the allocation formula, Louisiana would receive 52.6% of the CIAP funds; Texas, 20.04%; Mississippi, 12.76%; Alabama, 10.54%; California, 3.07%; and Alaska, 1%. Offshore Leasing Moratoria The offshore leasing moratoria began with the FY1982 Interior Appropriations Act ( P.L. 97 - 100 ), which prohibited new leases off the shore of California. The imposition of other moratoria came about after many coastal states and environmental groups contended that leasing tracts in environmentally sensitive areas might lead to activities that could cause economic or irreversible environmental damage. Eventually, the moratoria were expanded to include New England, the Georges Bank, the mid-Atlantic, the Pacific Northwest, a portion of Alaska, and much of the eastern Gulf of Mexico. Because of environmental and economic concerns, Congress for the past two decades has supported annual moratoria on leasing and drilling in the OCS. Congress enacted the moratoria for each of fiscal years 1982-2008 through the annual Interior Appropriations bill. The most recent Continuing Appropriation Act of 2009 ( P.L. 110 - 339 ) omitted language that had kept the annual moratoria in place. This law is in effect until March 6, 2009, or until a regular appropriation bill is passed. The permanent appropriations law ( P.L. 111-8 ) does not contain the OCS moratoria. President George H.W. Bush, in 1990, responding to pressure from the states of Florida and California and others concerned about protecting the ocean and coastal environments, issued a presidential directive ordering the Department of the Interior (DOI) not to conduct offshore leasing or preleasing activity in places other than Texas, Louisiana, Alabama, and parts of Alaska until 2000—prohibiting leasing in the same areas covered by the annual moratoria. In 1998, President Clinton extended the presidential offshore leasing prohibition until 2012. President George W. Bush lifted the executive ban on July 14, 2008, but in order for oil and gas leasing and development activity to occur, the congressional ban must also be repealed. There have been attempts to lift the congressional moratoria through the appropriations process. The FY2006 Interior and Environment Appropriations Act ( P.L. 109 - 54 ) continued the leasing moratoria in other areas, including the Atlantic and Pacific Coasts. An amendment to lift the moratorium in the eastern Gulf of Mexico was offered ( H.Amdt. 174 , Representative Istook) on the House floor during debate but was rejected on a point of order. An amendment (Representative Peterson) that would have lifted the moratoria on offshore natural gas was defeated (see Roll Call vote no. 192, May 19, 2005). Congress extended the offshore leasing moratoria through FY2007 and FY2008. However, the FY2006 and FY2007 Interior Appropriations Act did not include language to prohibit oil and gas leasing in the North Aleutian Basin Planning Area, previously in the moratoria. The FY2004 law ( P.L. 108 - 108 ) and FY2005 law ( P.L. 108 - 447 ) similarly omitted this language. There is reportedly some industry interest in eventually opening the area to oil and gas development as an offset to the depressed fishing industry in the Bristol Bay area. Environmentalists and others oppose this effort. The North Aleutian Basin Planning Area, containing Bristol Bay, is contained in MMS's current leasing program for 2007-2012. The Gulf of Mexico Energy Security Act of 2006 (GOMESA ) placed nearly all of the Eastern Gulf of Mexico (EGoM) Planning Area under a leasing and development ban until 2022. Once this ban was enacted statutorily, it was no longer a part of the executive ban. Thus, when President Bush lifted the executive ban, it did not include the EGoM. Also, GOMESA ( P.L. 109 - 432 ) contained provisions (discussed in the Appendix below - S. 3711 ) that opened 5.8 million acres in the Gulf of Mexico previously under the moratoria. California Leases Congress has banned additional drilling in the Santa Maria Basin and Santa Barbara Channel areas where there are leased tracts. Companies unable to develop their existing California lease holdings are seeking compensation from the federal government. The companies contend that more than a billion dollars has already been spent to obtain the leases. In previous buyback settlements, firms have recouped their bonus bid payments but lost possible future returns that would have been earned if commercial production were achieved. In the case of the offshore California leases, the Clinton Administration continued to extend the leases (through suspensions) that were granted between 17-33 years ago, before the moratoria were imposed. The last suspension by MMS, in 1999, extended 36 of the 40 existing offshore California leases at issue. This action was taken to give lease holders more time to "prove up" oil reserves and for MMS to show consistency with state coastal zone management plans, as required by 1990 amendments to the Coastal Zone Management Act (P.L. 92-583). A state's objection could prevent development of the oil and gas leases. On June 20, 2001, the U.S. District Court for the Northern District of California struck down the MMS suspensions, potentially allowing the leases to expire, because it held that MMS failed to show consistency with the state's coastal zone management plan. The Bush Administration appealed this decision to a three-judge panel of the Ninth Circuit of Appeals in San Francisco on January 9, 2002, and has proposed a more limited lease development plan that involves 20 leases, using existing platforms and other necessary infrastructure. However, on December 2, 2002, the Ninth Circuit panel upheld the District Court decision. The Department of the Interior did not appeal this decision and is currently working with lessees to resolve the issue. A breach-of-contract lawsuit was filed in the U.S. Federal Court of Claims against MMS on January 9, 2002, by nine oil companies seeking $1.2 billion in compensation for their undeveloped leases ( Amber Resources et al. v. United States ). After the lawsuit was filed, several oil and gas lessees involved in the dispute submitted a new round of suspension applications to prevent lease termination and loss of development rights. In response, the MMS prepared six environmental assessments and found no significant impact for processing the applications. However, under the Coastal Zone Management Act, a consistency review by MMS and the state's response to that review must occur before a decision is made to grant or deny the requests. The State Coastal Commission ruled unanimously on August 11, 2005, that the lease suspensions should not be renewed. Following that decision, on August 12, a U.S. District Court ordered the MMS to conduct additional studies under the National Environmental Policy Act (NEPA) of the 36 leases under suspension. MMS argued that it had presented sufficient evidence for the judge to reach a decision on whether to allow MMS to grant further suspensions. Senator Diane Feinstein of California has urged that the MMS conduct additional studies or, if not, allow the leases to terminate. In the meantime, on November 17, 2005, the U.S. Federal Court of Claims made a determination in the Amber Resources lawsuit that the federal government breached its contract with the lessees regarding the 36 offshore California leases. Although the government was ordered to repay the lessees $1.1 billion, the judge deferred a final judgment until additional claims (such as recovery of sunk costs) are resolved. If a settlement is reached, the MMS would automatically terminate the leases. This action would then negate any further action on the consistency determinations. Thus, no further action will be taken by the Department of the Interior to address the concerns of the California Coastal Commission until a final judgment is reached. The Court of Appeals for the Federal Circuit reached a final judgement that would pay the lessees $1.1 billion. The companies were unsuccessful in their claim that they should be compensated for additional exploration and development costs of about $727 million. Royalty Relief Royalty relief is commonly granted to assure full production of offshore oil and gas. OCSLA authorizes the Secretary of the Interior to grant royalty relief in order to promote increased oil and gas production. There are generally four royalty relief categories in the GOM: Deepwater, Shallow Water Deep Gas, End-of-Life, and Special Case. Royalty relief under the End-of-Life and Special Case categories was already in place under OCSLA before the Deep Water Royalty Relief Act of 1995 (DWRRA). The DWRRA expands the Secretary's authority to use royalty relief as an incentive for leasing federal OCS Gulf of Mexico deepwater. Under DWRRA, the Secretary of the Interior may reduce royalties if production would otherwise be uneconomic. Threshold price levels were established in 1995, above which the relief is discontinued. In 2008, the threshold price (with some exceptions) was $37.18 per barrel for deepwater oil and $4.65 per million BTUs for deepwater natural gas. The threshold price levels are adjusted annually for inflation. Congressional debate over royalty relief for OCS oil and gas producers has been ongoing. On February 13, 2006, the New York Times reported that the MMS would not collect royalties on leases awarded in 1998 and 1999 because no price threshold was included in the lease agreements during those two years. Without the price thresholds, lease holders may produce oil and gas up to specified volumes without paying royalties no matter what the price. The MMS asserts that placing price thresholds in the lease agreements is at the discretion of the Secretary of the Interior. However, according to the MMS, the price thresholds were omitted by mistake from 576 offshore leases during 1998 and 1999. An Interior Department Inspector General investigation acknowledged that mistakes were made but were considered to be "blunders" and not intentional omissions. The total value of foregone royalties over the six-year period is estimated by MMS at about $10 billion. The FY2009 Interior Appropriations bill, as passed by the subcommittee, contains a provision that would deny new Gulf of Mexico leases to lessees holding leases without price thresholds. Details of recent legislative activity related to the price threshold/royalty relief issues are below. Under the new majority leadership in the 110 th Congress, the House passed legislation ( H.R. 6 ) that would offer a remedy for the offshore leases without price thresholds. Under Title II, the bill would, among other things, deny new Gulf of Mexico oil and gas leases to lessees holding leases without price thresholds or payment or agreement to pay newly established "conservation of resources" fees. The bill would also repeal royalty relief provisions (sections 344 and 345) of the Energy Policy Act of 2005. Opponents of H.R. 6 argue that the companies with valid leases, even though without price thresholds, should not be penalized and that the provision could result in breach-of-contracts lawsuits by the companies. On July 30, 2007, the House introduced H.R. 3221 , containing language on offshore royalties (under Title VII) nearly identical to Title II of H.R. 6 . The House approved H.R. 3221 on August 4, 2007, by a vote of 241-170. In a recent development, the House amended and passed the Senate-passed version of energy policy legislation ( H.R. 6 ) on December 6, 2007, but without the royalty relief remedy in the earlier House-passed bills. The royalty relief remedy provisions were subsequently not enacted in the final version of energy policy legislation (Energy Independence and Security Act of 2007, P.L. 110 - 140 ). Royalty relief provisions are, however, contained in H.R. 6899 , discussed below. Kerr McGee Oil and Gas Corp. (acquired by Anadarko Petroleum Corp. in August 2006) challenged MMS's assertion in a lawsuit that it had authority to place price thresholds in the DWRRA leases (1996-2000). A recent U.S. District Court decision , however, which was upheld by a 3-member panel in the U.S. Court of Appeals, ruled that the Secretary of the Interior had no authority to impose price thresholds for oil and gas leases held under the DWRRA.. Based on the court ruling, the lessees, therefore, should have the right to produce up to the specified volume of oil and gas in the lease, regardless of the price. This ruling could cost the federal treasury as much as $1.8 billion in refunds according to the MMS and between $21-$53 billion over 25 years according to the Government Accountability Office (GAO), but may not affect congressional efforts to impose new fees or establish new lease eligibility criteria. (For details on Title II of H.R. 6 , see CRS Report RS22567, Royalty Relief for U.S. Deepwater Oil and Gas Leases , by [author name scrubbed].) Lease Development in the Gulf of Mexico The MMS reports that there is great potential in the central and western Gulf of Mexico (GOM) deepwater regions (> 400 meters). Spurred by the Royalty Relief Act of 1995, significant investment has been made, including bonus bids and annual rents by major and independent oil and gas companies. Overall, since 1995, deepwater production of oil has increased from 16% of total GOM production to nearly 75% in 2006. Deepwater natural gas has risen from 3.8% of total GOM production to about 38% during the same period. The deepwater production in the GOM is expected to continue growing over the next 20 years. There are, however, a limited number of rigs available to drill, and there are prospects elsewhere that could make any area available for leasing less likely to get developed in the short-term. Moreover, very little exploration and development have yet to occur within some of the deepwater regions that were leased since 1995. The amount of development of leases is significantly different in shallow and deep regions. In the West and Central Gulf region, at less than 400 meters deep, about 40% of the leased tracts have been producing since the 1990s, whereas a small and declining fraction of currently leased tracts have been explored but did not produce. About 40% of the active leases at this depth have not been explored. In the narrow region between 400 and 800 meters, most of the relatively few leases have not been explored, but a small and increasing number have begun production. This pattern is even clearer in the region deeper than 800 meters, where a large number of leases have been let, especially since 1995, and only a small fraction of them have been explored. A major stimulus to exploration and development of a promising lease is the approach of the end of the lease term. MMS officials contend they are allowing leases to expire and putting them up for reletting. MMS officials point out that, with a 10-year lease period, the many deepwater leases let in the mid-1990s will be running out in the next few years, which may stimulate increased activity in that region. The Department of the Interior (DOI) conducted a comprehensive inventory of OCS oil and natural gas resources, as required by the Energy Policy Act of 2005 ( P.L. 109 - 58 , Section 357). In the inventory, the DOI provided mean estimates of 8.5 billion barrels of known oil reserves and 29.3 trillion cubic feet (tcf) of natural gas; 82% of the oil and 95% of the gas is in the Gulf of Mexico (GOM). In the undiscovered resource category, the DOI estimated about 86 billion barrels (51% in the GOM) and 420 tcf of natural gas (55% in the GOM). Barriers to Development The high proportion of deepwater leases that have not been explored, in light of the high productivity of those that have been developed, raises questions of barriers that may be impeding full development of the region's potential. Although even developed regions have many leases that are not explored, the fact that more than 90% of deepwater leases have not been explored stands out. According to MMS officials interviewed by CRS, the major factor in determining exploration is the high cost of activity in the deepwater region, and also the relatively few rigs that are available to operate there. Financing oil exploration and development is an extremely complex process, frequently involving secondary markets for leases and farming out development to obtain financing. According to MMS, no barriers exist to discourage or penalize innovative and flexible financing schemes. Natural Gas-Only Proposals Under current law, all OCS lease sales include both oil and gas, and a lessee is required to develop the gas or the oil once it is discovered. Natural gas-only leases have been met with much skepticism by many experts in geology, who note that most of these offshore fields are likely to contain both oil and gas. Further, industry might be reluctant to bid on leases that did not transfer ownership of all discovered resources. Proponents argue that production of natural gas only would lessen states' concerns. 111th Congress Legislation The summaries below only include the titles relevant to OCS oil and gas leasing. H.R. 1696 (Pallone) Clean Ocean and Safe Tourism Anti-Drilling Act or the COAST Anti-Drilling Act. This proposal would permanently ban oil and gas leasing and development within the MMS's North Atlantic and Mid-Atlantic Planning Areas of the OCS. 110th Congress Legislation H.R. 6899 (Rahall) Comprehensive American Energy Security and Consumer Protection Act. The section of this proposal to expand domestic energy supply would allow states to "opt-in" to oil and gas development 50-100 miles off their coasts if a state legislature enacts a state law authorizing oil and gas development. Beyond 100 miles offshore in areas now under the congressional moratoria would be open to oil and gas development. The Eastern Gulf of Mexico placed under moratoria until 2022 in the Gulf of Mexico Energy Security Act of 2006 (GOMESA) ( P.L. 109 - 432 ) would remain law. National marine sanctuaries, national marine monuments, and the Georges Bank in the North Atlantic Planning Area would be withdrawn permanently from oil and natural gas leasing and development. Annual lease sales would be mandated in the National Petroleum Reserve in Alaska. Lessees without price thresholds in their leases would not be eligible for future leases in the Gulf of Mexico unless they amended lease to include price threshold levels, paid conservation of resources fees, or agreed to pay fees. A conservation of resources fee would be established at $9.00 per barrel of oil and $1.25 per million Btu of natural gas (in 2005 dollars). An annual fee of $3.75 per acre would be established on all nonproducing offshore leases. The Secretary of the Interior shall establish what constitutes diligent development. The Secretary shall provide resource estimates for onshore and offshore oil and natural gas (on lease and unleased acreage). The Secretary may take royalty payments in-kind and work to ensure that royalty payments are accurate and timely. Ethics training and a gift ban would be implemented at the Minerals Management Service. H.R. 6566 (Boehner) American Energy Act. The Outer Continental Shelf Lands Act would be amended by this bill. Title I of this act would repeal GOMESA of 2006 (section 122 of P.L. 109 - 432 ) and repeal the funding prohibition placed on finalizing rules for commercial oil shale leasing on federal land. The Secretary of the Interior would establish rules for natural gas-only leases in the OCS. The value of the leases for bidding purposes would exclude the value of any potential crude oil. However, oil could be produced if the adjacent state government did not object. Royalty relief incentives would be available for those lessees who would relinquish any part of a lease they have no intent in producing and the Secretary finds to be geologically promising. A phased-in revenue sharing plan for the adjacent states would be established for tracts within 100 miles of their coastlines and for those that lie beyond 100 miles of their coastlines. Revenue sharing would give adjacent states up to 75% of revenues generated from areas within 4 marine leagues of the state's coastline and up to 50% from areas beyond 4 marine leagues of the state's coastline. Areas within 50 miles of the state's coastline would be unavailable for leasing without a state request (petition). The Secretary of the Interior may accept or deny a petition. Areas between 50-100 miles would be open for oil and gas leasing unless a state petitions the Secretary of the Interior to prohibit leasing in that area. If the petition is granted, the state may extend the withdrawal for additional five-year periods. Areas in the Gulf of Mexico OCS east of the military mission line may be offered for oil and gas leasing unless a waiver is granted by the Secretary of Defense. If leases are allowed 62.5% of the revenue generated from that area would be would be shared with the National Guard of all states within 1,000 miles of the lease. H.R. 6709 (Peterson) National Conservation, Environment, and Energy Act. Title I of this bill would lift the congressional moratoria placed on the OCS through annual appropriations legislation and repeal the Gulf of Mexico Energy Security Act of 2006 (GOMESA). The proposal would prohibit leasing within 25 miles of the state's coastline but allow leasing beyond 25 miles. A state may enact laws disapproving leasing between 25-50 miles off its coastline. The Secretary of the Interior shall consult with the Secretary of Defense in areas east of the military mission line. In the eastern Gulf of Mexico. Several "reserve" accounts would be established including the Renewable Energy Reserve Account. H.R. 6529 (Calvert) Maximize Offshore Resource Exploration Act of 2008. This proposal would repeal the congressional and executive branch moratoria but continue to prohibit oil and gas leasing and development within 25 miles of a state's coastline unless the state passed a law approving oil and gas leasing. Twenty-five percent of the revenue generated from leases beyond 25 miles of the state's coastline would go to the general treasury and 75% would go to the states producing oil or gas. If production were to occur within 25 miles of the state's coastline, the state would then receive 90% of the revenues and the general treasury would receive 10%. New ERA Senate Draft Proposal (no bill number) New Energy Reform Act of 2008. Title I of this proposal would establish a National Commission on Energy Independence that would examine technical and policy obstacles to achieving U.S. energy independence and make recommendations to Congress and the President. Title IV, Subtitle A (Outer Continental Shelf) of this proposal would target domestic energy production and would open up part of the OCS Mid-Atlantic Planning Area (Virginia, North Carolina) and part of the South Atlantic Planning Area (South Carolina, Georgia) currently under a congressional moratoria for oil and gas leasing. The states listed above would have the option to "opt-in" a leasing program beyond 50 miles off their coastline. States would receive 37.5% of the revenues generated from leasing activity between 50-100 miles off their coasts. If two or more neighboring states opt-in then the revenues share would increase to 50% of the revenue generated off each state's coastline. The Eastern Gulf of Mexico (EGoM) would be open for leasing but only after consultation with the Secretary of Defense because much of the EGoM is located within a military mission zone. The New Era legislation would fund 3-D seismic testing of the OCS, would require that all production from the newly opened areas be consumed in the United States, and would create a National Commission on Offshore Oil and Gas Leasing that would, among other things, make recommendations to Congress on which areas of the OCS should be considered for oil and gas leasing in the future. An Alternative Fuel Trust Fund would be established and funded from specified OCS revenues. S. 3202 (McConnell) Gas Price Reduction Act of 2008. Title I of this act would open areas of the OCS beyond 50 miles ("new producing areas") of a state's coastline. States could petition to lease in new producing areas off its coast. Revenue sharing provisions would provide 50% to the General Treasury and 50% to a special account for the state's share. S. 3126 (Coleman) Energy Resource Development Act of 2008. Title I of this bill would revoke the executive and congressional moratoria and allow oil and gas leasing in those areas. The Secretary would be required to submit to the Governor a notice of proposed lease sale. The Governor's response can accept, accept with modifications, or reject the proposed sale. If the Secretary of the Interior is presented with a counterproposal, in consultation with the Secretary of Defense, they can accept, modify or deny the counterproposal. Upon approval of a proposed lease sale by the new producing state the Secretary of the Interior shall conduct the lease sale. A revenue sharing provision would provide 50% of the "qualified" revenues to a newly established Energy Independence Trust Fund (this Fund would be established in Title II of this act), and 50% in a special account that would be established to administer the state's share. Appendix. Legislation in the 109th Congress 109th Congress Oil and gas leasing in the outer continental shelf (OCS) was a major energy issue in the 109 th Congress. On June 29, 2006, the House approved H.R. 4761 the Deep Ocean Energy Resources Act of 2006, by a vote of 232-187. The bill would have allowed states, using specified criteria, to petition the Secretary of the Interior to lease the OCS adjacent to state waters. The Senate proposed an offshore leasing bill ( S. 3711 ) that was much more narrow in scope. The bill would make available about 8.3 million acres (see Figure A-1 below), provide coastal states with a share of the revenues generated from offshore leases (37.5%), extend the buffer zone within which drilling will not be allowed to 125 miles from parts of Florida, and provide a share of the revenues (12.5%) to the Land and Water Conservation Fund state-run programs. On August 1, 2006, the Senate approved S. 3711 by a vote of 71-25. The bill, S. 3711 , is described in more detail below. (For further discussion of the bill, see the Senate Committee on Energy and Natural Resources news release July 21, 2006, at http://energy.senate.gov/public/ , and see http://energy.senate.gov/public/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=235040&Month=7&Year=2006 . A conference agreement on the two very different OCS bills ( H.R. 4761 and S. 3711 ) did not take place. Instead, at the end of the 109 th Congress, the House leadership attached S. 3711 to a broad tax relief measure, H.R. 6111 ( P.L. 109 - 432 ), that passed the House on December 8, 2006, and the Senate on December 9. Prior to its passage, Representative Ed Markey and others offered an amendment related to royalty relief for deepwater oil and gas lessees that would have, among other things, denied new oil and gas leases on federal lands to lessees that did not have price thresholds in their current oil and gas leases. That amendment was defeated by a vote of 207-205. 109th Congress Legislation (Enacted) P.L. 109 - 432 ( S. 3711 ) Gulf of Mexico Energy Security Act of 2006. S. 3711 directs the Secretary of the Interior to offer lease sales within the 181 Area, primarily in the Central Gulf of Mexico as defined in the bill, within one year after enactment of this legislation. The 181 Area (defined in the bill) is part of the original Lease Sale 181 contained in the Outer Continental Shelf (OCS) 1996-2001 5-Year Leasing Program before the area was scaled back by the Secretary of the Interior. The 181 Area, as defined in the bill, covers about 2.5 million acres. In addition, the bill directs the Secretary to offer for lease, as soon as practicable, an area south of the 181 Area known as 181 South Area. This area covers about 5.8 million acres. 181 South Area is in its 2007-2012 5-Year Leasing Program. The MMS estimates that together, these two areas covered by the bill contain 5.8 trillion cubic feet of natural gas and 1.26 billion barrels of recoverable oil. The Senate passed S. 3711 on August 1, 2006, by a vote of 71-25. At the end of the 109 th Congress, provisions contained in S. 3711 were attached to a broad tax relief measure ( H.R. 6111 ), which passed the House and Senate and was signed into law ( P.L. 109 - 432 ). Areas where preleasing and leasing activity would be excluded under the bill and placed under moratorium until 2022, would be east of the Military Mission Line (about 230 miles from Florida's west coast), within 125 miles of Florida in the New Eastern Gulf of Mexico Planning Area, and within 100 miles of the State of Florida in the New Central Gulf of Mexico Planning Area. Current lessees within the prohibited areas in the New Eastern and Central Gulf of Mexico Planning Areas could exchange those leases for bonus or royalty credits (valued at the amount paid in bonuses and rents on existing leases) for another lease in the Gulf of Mexico. Revenue sharing provisions in the bill would allow for Gulf producing states (defined as Alabama, Mississippi, Louisiana, and Texas) to receive 37.5% of revenues generated from leases held in the 181 Area and 181 South Area beginning FY2007. Beginning in FY2017 and thereafter, the Gulf producing states would also receive 37.5% of the revenues generated from leases awarded within the 2002-2007 planning area, including historical leases (described in Sec. 5(b)(2)(C) of the bill). Distribution among the Gulf producing states would be determined by the Secretary of the Interior according to a formula to be developed that would accomplish a distribution inversely proportional to the respective distances from the coastlines to the center of the lease tracts. The minimum amount available to any of the Gulf producing states would be 10% of the qualified revenues. The Secretary would pay 20% of the state's share to its coastal political subdivisions. The Land and Water Conservation Fund (currently funded from OCS revenues) would receive 12.5% of the qualified revenues for state programs and the Federal General Treasury would receive 50% of those revenues. An annual net spending cap of $500 million (on revenues shared with the states) above receipts in the newly opened areas is included in this bill. The MMS estimates that the state's share would total $3.1 billion through 2022 and increase to a total of $59.6 billion through 2067. Lease Sale 181: Revisited Sales in the eastern Gulf of Mexico (GOM) have been especially controversial. A Bush Administration plan (originating in the Clinton Administration) to lease 5.9 million acres in the eastern GOM (Lease Sale 181) sparked considerable debate, although the area was not under a leasing moratorium. No eastern GOM lease sale had taken place since 1988. The Lease Sale 181 area was considered by opponents to be too close to the shore and to environmentally sensitive areas. Some tracts were as close as 17 miles from the Florida and Alabama coastline. The major concern of those in Florida opposing the sale was impairing the value of tourism to the state. If an accident were to occur, causing an oil spill, it could damage the state's beaches and thus the tourist industry. It also could severely affect the marine environment, opponents contended. The original area of 5.9 million acres, estimated to contain nearly 8 trillion cubic feet (tcf) of natural gas and 396 million barrels of oil, was reduced to 1.47 million acres after intense pressure from environmentalists and state officials. The reduced Lease Sale 181 offered 256 blocks containing an estimated 1.25 tcf of natural gas and 185 million barrels of oil. The sale took place December 5, 2001. Toward the end of the first session of the 109 th Congress, Senator Pete Domenici, Chairman of the Senate Energy and Natural Resources Committee, expressed an interest in opening up offshore areas now under the moratoria in a push to ease the "natural gas crisis." The legislation he introduced ( S. 2253 ) was limited to offering for lease a portion (3.6 million acres) of Lease Sale Area 181 within a year of enactment. Based on revised MMS estimates provided to the committee, there are about 6 tcf of natural gas and 930 million barrels of oil (mbo) in the area that would have been leased under S. 2253 . An alternative bill ( S. 2239 /Martinez) would have extended a buffer zone around Florida's coast out 150 miles and would thus make available a much smaller area for Lease Sale Area 181—about 740,000 acres. The Senate eventually passed a bill ( S. 3711 , discussed below) that included 8.3 million acres and revenue sharing provisions for selected Gulf states. The MMS's five-year leasing program (2007-2012) includes a Lease Sale 181 area that is smaller than the Domenici version but larger than the Martinez proposal. The area recommended by the MMS is 2 million acres and estimated to contain 3.4 tcf of natural gas and 530 mbo. Industry groups contend that eastern GOM sales are too limited, given what they say is an enormous resource potential, whereas environmental groups and some state officials argue that the risks of development to the environment and local economies are too great.

Oil and gas leasing in the Outer Continental Shelf (OCS) has been an important issue in the debate over energy security and domestic energy resources. The Department of the Interior (DOI) released a comprehensive inventory of OCS resources in February 2006 that estimated reserves of 8.5 billion barrels of oil and 29.3 trillion cubic feet (tcf) of natural gas. Another 86 billion barrels of oil and 420 tcf of natural gas are classified as undiscovered resources. Congress had imposed moratoria on much of the OCS since 1982 through the annual Interior appropriation bills. A Presidential Directive issued by President George H.W. Bush in 1990 (and extended by President Clinton until 2012) also banned offshore oil and gas development in much of the OCS. Proponents of the moratoria contend that offshore drilling would pose unacceptable environmental risks and threaten coastal tourism industries. However, on June 18, 2008, President Bush announced his support for lifting the moratoria on offshore oil and gas development. However, President Bush said that he would not lift the executive ban until Congress acted to lift its ban first. But, on July 14, 2008, President Bush reversed his position and lifted the executive ban on the OCS before Congress acted. Congressional action approving the Continuing Appropriations Act for FY2009 (P.L. 110-329, enacted September 30, 2008), 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. The permanent appropriations law (P.L. 111-8) does not contain the OCS moratoria. Those areas may now be made available for preleasing, leasing, and related activity that could lead to oil and gas development. The moratorium, however, is still in place for most of the Eastern Gulf of Mexico which was placed off-limits statutorily until 2022 under the Gulf of Mexico Energy Security Act of 2006 (GOMESA) (P.L. 109-432). There are some indications in the 111th Congress that a total OCS ban is unlikely, but the question may be, how much of the OCS remains open and available for oil and gas drilling. Separate legislation (H.R. 1696) has been introduced to place MMS planning areas in the North Atlantic and Mid-Atlantic permanently off-limits to oil and gas leasing and development. Further, the Administration began planning its next five-year leasing program in August 2008 that would, if approved, be implemented as early as 2010 - two years ahead of schedule. The proposed new five-year program, introduced in January 2009, would supersede the current five-year leasing program from 2007-2012. A new five-year lease program, beginning in 2010, would allow the newly opened OCS areas to be offered in a lease sale sooner than if the MMS remained on their current schedule. The Obama Administration extended the comment period on the proposed five-year leasing program 180 days beyond its required 60 days to assess the information they have on the OCS for energy development, including renewable energy development. Royalty relief, particularly for deep-water projects, has come under closer scrutiny since it was revealed in a February 2006 New York Times article that leases issued during 1998 and 1999 did not contain price thresholds for royalty relief (above which royalties apply) as part of the Deep Water Royalty Relief Act (DWRRA) of 1995 (leases issued between 1996-2000). However, Kerr McGee Oil and Gas Corp. (now Anadarko Petroleum Corp.) filed a lawsuit challenging the Minerals Management Service's (MMS) authority to impose price thresholds in the DWRRA leases. A recent U.S. District Court decision, which was upheld by a 3-member panel in the U.S. Court of Appeals, ruled that the Secretary of the Interior had no authority to impose price thresholds for oil and gas leases held under the DWRRA .

Most Recent Developments The Bush Administration's request for funding Energy and Water Development programs for FY2009, submitted in February 2008, totaled $31.209 billion, compared with $30.998 billion appropriated for FY2008. The House Appropriations Committee approved a bill June 25, 2008, that would have appropriated $33.811 billion for these programs. The Senate's bill, S. 3258 , reported by the Appropriations Committee July 14, 2008, would have appropriated $33.767 billion. On September 24, 2008, the House passed H.R. 2638 , the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, which continued appropriations for Energy and Water Development, among other programs, at the FY2008 level (with some exceptions) until March 6, 2009. The bill passed the Senate September 27 and was signed by the President September 30 ( P.L. 110-329 ). An extension through March 11, 2009, was signed March 6, 2009 ( P.L. 111-6 ). On February 25, 2009, the House passed an Omnibus Appropriations Act for FY2009 ( H.R. 1105 ), which includes funding for nine FY2009 appropriations bills, including Energy and Water Development (Division C). The Senate approved the funding measure on March 10, 2009, without amendment, and President Obama signed it on March 11, 2009 ( P.L. 111-8 ). Prior to that, the Congress passed, and the President signed, the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), which includes FY2009 appropriations for a number of programs funded in the Energy and Water Development appropriations bill. Status The House Appropriations Subcommittee on Energy and Water Development marked up its FY2009 funding bill on June 17, 2008. The full Appropriations Committee approved the bill on June 25 and released the draft report of the subcommittee, along with the text of two amendments adopted by the full committee. However, neither the bill nor the report was assigned a number until December 10, 2008, when the full committee reported out H.R. 7324 (110 th ) and accompanying report H.Rept. 110-921 . The Senate Appropriations Committee reported out S. 3258 (110 th ) on July 14. The Senate figures in this update are derived from the report on that bill, S.Rept. 110-416 . (See Table 1 .) The continuing resolution (Division A of P.L. 110-329 ) funds these programs at the FY2008 rate. Special provisions mandate a 3.9% increase in pay rates for employees (Sec. 142), and an additional $250 million for DOE's weatherization program. Sec. 104 prohibits the use of funds to initiate or resume any project or activity for which funds were not available during FY2008. This provision applies to DOE's Reliable Replacement Warhead program, for which no funding was appropriated for FY2008. DOE had requested $10 million for the program for FY2009, but both the House and the Senate bills would have eliminated the program. (For details, see " Nuclear Weapons Stockpile Stewardship ," below.) Sec. 129 of the continuing resolution appropriates $7.51 billion to implement Sec. 136 of the Energy Independence and Security Act of 2007 ( P.L. 110-140 ), providing $25 billion in direct loans to automakers and parts suppliers to build new plants or modify existing plants to produce higher fuel efficiency vehicles and parts. Division B of P.L. 110-329 , the Disaster Relief and Recovery Supplemental Appropriations Act, 2008, appropriated $2,776.8 million for the Corps for emergencies and for southeast Louisiana projects. (See " Title I: Army Corps of Engineers .") Energy and water development funding for all of FY2009 is included in the Omnibus Appropriations Act, 2009 ( H.R. 1105 ). The bill was introduced February 23, with an "explanatory statement" printed in the Congressional Record for that day "as if it were a joint explanatory statement of a committee of conference." The House passed the measure February 25, 2009, by a vote of 245-178. It was passed by the Senate without amendment on March 10, 2009, following a cloture vote of 62-35. President Obama signed the bill March 11, 2009 ( P.L. 111-8 ). Additional FY2009 funding for some energy and water development programs is included in the economic stimulus measure, the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ), signed by the President on February 17, 2009. The ARRA funding is to remain available for obligation through FY2010 (sec. 1603). Overview The Energy and Water Development bill includes funding for civil works projects of the U.S. Army Corps of Engineers (Corps), the Department of the Interior's Central Utah Project (CUP) and Bureau of Reclamation (BOR), the Department of Energy (DOE), and a number of independent agencies, including the Nuclear Regulatory Commission (NRC) and the Appalachian Regional Commission (ARC). Table 2 includes budget totals for energy and water development appropriations enacted for FY2002 to FY2009. Table 3 lists totals for each of the bill's four titles. It also lists the total of several scorekeeping adjustments. These figures were not available for the House bill or for S. 3258 . Tables 4 through 15 provide budget details for Title I (Corps of Engineers), Title II (Department of the Interior), Title III (Department of Energy), and Title IV (independent agencies) for FY2008-FY2009. Accompanying these tables is a discussion of the key issues involved in the major programs in the four titles. Title I: Army Corps of Engineers Regular annual appropriations for the Corps' civil works activities have been augmented since Hurricane Katrina through supplemental appropriations and through the American Recovery and Reinvestment Act of 2009. In 2008, the agency received more than $9 billion in supplemental funds; these funds are for work related to post-Katrina repair and improvements in coastal Louisiana and for emergency flood response, including the 2008 Midwest flood and Hurricane Ike response. The American Recovery and Reinvestment Act of 2009 provided an additional $4.6 billion to the agency for FY2009. For the agency's regular annual appropriations, P.L. 111-8 provides $5.402 billion for FY2009, which is above the Bush Administration's request of $4.741 billion but below the FY2008 enacted amount of $5.587. The preliminary budget request for FY2010 is at $5.1 billion. Unlike highways and municipal water infrastructure programs, federal funds for the Corps are not distributed to states or projects based on a formula or delivered via a competitive program. Generally around 85% of the appropriations for the Corps' civil works activities is directed to specific projects. Many of these projects are identified in the budget request and others are added during congressional deliberations of the agency's appropriations. As a result, the agency's funding is often part of the debate over earmarks. Generally, appropriations are not provided to studies, projects, or activities that have not been previously authorized, typically in a Water Resources Development Act (WRDA). Estimates of the backlog of authorized projects vary from $11 billion to more than $80 billion, depending on which projects are included (e.g., those that meet Administration budget criteria, those that have received funding in recent appropriations, those that have never received appropriations). The backlog raises policy questions, such as whether there is a disconnect between the authorization and appropriations process and how to prioritize among authorized activities. The Bush Administration's approach to the backlog was to limit the number of new starts, i.e., activities not previously funded, and to focus funds on completing a limited number of activities. Congress has generally chosen to distribute the Corps appropriations across a larger set of projects and to initiate a limited number of new starts. P.L. 111-8 continues the use of restrictions and congressional oversight on the Corps' initiation of new starts via reprogramming funds during the fiscal year. Key Policy Issues—Corps of Engineers Hurricane Katrina Repairs and Coastal Louisiana Restoration The Corps is responsible for much of the repair and fortification of the hurricane protection system of coastal Louisiana, particularly in the greater New Orleans area. To date, most of the Corps' work on the region's hurricane protection system has been funded through $14.3 billion in emergency supplemental appropriations, not through the annual appropriations process. In addition to the post-hurricane emergency repairs, these funds are being used for construction of levees, floodwalls, storm surge barriers, and pump improvements to reduce the hurricane flooding risk to the New Orleans area to a 100-year level of protection (i.e., protection against a storm surge of an intensity that has 1% probability of occurring in a given year) and to restore and complete hurricane protection in surrounding areas to previously authorized levels of protection by 2011. Of the $14.3 billion, $7.3 billion was provided in supplemental appropriations acts in 2008. The Bush Administration included in its FY2009 budget a request for $5.8 billion in emergency supplemental funds to complete these construction activities and for related purposes. The request said the $7 billion in previously appropriated funds were insufficient to complete these activities because of increased costs, improved data on costs, and other factors. The Supplemental Appropriations Act of 2008 ( P.L. 110-252 ) provided the requested $5.8 billion. As proposed by the Administration and enacted in P.L. 110-252 , the State of Louisiana would be responsible for $1.3 billion as its nonfederal cost-share contribution for the work. Subsequently in the Disaster Relief and Recovery Supplemental Appropriations Act of 2008 ( P.L. 110-329 ), Congress provided $1.5 billion to cover the state's share until it is repaid over 30 years by the State of Louisiana. The Bush Administration also proposed as part of its FY2009 budget request legislative language to consolidate the authorities for Corps hurricane protection projects in the New Orleans area into a single project. Consolidation would allow for the hurricane protection activities funding to be managed systematically, rather than on a project-by-project basis. Although neither P.L. 110-252 nor P.L. 110-329 provides this authority, they provide for flexibility in the expenditure and reprogramming of the funds for southeast Louisiana activities. Corps officials have continued to request coastal Louisiana reprogramming flexibility in order to meet the 2011 goal. Everglades The Corps plays a significant coordination role in the restoration of the Central and Southern Florida ecosystem. In addition to funding for Corps activities through Energy and Water Development appropriations, federal activities in the Everglades also are funded through Department of the Interior appropriations bills. Concerns regarding the level of appropriations across the federal agencies and the State of Florida and progress in the restoration effort are discussed in CRS Report RS20702, South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan , by [author name scrubbed] and [author name scrubbed]. The Bush Administration requested $185 million for FY2009; P.L. 111-8 provides $123 million. The primary cause of the difference is that P.L. 111-8 provides no Corps funding for the Modified Waters Deliveries Project (Mod Waters), instead of the $50 million requested. P.L. 111-8 instead funds the project through Department of Interior appropriations, which had been the process until recent years. Other components of the Everglades restoration effort receive lower appropriations in P.L. 111-8 than requested; these projects, however, may receive stimulus funds in FY2009, so it is unknown what the total FY2009 appropriations for the Everglades will be. P.L. 111-8 provides $91.6 million for Central and Southern Florida Project ($100 million requested), $28.4 million for Kissimmee River Restoration Project ($31 million requested), and $3.5 million for Everglades and South Florida Restoration Projects ($4 million requested). Inland Waterway Trust Fund The Inland Waterway Trust Fund (IWTF) has a looming deficit due to the amount of ongoing work that it funds relative to the collections for the fund. Expenses associated with construction and major rehabilitation of inland waterways is a federal responsibility (i.e., no local cost-share), with 50% of the federal monies coming from the IWTF and 50% from the federal general revenue fund. The IWTF monies derive from a fuel tax imposed on vessels engaged in commercial waterway transportation on designated waterways, plus investment interest on the balance. The collections have been roughly $100 million, and the outlays more than $200 million. The Bush Administration proposed replacing the fuel tax with a lockage fee for each barge. P.L. 111-8 neither adopted this proposal nor made other changes to existing law to address the IWTF balance. Instead it funds some projects with IWTF funds; other projects it funds using only general revenue funds and directs that they be brought to a logical stopping point and future work deferred until the IWTF revenue stream is enhanced. The use of general funds for projects that are intended to be cost shared by those benefiting from them raises fiscal equity issues among some stakeholders. In contrast, the Harbor Maintenance Trust Fund (HMTF) has a $4.7 billion growing balance. Navigation stakeholders argue that this balance poses the opposite side of the equity concern. Title II: Department of the Interior The Department of the Interior requested that Congress reduce funding for the Central Utah Project (CUP) Completion Account and also for the Bureau of Reclamation (Reclamation) for FY2009. The total request for Title II funding was originally $961.3 million—$189.6 million (16%) below FY2008 funding levels. However, President Bush submitted a budget amendment in June 2008 rescinding another $175 million from Reclamation's budget. The revised total request for Title II is $786.3 million, 32% below FY2008 appropriations. P.L. 111-8 provides $1.1 billion for Title II; $33.1 million less than enacted for FY2008, but $331.5 million more than requested for FY2009. Central Utah Project and Bureau of Reclamation: Budget In Brief The Bush Administration requested $42.0 million for the CUP Completion Account. The amended FY2009 request for Reclamation totals $744.3 million in gross current budget authority. This amount is $363.6 million less than enacted for FY2008. The FY2009 request included "offsets" of $48.3 million for the Central Valley Project (CVP) Restoration Fund (Congress does not list this line item as an offset), as well as a $175.0 million rescission proposed in a budget amendment submitted by President Bush, yielding a "net" current authority of $696.0 million for Reclamation. The total amended budget request for Title II funding—Central Utah Project and Reclamation—is $786.3 million. The House Committee on Appropriations recommended $42 million, the amount requested, for CUP funding for FY2009. The Committee's recommendation for Reclamation programs was $915.5 million, $171.2 million more than the President's amended FY2009 request. The Committee recommended a $120.0 million rescission, $55.0 million lower than the Bush Administration request. The Senate Committee on Appropriations also recommended $42 million for FY2009 CUP funding. The Committee's recommendation for the remaining Title II programs was $1,084.8 million, $340.5 million more than the amended FY2009 request, and $169.3 million more than recommended by House appropriators. The Senate did not include a rescission in its recommendations. P.L. 111-8 includes $42 million for CUP funding; $1 million less than enacted for FY2008. Reclamation's single largest account, Water and Related Resources, encompasses the agency's traditional programs and projects, including construction, operations and maintenance, the Dam Safety Program, Water and Energy Management Development, and Fish and Wildlife Management and Development, among others. The Bush Administration requested $779.3 million for the Water and Related Resources Account for FY2009. This amount is $170.6 million (18%) less than enacted for FY2008. The House Committee on Appropriations recommended a total of $888.0 million for the Water and Related Resources account, $108.7 million above the FY2009 request of $779.3 million. The Senate Committee on Appropriations recommended $927.3 million for Water and Related Resources, $39.3 million more than the House recommendation. P.L. 111-8 provides $920.3 million for the Water and Related Resources Account; $29.6 million less than enacted in FY2008. There are a number of programs whose funding recommendations differ between House and Senate appropriators; however, the single largest difference appears to be for the Pick-Sloan Missouri Basin's Garrison Diversion Unit. For this line item the Senate committee recommended $64.4 million and the House panel recommended $18.5 million—a difference of $45.9 million. P.L. 111-8 provides $64.4 million, the same as recommended by the Senate. Key Policy Issues—Bureau of Reclamation Background Most of the large dams and water diversion structures in the West were built by, or with the assistance of, Reclamation. Whereas the Army Corps of Engineers built hundreds of flood control and navigation projects, Reclamation's mission was to develop water supplies, primarily for irrigation to reclaim arid lands in the West. Today, Reclamation manages hundreds of dams and diversion projects, including more than 300 storage reservoirs in 17 western states. These projects provide water to approximately 10 million acres of farmland and 31 million people. Reclamation is the largest wholesale supplier of water in the 17 western states and the second-largest hydroelectric power producer in the nation. Reclamation facilities also provide substantial flood control, recreation, and fish and wildlife benefits. At the same time, operations of Reclamation facilities are often controversial, particularly for their effect on fish and wildlife species and conflicts among competing water users. CALFED The Bush Administration requested $32.0 million for the California Bay-Delta Restoration Account (Bay-Delta, or CALFED) for FY2009. This request is nearly identical to Reclamation's FY2008 request of $31.8 million, and is approximately $8.0 million less than the $40.1 million enacted for FY2008. The bulk of the requested funds is targeted at four program areas: the environmental water account, the storage program, water quality, and conveyance. The remainder of the request is allocated for science, planning and management, and ecosystem restoration. The House Committee on Appropriations recommended $37.0 million for CALFED in FY2009. The increase of $5.0 million in this account matched a $5.0 million decrease recommended by the Committee for Reclamation's Policy and Administration account. The Senate Committee on Appropriations recommended $42.0 million for CALFED funding in FY2009. This recommendation is $10.0 million more than the President's request, and a $5.0 million increase over the House recommendation. P.L. 111-8 provides $40.0 million for the CALFED program. (For more information on CALFED, see CRS Report RL31975, CALFED Bay-Delta Program: Overview of Institutional and Water Use Issues , by [author name scrubbed] and [author name scrubbed].) San Joaquin River Restoration Fund Reclamation proposed an allocation of $17.3 million to the San Joaquin River Restoration Fund in FY2009. The Fund would be authorized by the enactment of Title X of S. 22 (previously H.R. 4074 ), the San Joaquin River Restoration Settlement Act. The Fund would implement provisions of the Stipulation of Settlement for the Natural Resources Defense Council et al. v. Rodgers lawsuit and would be funded through the combination of a reallocation of $7.5 million in receipts from the Friant Division water users and other federal and non-federal sources. In its FY2008 budget request, Reclamation also planned for the redirection of $7.5 million in receipts from the Friant Division water users; however, authorizing legislation was not enacted, and the $7.5 million planned for the Fund was reallocated to other Central Valley Project (CVP) Restoration Fund programs. For FY2009, House appropriators originally stated that Congress had not enacted legislation authorizing the $7.5 million proposal for the new San Joaquin River Restoration Fund and directed Reclamation to expend the $7.5 million in anticipated transferred receipts within its anadromous fish screening program under the CVP Restoration Fund. The Senate Committee on Appropriations had also noted that authorizing legislation for a transfer of $7.5 million to the new San Joaquin River Restoration Fund had not been enacted and included language to allow the use of the $7.5 million under Reclamation's existing authorities in the event that the legislative proposal was not enacted. Explanatory text accompanying P.L. 111-8 directs Reclamation to use the $7.5 million on activities within existing authorities "until such time as the proposed legislation is enacted." (For more information on the San Joaquin River Restoration Fund, see CRS Report R40125, Title X of H.R. 146: San Joaquin River Restoration , by [author name scrubbed] and [author name scrubbed], and CRS Report RL34237, San Joaquin River Restoration Settlement , coordinated by [author name scrubbed] and [author name scrubbed].) Security Under Reclamation's Water and Related Resources account, the Administration requested $29.0 million for site security for FY2009, a decrease of $6.5 million compared with that requested for FY2007. The bulk of the request is for facility operations/security. Funding covers activities such as administration of the security program (e.g., surveillance and law enforcement), antiterrorism activities, and physical emergency security upgrades. (For more information, see CRS Report RL32189, Terrorism and Security Issues Facing the Water Infrastructure Sector , by [author name scrubbed].) The FY2009 request assumes that annual costs for guard and patrol activities will be treated as project O&M costs, and hence reimbursable based on project cost allocations. These costs were estimated to be $20.1 million in FY2009, of which $12.2 million would be in up-front funding from power customers and $7.9 million would be appropriated funds, which are reimbursed by irrigation, municipal, and industrial users and other customers. The House and Senate Committees on Appropriations each recommended $29.0 million for site security in FY2009, matching the amount requested by the President. P.L. 111-8 includes $28 million for site security. Water for America Reclamation proposed funding a new program for FY2009. The Water for America Initiative, part of Reclamation's Water and Related Resources budget account, would be a partnership between Reclamation and the U.S. Geological Survey (USGS). Reclamation indicated that the Water for America Initiative was meant to address increased demand, aging infrastructure, and decreased or changed water availability—factors that Reclamation had identified as threats to its ability to continue to provide water to the West. The initiative would subsume two existing Reclamation programs: Water 2025 and the Water Conservation Field Services program. Reclamation's funding request for its portion of the program was $31.9 million ($19 million appears under a Water for America line item, and the remaining $12.9 million is included in specific programs for endangered species and other programs). These funds would be used to address two of the program's three strategies: "Plan for Our Nation's Water Future," and "Expand, Protect, and Conserve Our Nation's Water Resources." The third strategic thrust of the initiative, to be addressed by USGS, was "Enhance Our Nation's Water Knowledge." Reclamation proposed to apply $8.0 million in FY2009 toward activities that fall under the "Plan for Our Nation's Water Future" thrust. This funding would be divided equally between basin studies (two or three comprehensive water supply and demand studies) and investigations (with a focus on analyzing and developing new water supplies). The balance of Reclamation's funding request for this initiative, $23.9 million, would be devoted to the "Expand, Protect, and Conserve Our Nation's Water Resources" effort. Within this subset of funding was $11.0 million for challenge grants, $4.0 million for the Water Conservation Field Services program, and $8.9 million for endangered species recovery activities. The House and Senate Committees on Appropriations both recommend the amount requested, $19.0 million, for the Water for America Initiative line item in FY2009. The total request for the Water for America Initiative was $31.9 million and it is unclear if the $12.9 million balance of the program is funded. Within Reclamation's budget, $19.0 million appears under a Water for America line item, while the remaining $12.9 million is included in programs for endangered species and other activities. House and Senate appropriators fully funded an FY2009 request of $22.0 million for Endangered Species Recovery Implementation, which may include the endangered species component of Water for America. P.L. 111-8 provides $15.1 million for the Water for America Initiative line item for FY2009; $20.1 million is included for Endangered Species Recovery Implementation, although it is not clear how much of this funding may include the endangered species component of Water for America. Title III: Department of Energy The Energy and Water Development bill has funded all DOE's programs since FY2005. Major DOE activities historically funded by the Energy and Water bill include research and development on renewable energy and nuclear power, general science, environmental cleanup, and nuclear weapons programs, and the bill now includes programs for fossil fuels, energy efficiency, the Strategic Petroleum Reserve, and energy statistics, which formerly had been included in the Interior and Related Agencies appropriations bill. The Bush Administration's FY2009 request for DOE programs was $25.9179 billion, compared with $24.3780 billion appropriated for FY2008. The House Appropriations Committee recommended $27.2174 billion, and the Senate Appropriations Committee recommended $27.0417 billion. P.L. 111-8 funds these programs at $26.9670 billion. Key Policy Issues—Department of Energy DOE administers a wide variety of programs with different functions and missions. In the following pages, the most important programs are described and major issues are identified, in approximately the order in which they appear in Table 7 . Energy Efficiency and Renewable Energy (EERE) President Bush's 2008 State of the Union address set out goals to strengthen energy security and confront global climate change, and stated that "... the best way to meet these goals is for America to continue leading the way toward the development of cleaner and more energy-efficient technology." As part of that effort, the Bush Administration proposed to continue its support for the Advanced Energy Initiative (AEI, an element of the American Competitiveness Initiative), which aimed to reduce America's dependence on imported energy sources. The AEI included hydrogen, biofuels, and solar energy initiatives that were supported by programs in EERE. According to the FY2009 budget document, the Hydrogen Initiative has a long-term aim of developing hydrogen technology, and to "enable industry to commercialize a hydrogen infrastructure and fuel cell vehicles by 2020." The Biofuels Initiative seeks to make cellulosic ethanol cost competitive by 2012 using a wide array of regionally available biomass sources. The Solar America Initiative aims to "... accelerate the market competitiveness of photovoltaic systems using several industry-led consortia which are focused on lowering the cost of solar energy through manufacturing and efficiency improvements." Further, the proposed FY2009 federal budget set a goal of making solar power "cost-competitive with conventional [sources of] electricity by 2015." DOE's FY2009 request contained $1,255.4 million for the EERE programs. Compared with the FY2008 appropriation, the FY2009 request would have reduced EERE funding by $467.0 million, or 27.1%. Three proposed cuts would comprise most of this reduction. First, the request would have eliminated $186.7 million in congressionally directed assistance. Second, it would have reduced Facilities construction spending by $57.3 million. Third, the request would have cut $227.2 million in funding to terminate the Weatherization Assistance Program, citing a higher benefit-cost ratio for technology development programs. In contrast to the Administration's request, the House Appropriations Committee recommended $2,531.1 million for DOE's EERE programs in FY2009. This would have been an $808.7 million (47%) increase over the FY2008 appropriation and a $1,275.7 million (102%) increase over the DOE request. Compared with the request, the Committee recommendation would have embraced a $381.5 million increase for R&D programs. Further, the Committee would have provided $259.2 million more for energy assistance programs, of which $250.0 million would have gone to the Weatherization Program—in sharp contrast to DOE's proposal to eliminate it. Also, the Committee recommended $500.0 million for new assistance programs authorized by the Energy Independence and Security Act (EISA, P.L. 110-140 ). As a major initiative, the Committee recommended $500.0 million as an "initial program investment" for several new programs authorized by EISA. The Energy Efficiency and Conservation Block Grant Program (EISA, §541-548) would have received $295.0 million in start-up funding. The Renewable Fuel Infrastructure Program (EISA §244) would have received $25.0 million to begin grant-giving operations. The Advanced Technology Vehicles Manufacturing Program (EISA §136[b]) would have received $30.0 million for grants to help convert factories to produce more efficient vehicles. Also, $1 billion in loan authority would be provided for the Advanced Technology Vehicles Manufacturing Incentive Program (EISA §136[d]). Aside from the $500.0 million initiative, some additional EISA-related funding would have been provided under the technology programs. The most notable examples were $25 million for the production of advanced biofuels (EISA §207) under the Biomass and Biorefinery Program and $33 million for zero net energy commercial buildings (EISA §422) under the Buildings Program. The Committee recommended $134.7 million for Congressionally Directed Assistance. In addition to providing funding recommendations, the House Appropriations Committee report included three policy directives for DOE. First, DOE would be required to report annually on the return on investment for each of the major EERE program funding accounts. Second, DOE would be directed to make up to $20 million of EERE funds available for "projects at the local level capable of reducing electricity demand." Each project would involve multiple technologies and public-private partnerships. Priority would go to projects that have a substantial local cost-share, help reduce water use, or curb greenhouse gas emissions. Third, DOE would be required to implement "an aggressive program" of minority outreach at Historically Black Colleges and Universities and at Hispanic Serving Institutions to deepen the recruiting pool of scientific and technical persons available to support the growing renewable energy marketplace. The Senate Appropriations Committee recommended $1,928.3 million for EERE, which is $205.9 million (12.0%) more than the FY2008 appropriation and $672.9 million (53.6%) more than the request. Compared with the House Appropriations Committee report, the Senate Appropriations Committee recommended $602.8 million, or 23.8%, less for EERE programs. The main difference ($450.0 million) was that the House Appropriations Committee proposed an increase of $500.0 million for a new EISA Federal Assistance Program, while the Senate Appropriations Committee proposed an increase of $50.0 million for a new Local Government/Tribal Technology Demonstration Program. Further, the Senate report recommended less funding than the House report for several technology programs. Relative to the House Committee report figures, the Senate Committee report's proposed decreases for renewable energy R&D included Geothermal (-$20.0 million), Bioenergy (-$15.0 million), and Water Energy (-$10.0 million). The major decreases for energy efficiency included Weatherization (-$48.8 million), Industrial Technologies (-$34.9) million, and Vehicle Technologies (-$24.5 million). The Senate Appropriations Committee recommended $124.2 million for Congressionally Directed Projects. In general, both committee reports recommended higher funding levels than the Bush Administration's request. In particular, each included more than $200 million for the Weatherization Program. Both committees disagreed with the DOE request to fund the Asia Pacific Partnership, and neither committee recommended funding it. Both committees called for the Biomass program to emphasize the use of non-food sources for the development of biofuels. The Senate Committee report further stressed R&D efforts to focus on algae as a biofuels source. The continuing resolution (Division A of P.L. 110-329 ) funded these programs at the FY2008 rate. Special provisions mandated an additional $250 million for DOE's weatherization program and $7.5 billion to leverage a one-time $25 billion loan to help U.S. automakers retool facilities to produce advanced technology energy-efficient vehicles. Electricity Delivery and Energy Reliability The FY2009 Bush Administration request included $134.0 million for the Office of Electricity Delivery and Energy Reliability (OE). The House Appropriations Committee recommended $149.3 million, which would have been $15.3 million more than the request. The Senate Appropriations Committee recommended $166.9 million, which would have been $17.7 million more than the House Appropriations Committee recommended. For OE congressionally directed projects, the House Committee report called for $5.3 million, while the Senate Committee report sought $12.9 million. Economic Recovery Bill (P.L. 111-5) The law provides $16.8 billion for several program accounts under EERE, which must be obligated during FY2009 and FY2010. In particular, it provides $2.5 billion for the R&D programs, including $800 million for the Biomass Program, and $400 million for the Geothermal Program. Further, it provides $5.0 billion for the Weatherization Grants Program, $3.1 billion for the State Energy Program, and $3.2 billion for the Energy Efficiency and Conservation Block Grant Program—a new program authorized by Title V of the Energy Independence and Security Act of 2007 (EISA). Also, the law provides $4.5 billion to the Office of Electricity Delivery and Energy Reliability for grid modernization and related technologies, such as electricity storage. That amount includes funds for the smart grid and grid modernization provisions in EISA (Title 13). P.L. 111-8 P.L. 111-8 appropriates $1.93 billion for EERE programs. That total amount is nearly identical to the Senate Appropriations Committee's recommendation. However, the amounts for individual programs differ significantly in many cases. Of the $1.93 billion total, $228.8 million is for congressionally directed projects. One highlight of the bill is that it provides $33 million under the Buildings Program to support the Commercial High Performance Buildings Program, which was authorized by EISA. Also, P.L. 111-8 provides $137.0 million for OE programs. Of that total, $19.7 million is for congressionally-directed projects. Nuclear Energy For nuclear energy research and development—including advanced reactors, fuel cycle technology, nuclear hydrogen production, and infrastructure support— P.L. 111-8 provides $870.8 million, including $78.8 million allocated to DOE defense activities. The total nuclear energy funding is $61.6 million below the comparable request by the Bush Administration. The House Appropriations Committee had recommended $1.317 billion for FY2009. DOE had requested $1.419 billion, about 40% higher than the FY2008 appropriation of $1.033 billion. Those totals are significantly higher than the P.L. 111-8 levels because they include DOE's mixed-oxide (MOX) fuel fabrication facility to make fuel from surplus weapons plutonium. The FY2009 request included an 80% increase in assistance for new commercial reactor orders (Nuclear Power 2010), a 70% increase for nuclear spent fuel reprocessing R&D (the Advanced Fuel Cycle Initiative), and a 75% boost for the MOX project. Those activities are funded by various appropriations accounts through DOE's Office of Nuclear Energy. The Senate Appropriations Committee had voted to fully fund the MOX project at the Administration's request of $487.0 million but place it under the National Nuclear Security Administration's Office of Defense Nuclear Nonproliferation. As a result, the Senate panel's funding total for the Office of Nuclear Energy was $803.0 million, $50.6 million below the comparable request and $120.1 million above the comparable FY2008 level. According to DOE's FY2009 budget justification, the nuclear energy R&D program is intended "to develop new nuclear energy generation technologies to meet energy and climate goals." However, opponents have criticized DOE's nuclear research program as providing wasteful subsidies to an industry that they believe should be phased out as unacceptably hazardous and economically uncompetitive. The increased funding sought by the Bush Administration for the Advanced Fuel Cycle Initiative (AFCI) was intended to help implement the Administration's Global Nuclear Energy Partnership (GNEP). GNEP was established to develop technologies for recycling uranium and plutonium from spent nuclear fuel without creating pure plutonium that could be readily used for nuclear weapons. According to DOE's budget justification, such technologies could allow greater expansion of nuclear power throughout the world "with reduced risk of nuclear weapons proliferation." But nuclear opponents dispute DOE's contention that nuclear recycling technology can be made sufficiently proliferation-resistant for widespread use. The House Appropriations Committee sharply criticized GNEP as "rushed, poorly-defined, expansive, and expensive," and eliminated all funding for the program. On the other hand, the House panel dramatically boosted funding for advanced nuclear reactors, which the Administration had proposed cutting. The Senate Appropriations Committee did not mention GNEP, but provided $50.3 million of the Administration's proposed $122.1 million increase for AFCI. The House Appropriations Committee's summary of the Energy and Water portion of P.L. 111-8 describes GNEP as being "zeroed out," although funding for AFCI would be continued. Nuclear Power 2010 President Bush's specific mention of "emissions-free nuclear power" in his 2008 State of the Union address reiterated his Administration's interest in encouraging construction of new commercial reactors—for which there have been no U.S. orders since 1978. DOE's efforts to restart the nuclear construction pipeline have been focused on the Nuclear Power 2010 Program, which will pay up to half of the nuclear industry's costs of seeking regulatory approval for new reactor sites, applying for new reactor licenses, and preparing detailed plant designs. The Nuclear Power 2010 Program, which includes the Standby Support Program authorized by the Energy Policy Act of 2005 ( P.L. 109-58 ) to pay for regulatory delays, is intended to encourage near-term orders for advanced versions of existing commercial nuclear plants. Two industry consortia are receiving DOE assistance over the next several years to design and license new nuclear power plants. DOE awarded the first funding to the consortia in 2004. DOE requested $241.6 million for Nuclear Power 2010 for FY2009, an increase of $107.8 million from the FY2008 funding level. According to DOE's budget justification, the additional funding would be used to accelerate the first-of-a-kind design activities for the two reactors being planned by the two industry consortia, the Westinghouse AP1000 reactor and the General Electric Economic Simplified Boiling Water Reactor (ESBWR). The House Appropriations Committee recommended holding the program's FY2009 funding level to $157.3 million, which the panel said was DOE's previous planning level. The Senate Appropriations Committee recommended the full request. P.L. 111-8 provides $177.5 million, $84.1 million below the request but $43.7 million above the FY2008 level. The nuclear license applications under the Nuclear Power 2010 program are intended to test the "one-step" licensing process established by the Energy Policy Act of 1992 ( P.L. 102-486 ). Under the process, the Nuclear Regulatory Commission (NRC) may grant a combined construction permit and operating license (COL) that allows a completed plant to begin operation if all construction criteria have been met. Even if the licenses are granted by NRC, the industry consortia funded by DOE have not committed to building new reactors. Two consortia are receiving Nuclear Power 2010 assistance: A consortium led by Dominion Resources that is preparing a COL for the GE ESBWR. The proposed reactor would be located at Dominion's existing North Anna plant in Virginia, where the company received an NRC early-site permit with DOE assistance. Dominion Energy submitted a COL application for a new unit at North Anna on November 27, 2007. A consortium called NuStart Energy Development, which includes Exelon and several other major nuclear utilities. NuStart announced on September 22, 2005, that it would seek a COL for two Westinghouse AP1000 reactors at the site of TVA's uncompleted Bellefonte nuclear plant in Alabama and for an ESBWR at the Grand Gulf plant in Mississippi. The Nuclear Power 2010 Program is providing funding for review and approval of the Bellefonte COL, which was submitted to NRC on October 30, 2007. Generation IV Advanced commercial reactor technologies that are not yet close to deployment are the focus of DOE's Generation IV Nuclear Energy Systems Initiative, for which $70.0 million was requested for FY2009. The request was $44.9 million below the FY2008 funding level of $114.9 million, which was nearly triple the Administration's FY2008 budget request of $36.1 million. The House Appropriations Committee had recommended an increase to $200.0 million, while the Senate panel had recommended the requested level. P.L. 111-8 provides $177.5 million. Most of the FY2009 request—$59.5 million—was for Next Generation Nuclear Plant (NGNP) research and development, which received an FY2008 appropriation of $114.1 million. Under DOE's current plans, NGNP will use Very High Temperature Reactor (VHTR) technology, which features helium as a coolant and coated-particle fuel that can withstand temperatures up to 1,600 degrees celsius. Phase I research on the NGNP is to continue until 2011, when a decision will be made on moving to the Phase II design and construction stage, according to the FY2009 DOE budget justification. The House Appropriations Committee provided $196.0 million "to accelerate work" on NGNP—all but $4.0 million of the Committee's total funding level for the Generation IV program. P.L. 111-8 allocates $169.0 million of Generation IV funding for NGNP. The Energy Policy Act of 2005 authorizes $1.25 billion through FY2015 for NGNP development and construction (Title VI, Subtitle C). The authorization requires that NGNP be based on research conducted by the Generation IV program and be capable of producing electricity, hydrogen, or both. Advanced Fuel Cycle Initiative According to the DOE budget justification, AFCI is intended to develop and demonstrate nuclear fuel cycles that could reduce the long-term hazard of spent nuclear fuel and recover additional energy. Such technologies would involve separation of plutonium, uranium, and other long-lived radioactive materials from spent fuel for reuse in a nuclear reactor or for transmutation in a particle accelerator. Much of the program's research is planned to focus on a separations technology called UREX+, in which uranium and other elements are chemically removed from dissolved spent fuel, leaving a mixture of plutonium and other highly radioactive elements. The FY2009 AFCI funding request was $301.5 million, nearly 70% above the FY2008 appropriation of $179.4 million but below the FY2008 request of $395.0 million. AFCI, the primary technology component of the GNEP program, includes R&D on reprocessing technology and fast reactors that could use reprocessed plutonium. The House Appropriations Committee had recommended cutting AFCI to $90.0 million in FY2009, eliminating all funding for GNEP. The remaining funds would be used for research on advanced fuel cycle technology, but none could be used for design or construction of new facilities. The Committee urged DOE to continue coordinating its fuel cycle research with other countries that already have spent fuel recycling capability, but not with "countries aspiring to have nuclear capabilities." The Senate Appropriations Committee had recommended $229.7 million for AFCI, focusing on advanced fuel separation and fuel fabrication. P.L. 111-8 provides $145.0 million for the program and eliminate GNEP funding. FY2009 funding of $10.4 million was requested for conceptual design work on an Advanced Fuel Cycle Facility (AFCF) to provide an engineering-scale demonstration of AFCI technologies, according to the budget justification. The FY2008 Consolidated Appropriations act rejected funding for development of AFCF, as did the House Appropriations Committee for FY2009. Removing uranium from spent fuel would eliminate most of the volume of spent nuclear fuel that would otherwise require disposal in a deep geologic repository, which DOE is developing at Yucca Mountain, Nevada. The UREX+ process also could reduce the heat generated by nuclear waste—the major limit on the repository's capacity—by removing cesium and strontium for separate storage and decay over several hundred years. Plutonium and other long-lived elements would be fissioned in accelerators or fast reactors to reduce the long-term hazard of nuclear waste. Even if technically feasible, however, the economic viability of such waste processing has yet to be determined, and it still faces significant opposition on nuclear nonproliferation grounds. Nevertheless, proponents believe the process is proliferation-resistant, because further purification would be required to make the plutonium useable for weapons and because the high radioactivity of the plutonium mixtures would make the material difficult to divert or work with. Under the Administration's GNEP initiative, plutonium partially separated from the highly radioactive spent fuel from nuclear reactors would be recycled into new fuel to expand the future supply of nuclear fuel and potentially reduce the amount of radioactive waste to be disposed of in a permanent repository. Under the initial concept for GNEP, the United States and other advanced nuclear nations would lease new fuel to other nations that agreed to forgo uranium enrichment, spent fuel recycling (also called reprocessing), and other fuel cycle facilities that could be used to produce nuclear weapons materials. The leased fuel would then be returned to supplier nations for reprocessing. Solidified high-level reprocessing waste would be sent back to the nation that had used the leased fuel, along with supplies of fresh nuclear fuel. The Nuclear Nonproliferation Treaty guarantees the right of all participants to develop fuel cycle facilities, and a GNEP Statement of Principles signed by the United States and 15 other countries on September 16, 2007, preserves that right, while encouraging the establishment of a "viable alternative to acquisition of sensitive fuel cycle technologies." The National Academy of Sciences in October 2007 strongly criticized DOE's "aggressive" deployment schedule for GNEP and recommended that the program instead focus on research and development. As part of GNEP, AFCI has been conducting R&D on an Advanced Burner Reactor (ABR) that could destroy recycled plutonium and other long-lived radioactive elements. DOE requested $18.0 million for the ABR program for FY2009, up from $11.7 million in FY2008. The program is expected to focus on developing a sodium-cooled fast reactor (SFR). The House Appropriations Committee had recommended no FY2009 funding for the ABR, although it is not directly mentioned in the H.R. 1105 explanatory statement. (For more information about GNEP and reprocessing, see CRS Report RL34579, Advanced Nuclear Power and Fuel Cycle Technologies: Outlook and Policy Options , by [author name scrubbed].) Nuclear Hydrogen Initiative In support of President Bush's program to develop hydrogen-fueled vehicles, DOE requested $16.6 million for FY2009 for the Nuclear Hydrogen Initiative, about 67% above the FY2008 funding level but below the FY2007 appropriation. The House Appropriations Committee had provided the full FY2009 request, while the Senate panel had recommended $10.0 million—slightly above the FY2008 level. P.L. 111-8 provides $7.5 million. According to DOE's FY2009 budget justification, the program will continue laboratory-scale experiments to allow selection by 2011 of a hydrogen-production technology for pilot-scale demonstration by 2013. Mixed Oxide Fuel Fabrication Facility DOE requested $487.0 million for the Mixed Oxide Fuel Fabrication Facility at the Savannah River Site in South Carolina—a 75% increase from the FY2008 funding level. The multi-billion-dollar facility is intended to convert surplus weapons plutonium into oxide form and then blend it with uranium oxide to produce fuel for nuclear power plants. The FY2008 Consolidated Appropriations act shifted funding for the project to the DOE nuclear energy program from the Defense Nuclear Nonproliferation account. For FY2009, DOE proposed to shift the program's funding to the Other Defense Activities account. The House Appropriations Committee had provided the full request, but recommended that the funding remain under the nuclear energy account. The Senate Appropriations Committee also recommended the full request but transferred the project back to the nuclear nonproliferation program. (For more details, see Nuclear Weapons Stockpile Stewardship, below.) Integrated University Program The Senate Appropriations Committee recommended the establishment of an Integrated University Program to support university research in the nuclear field and to provide grants to help maintain university nuclear science and engineering programs. Under the Committee recommendation, $15.0 million each would be appropriated to the Office of Nuclear Energy, the Office of Defense Nuclear Nonproliferation, and the Nuclear Regulatory Commission, for a total of $45.0 million. P.L. 111-8 provides the entire $15.0 million to the Nuclear Regulatory Commission. Fossil Energy Research, Development, and Demonstration The Bush Administration requested $765.3 million for the Fossil Energy Research and Development budget in FY2009, to be offset by use of $11.3 million in prior-year balances (resulting in a requested appropriation of $754 million). The administration requested $149 million deferred as unobligated balances to FY2009, and $166 million in uncommitted balances to be transferred from Clean Coal Technology to Fossil Energy R&D (FutureGen). The total request represented a 33% increase over the FY2008 request of $566.8. Under the FY2009 request, programs in Natural Gas Technology, Petroleum-Oil Technology, and Cooperative R&D would be left unfunded. DOE had proposed terminating programs in Natural Gas Technology and Petroleum-Oil Technology in FY2008. OMB rated both programs as ineffective based on its Program Assessment Rating Tool. Nor had DOE requested funding for Plant and Capital Equipment or the Cooperative Research and Development program. (Contending that research-center-sponsored work can seek Fossil Energy funding through the competitive solicitation process, DOE had not requested funding in FY2007 or FY2008.) Congress reinstated the funding of these programs in FY2008. The former FutureGen project was intended to demonstrate clean coal-based Integrated Gasification Combined Cycle (IGCC) power generation with capture and sequestration of CO 2 emissions. In early 2008, after cost estimates for the project escalated to $1.8 billion, DOE announced that it would restructure the program to focus exclusively on commercial application of Carbon Capture and Storage (CCS) technologies for IGCC or other advanced clean coal-based power generation technology. Under the "Restructured FutureGen" program, DOE proposed a cost-shared collaboration with industry and anticipated making a number of awards ranging from $100 million-$600 million (DOE share). The House Appropriations Committee directed DOE to merge FutureGen and the Clean Coal Power Initiative into a single solicitation for a Carbon Capture Demonstration Initiative and established it as new appropriations control level. The House Appropriations Committee then recommended $853.6 million for Fossil Energy Research and Development Programs, a 13.8% increase over the request, of which $149 million would be derived by transfer from prior-year unobligated Clean Coal Technology balances (deferred earlier by the Consolidated Appropriations Act of 2008, P.L. 110-161 ), and $11.3 million in prior-year balances from completed or cancelled construction projects. Major funding categories include the newly created Carbon Capture Demonstration Initiative ($241 million), which consolidates the former Clean Coal Power Initiative and the FutureGen project; Carbon Sequestration ($220 million); Fuels and Power Systems ($220.6 million); Petroleum-Oil Technologies ($3 million); Natural Gas Technologies ($25 million); Liquefied Natural Gas Report; Program Direction ($126.3 million); Other ($15.4 million); and Congressionally Directed Projects ($13.7 million). The Senate Committee on Appropriations, in its report accompanying S. 3258 , recommended increasing the President's budget request by $122.7 billion to accelerate Carbon Sequestration development for a total of $876.7 billion. The Committee recommended spending $232.3 million on the Clean Coal Power Initiative; no funding of the FutureGen account; $412.1 million on Fuels and Power Systems; $20 million on Natural Gas Technologies; $5 million on Oil Technologies; $152.8 million on Program Direction; $9.7 million on Other Programs, and $32.7 million on congressionally directed programs. Under P.L. 111-8 , $876.3 million is appropriated for fossil energy research and development, of which $149.0 million is to be derived by transfer from Clean Coal Technology. Of that total, $288.2 million is available for the Clean Coal Power Initiative Round III solicitation. Furthermore, $43.9 million of the appropriated amount is to be used for projects specified as Congressionally Directed Fossil Energy Projects. An additional $3.4 billion was appropriated for DOE fossil energy programs in FY2009 by the American Recovery and Investment Act of 2009 ( P.L. 111-5 ). Funds under this heading include $1.0 billion for fossil energy research and development programs; $800.0 million for additional amounts for the Clean Coal Power Initiative Round III Funding Opportunity Announcement; $1.52 billion for a competitive solicitation for a range of industrial carbon capture and energy efficiency improvement projects, including a small allocation for innovative concepts for beneficial CO2 reuse; $50.0 million for a competitive solicitation for site characterization activities in geologic formations; $20.0 million for geologic sequestration training and research grants; and $10.0 million for program direction. Strategic Petroleum Reserve The Strategic Petroleum Reserve (SPR), authorized by the Energy Policy and Conservation Act ( P.L. 94-163 ) in 1975, consists of caverns formed out of naturally occurring salt domes in Louisiana and Texas in which nearly 700 million barrels of crude oil are stored. Its current capacity is 727 million barrels, and it is authorized at 1 billion barrels. The purpose of the SPR is to provide an emergency source of crude oil that may be tapped in the event of a presidential finding that an interruption in oil supply, or an interruption threatening adverse economic effects, warrants a drawdown from the reserve. A Northeast Heating Oil Reserve (NHOR) was established during the Clinton Administration. The NHOR houses 2 million barrels of home heating oil in above-ground facilities in Connecticut, New Jersey, and Rhode Island. Appropriations for the purchase of oil for the SPR ceased in the mid-1990s. Beginning in FY1999, any fill of the SPR was with deliveries of royalty-in-kind (RIK) oil to the SPR, in lieu of cash royalties on offshore production paid to the federal government. Through FY2007, royalty-in-kind deliveries to the SPR totaled roughly 140 million barrels and forgone receipts to the Department of the Interior were estimated at $4.6 billion. DOE estimated that deliveries of RIK oil during FY2008 would be roughly 19.1 million barrels and $1.170 billion in forgone revenues. However, on May 13, 2008, the House and Senate passed H.R. 6022 , suspending RIK fill. President Bush signed the legislation into law ( P.L. 110-232 ) on May 19. A few days earlier, on May 16, DOE announced it would not accept bids for an additional 13 million barrels of RIK oil that had been intended for delivery during the second half of 2008. The Bush Administration request for FY2009 for the SPR was $346.9 million. As in its FY2008 request, the Administration was seeking funding to expand the capacity of the SPR to 1 billion barrels by (1) adding 115 million barrels of capacity at three existing sites; and (2) establishing a new site, in Richton, Mississippi, where 160 million barrels of capacity would be created. The request included $169.7 million for expansion activities. Included as well in the request was $13.5 million to initiate the National Environmental Policy Act (NEPA) environmental review process for expansion of the SPR to 1.5 billion barrels, a level not yet authorized by Congress but strongly supported by the Administration. Congress approved nearly $25 million in the FY2008 budget for land acquisition at the Richton site but otherwise expressed opposition to funding expansion. Congress approved funding of $186.8 million for FY2008; the Administration had requested $331.6 million. In its report on the FY2008 appropriations bill, the House Committee on Appropriations noted an estimate that it would cost $10 billion to create additional capacity and $105 billion to fill it, and that expansion would not be completed until 2027. The Committee indicated that the benefits of doubling the size of the Reserve were not "commensurate with this enormous cost." For FY2009, the Committee did not alter its position. The Committee recommended funding for FY2009 at $172.6 million, including the use of $2.9 million of prior year balances. The recommendation is $171.4 million less than the Administration request. The Senate Committee on Appropriations recommended $205 million for FY2009, including $31.5 million "to initiate new site expansion activities and support beyond land acquisition." This would include further work at the Richton site to prepare for the creation of storage capacity. The Bush Administration requested $9.8 million for the NHOR in FY2009, a reduction of $2.5 million from the FY2008 enactment, principally due to a reduction in the need for funds for repurchasing heating oil that was sold during FY2007 to finance new storage contracts. Both House and Senate committees agreed to the Administration request. P.L. 111-8 sets spending for the SPR at the levels recommended by the Senate, as well as providing $9.8 million for the NHOR, as requested. Science and ARPA-E The DOE Office of Science conducts basic research in six program areas: basic energy sciences, high-energy physics, biological and environmental research, nuclear physics, fusion energy sciences, and advanced scientific computing research. Through these programs, DOE is the third-largest federal funder of basic research and the largest federal funder of research in the physical sciences. The America COMPETES Act ( P.L. 110-69 ) authorized the establishment of a new Advanced Research Projects Agency—Energy (ARPA-E), separate from the Office of Science, to support transformational energy technology research projects. For FY2009, DOE requested $4.722 billion for Science, an increase of 18% from the FY2008 amount of $4.018 billion. This unusually large increase reflects the American Competitiveness Initiative (ACI), which President Bush had announced in January 2006. Over 10 years, the ACI would double the combined R&D funding of the DOE Office of Science and two other agencies. In the 110 th Congress, the House Appropriations Committee recommended $4.862 billion for Science, and the Senate panel recommended $4.640 billion. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) appropriated $1.6 billion for the Office of Science for FY2009 (with no allocation specified to particular programs) and $400 million for the newly established ARPA-E. P.L. 111-8 provides $4.773 billion for Science, including $15 million for ARPA-E and the remainder for the Office of Science. The requested funding for the largest Office of Science program, basic energy sciences, was $1.568 billion, up 23% from FY2008. Increases included $153 million for a new program of Energy Frontier Research Centers, $66 million to initiate construction of the National Synchrotron Light Source II (NSLS-II) at Brookhaven National Laboratory, and $73 million to expand facility operating time. The House and Senate appropriations reports for FY2006 both called for an increase for facility operating time. Increases were proposed in the FY2007 and FY2008 budget requests and funded in the House and Senate appropriations bills for those years, but were not ultimately included in either the FY2007 or the FY2008 appropriations. (The request also included increases to expand facility operating time in some of the other Office of Science research programs.) In the 110 th Congress, the House committee recommended $1.600 billion, including increases of $17 million for a facility at the Stanford Linear Accelerator Center and $14.5 million for the NSLS-II, and the Senate committee recommended $1.415 billion, including a transfer of $59 million of basic solar research to the Energy Efficiency and Renewable Energy account and an unspecified reduction of $93 million. P.L. 111-8 provides $1.572 billion, including an increase of about $9 million for the Experimental Program to Stimulate Competitive Research (EPSCoR). For high-energy physics, the request was $805 million, up 17% from FY2008. Included were increases for three programs whose funding Congress sharply reduced in the final FY2008 appropriation: $37 million (up from $6 million) for construction of the NOνA detector at Fermilab, $25 million (up from $5 million) for superconducting radiofrequency R&D, and $35 million (up from $15 million) for R&D related to the proposed International Linear Collider. The request included $10 million for the DOE/NASA Joint Dark Energy Mission (JDEM). Responding to appropriations report language in FY2008, NASA included its portion of JDEM in its FY2009 request. In the 110 th Congress, the House and Senate committees both recommended the requested amount for high-energy physics. P.L. 111-8 provides $796 million. The request for biological and environmental research was $569 million, up 4%. The bulk of the requested increase was for climate change modeling. In the 110 th Congress, the House committee recommended $579 million, including increases of $5 million each for biological research and climate change research, and the Senate committee recommended $599 million, including increases of $20 million for climate change research and $10 million for nuclear medicine. P.L. 111-8 provides $602 million, including increases of $23 million for climate change research and $10 million for nuclear medicine. For nuclear physics, the request was $510 million, up 18% from FY2008. Included were $20 million for isotope production and applications (transferred from the Office of Nuclear Energy) and $15 million to begin construction of an upgrade at the Continuous Electron Beam Accelerator Facility (CEBAF). Most other nuclear physics activities would also receive increases. In the 110 th Congress, the House committee recommended $517 million, including an increase of $7 million to accelerate the CEBAF upgrade, and the Senate committee recommended the requested amount. P.L. 111-8 provides $512 million. The request for fusion energy sciences was $493 million, up 72%. Almost the entire increase ($204 million) was for the U.S. share of the International Thermonuclear Experimental Reactor (ITER), a fusion facility now under construction in France. For FY2008, although the House and Senate bills both provided the requested amount for ITER, the final appropriation eliminated all except $10 million for related R&D. According to press reports, the lack of U.S. funds in FY2008 had no immediate impact on the project's planned 2008 start, but "what the other ITER partners now want from the United States is clarity" about its plans. The ITER partners are China, the European Union, India, Japan, Russia, South Korea, and the United States. Under an agreement signed in 2006, the U.S. share of ITER's construction cost is 9.1%. That share is now expected to be between $1.45 billion and $2.2 billion, with a completion date between FY2014 and FY2017. A preliminary estimate of $1.122 billion through FY2014 was revised upwards in December 2007. In the 110 th Congress, the House committee recommended $499 million, including a $6 million increase above the request to "help revitalize the domestic fusion energy sciences program," and the Senate committee recommended the requested amount. P.L. 111-8 provides $403 million, including $90 million less than the request for ITER and no funding for National Compact Stellarator Experiment (NCSX) project, which is currently under construction at Princeton Plasma Physics Laboratory. The request for the smallest of the Office of Science research programs, advanced scientific computing research, was $369 million, up 5% from FY2008. The majority of the requested increase would fund establishment of a new Applied Mathematics-Computer Science Institute. In the 110 th Congress, the House committee recommended $379 million, an increase of $10 million, and the Senate committee recommended the requested amount. P.L. 111-8 provides the requested amount. The request for laboratory infrastructure was $110 million, up 65% from FY2008. An Infrastructure Modernization Initiative, to be funded in FY2009 by transfers from the research programs, accounts for $33 million of the requested increase. In the 110 th Congress, the House committee recommended $146 million, including increases for excess facilities disposition, laboratory facility modernization, and building construction, and the Senate committee recommended the requested amount. P.L. 111-8 provides $145 million. In the 110 th Congress, the House committee recommended $15 million for ARPA-E as part of the Science appropriation; the Senate committee did not mention ARPA-E. The American Recovery and Reinvestment Act of 2009 provided $400 million as a separate appropriations account. P.L. 111-8 provides $15 million as part of the Science appropriation. Nuclear Waste Disposal DOE's Office of Civilian Radioactive Waste Management (OCRWM) is responsible for developing a nuclear waste repository at Yucca Mountain, Nevada, for disposal of nuclear reactor spent fuel and defense-related high-level radioactive waste. The FY2009 OCRWM request was $494.7 million; the House Appropriations Committee had approved the full amount, and the Senate Appropriations Committee had recommended $388.4 million. P.L. 111-8 cuts the program's budget to $288.4 million—$206 million below the Bush Administration request and $98.1 million below the FY2008 level. The FY2009 request was 28% above the FY2008 appropriation of $386.4 million, but the FY2008 level is about $50 million below the FY2007 level and more than $100 million below the Administration's FY2008 request. The FY2008 funding reductions required OCRWM to reduce its workforce by about 900, according to the program's director, and DOE pushed back its most optimistic date for opening the Yucca Mountain repository from 2017 to 2020. Despite the reduced funding and staff, OCRWM achieved a major milestone by submitting a license application for the proposed repository to the Nuclear Regulatory Commission on June 3, 2008. The deep funding cut in P.L. 111-8 for FY2009 appears to reflect the Obama Administration's budget outline for FY2010, in which DOE's nuclear waste funding would be "scaled back to those costs necessary to answer inquiries from the Nuclear Regulatory Commission" during its consideration of the Yucca Mountain license application. Funding for the nuclear waste program is provided under two appropriations accounts. The Administration requested $247.4 million from the Nuclear Waste Fund, which holds fees paid by nuclear utilities. An additional $247.4 million was requested in the Defense Nuclear Waste Disposal account, which pays for disposal of high-level waste from the nuclear weapons program in the planned Yucca Mountain repository. The House Appropriations Committee had recommended the full amount for both accounts, while the Senate panel had recommended $195.4 million from the Waste Disposal account and $193.0 million from the defense account. P.L. 111-8 provides $145.4 million from the Nuclear Waste Fund and $143 million from the defense account. The Nuclear Waste Policy Act of 1982 (NWPA, P.L. 97-425 ), as amended, names Yucca Mountain as the sole candidate site for a national geologic repository. Congress passed an approval resolution in July 2002 ( H.J.Res. 87 , P.L. 107-200 ) that authorized the Yucca Mountain project to proceed to the licensing phase. NWPA required DOE to begin taking waste from nuclear plant sites by January 31, 1998. Nuclear utilities, upset over DOE's failure to meet that deadline, have won two federal court decisions upholding the department's obligation to meet the deadline and to compensate utilities for any resulting damages. Utilities have also won several cases in the U.S. Court of Federal Claims. DOE estimates that liability payments will total $11 billion if Yucca Mountain begins receiving waste by 2020. (For more information, see CRS Report R40202, Nuclear Waste Disposal: Alternatives to Yucca Mountain , by [author name scrubbed], and CRS Report RL33461, Civilian Nuclear Waste Disposal , by [author name scrubbed].) Loan Guarantees Congress established the DOE Innovative Technology Loan Guarantee Program in the Energy Policy Act of 2005. The act authorized loan guarantees for energy projects using "new or significantly improved technologies" to reduce greenhouse gas emissions. The FY2008 consolidated appropriations act allowed DOE to guarantee repayment of up to $38.5 billion in loans for energy projects during FY2008 and FY2009. Of that amount, $18.5 billion was for nuclear power plants, $6 billion was for coal projects that incorporate carbon capture and sequestration, $2 billion was for advanced coal gasification, $10 billion was for renewable energy and energy efficiency projects, and $2 billion for uranium enrichment and other "front end" nuclear fuel cycle facilities. DOE must submit an implementation plan to the House and Senate Appropriations Committees at least 45 days before issuing the loan guarantees. DOE's FY2009 budget request proposed to extend the previously approved $38.5 billion in loan guarantee authority. Under the request, $20 billion would be available through FY2010 for technologies other than nuclear power plants, while the remaining $18.5 billion for nuclear power plants would be available through FY2011. In addition to the $38.5 billion in loan guarantee authority that must be used by FY2010 and FY2011, the FY2007 DOE appropriation (included in P.L. 110-5 ) provided $4 billion in loan guarantee authority with no expiration date or specified technology. To administer the loan guarantee program, DOE requested an appropriation of $19.9 million for FY2009, an amount that is to be entirely offset by fees imposed on project sponsors. The House Appropriations Committee had recommended an increase in DOE's loan guarantee authority to $47 billion, all to be available through FY2011, in addition to the previously authorized $4 billion. Of the $47 billion, $18.5 billion was for nuclear power, $18.5 was for energy efficiency and renewables, $6 billion was for coal, $2 billion was for carbon capture and sequestration, and $2 billion was for uranium enrichment. The House panel provided the full $19.9 million administrative funding request, to be offset by fees. The Senate Appropriations Committee did not increase the $38.5 billion in loan guarantees authorized in the FY2008 funding act, but recommended that the time limits be removed entirely. P.L. 111-8 adopts the House Committee level of $47 billion, in addition to the previously approved $4 billion. Allocations among technologies are the same as the House Committee recommendation. As in the Senate recommendation, the time limits on the loan guarantee authority are eliminated. Administrative funding of $19.9 million is provided. Because of Congressional Budget Office scoring requirements, the House panel provided $465 million in budget authority (including $25 million in advance appropriations from FY2008) to cover possible future government costs resulting from the loan guarantees. The Senate Appropriations Committee included $355 million for that purpose. P.L. 111-8 adopts the House Committee level. An additional $60 billion in loan guarantees for renewable energy and electric transmission projects was provided by the economic stimulus legislation ( P.L. 111-5 ). Unlike under the annual appropriations bills, project sponsors under P.L. 111-5 will not have to pay up-front fees to cover potential loan defaults; instead, $6 billion was appropriated to cover such potential costs. In addition, P.L. 111-5 provided $10 million for administrative expenses for DOE loans to the U.S. auto industry for advanced vehicle manufacturing. Nuclear Weapons Stockpile Stewardship Congress established the Stockpile Stewardship Program in the FY1994 National Defense Authorization Act ( P.L. 103-160 ) "to ensure the preservation of the core intellectual and technical competencies of the United States in nuclear weapons." The program is operated by the National Nuclear Security Administration (NNSA), a semiautonomous agency within DOE that Congress established in the FY2000 National Defense Authorization Act ( P.L. 106-65 , Title XXXII). It seeks to maintain the safety and reliability of the U.S. nuclear stockpile. Stockpile stewardship consists of all activities in NNSA's Weapons Activities account: three main programs—Directed Stockpile Work, Campaigns, and Readiness in Technical Base and Facilities—as well as several smaller ones. All are described below. Table 10 presents their funding. NNSA manages two programs outside of Weapons Activities: Defense Nuclear Nonproliferation, discussed later in this report, and Naval Reactors. Most stewardship activities take place at the nuclear weapons complex, which consists of three laboratories (Los Alamos National Laboratory, NM; Lawrence Livermore National Laboratory, CA; and Sandia National Laboratories, NM and CA); four production sites (Kansas City Plant, MO; Pantex Plant, TX; Savannah River Site, SC; and Y-12 Plant, TN); and the Nevada Test Site. NNSA manages and sets policy for the complex; contractors to NNSA operate the eight sites. The FY2009 request document includes data from NNSA's Future Years Nuclear Security Program (FYNSP), which projects the budget and components through FY2013 (see Table 11 ). Nuclear Weapons Complex Reconfiguration Although the nuclear weapons complex (the "Complex") currently consists of the eight sites noted above, it was much larger during the Cold War in terms of number of sites, budgets, and personnel. Despite the post-Cold War reduction, many in Congress have for years wanted the Complex to change further, in various ways: fewer personnel, lower cost, greater efficiency, smaller footprint at each site, increased security, and the like. (For congressional action on FY2005-FY2008 appropriations, see CRS Report RL34009, Energy and Water Development: FY2008 Appropriations , by [author name scrubbed] et al.) In response, in January 2007 NNSA submitted a report to Congress on its plan for transforming the Complex, "Complex 2030." The House Appropriations Committee, in its FY2008 report, expressed displeasure with this plan and demanded "a comprehensive nuclear defense and nonproliferation strategy," a detailed description translating that strategy into a "specific nuclear stockpile," and "a comprehensive, long-term expenditure plan, from FY2008 through FY2030 ... " before considering further funding for Complex 2030 and a nuclear weapon program, the Reliable Replacement Warhead (RRW, discussed below). It stated that "NNSA continues to pursue a policy of rebuilding and modernizing the entire complex in situ without any thought given to a sensible strategy for long-term efficiency and consolidation." Similarly, the Senate Appropriations Committee expressed concern with NNSA's plans for the Complex. It saw an inadequate linkage between warheads, the Complex, and strategy, and "rejects the Department's premature deployment of the NNSA Complex 2030 consolidation effort." The joint explanatory statement accompanying the consolidated appropriations bill said, "The Congress agrees to the direction contained in the House and Senate reports requiring the Administration ... to develop and submit to the Congress a comprehensive nuclear weapons strategy for the 21 st century." On December 18, 2007, NNSA announced its plan, Complex Transformation, a name change from Complex 2030. It would retain existing sites, reduce the weapons program footprint by as much as one-third, close or transfer from weapons activities about 600 structures, reduce the number of weapons workers by 20-30%, dismantle weapons more rapidly, and build several major new facilities, such as a Uranium Processing Facility at Y-12 Plant, a Weapons Surveillance Facility at Pantex Plant, and a Chemistry and Metallurgy Research Replacement Nuclear Facility at Los Alamos National Laboratory. This plan is more fully described in a Draft Complex Transformation Supplemental Programmatic Environmental Impact Statement released in January 2008. The House Appropriations Committee reiterated its FY2008 views in its FY2009 report: Before the Committee will consider funding for most new programs, substantial changes to the existing nuclear weapons complex, or funding for the RRW, the Committee insists that the following sequence be completed: (1) replacement of Cold War strategies with a 21 st Century nuclear deterrent strategy sharply focused on today's and tomorrow's threats, and capable of serving the national security needs of future Administrations and future Congresses without need for nuclear testing; (2) determination of the size and nature of the nuclear stockpile sufficient to serve that strategy; (3) determination of the size and nature of the nuclear weapons complex needed to support that future stockpile. In keeping with this approach, the committee recommended eliminating funds for RRW and for several programs described below. P.L. 111-8 provided no funds for RRW. In its FY2009 report, the Senate Appropriations Committee recommended eliminating funds for RRW and made various changes to individual programs. It did not provide general comments on Complex transformation. Directed Stockpile Work (DSW) This program involves work directly on nuclear weapons in the stockpile, such as monitoring their condition; maintaining them through repairs, refurbishment, life extension, and modifications; R&D in support of specific warheads; and dismantlement. Specific items under DSW include the following: Life Extension Programs (LEPs). These programs aim to extend the life of existing warheads by 20 to 30 years through design, certification, manufacture, and replacement of components. Two LEPs are underway. One for the B61 mods 7 and 11 bombs will complete actions needed to close out the program in FY2009; its FY2008 budget was $61.9 million, and the FY2009 request was $2.2 million. The other LEP is for the W76 warhead for the Trident II submarine-launched ballistic missile. Its FY2008 budget was $172.2 million, while its FY2009 request was $209.2 million. Work in FY2008 involved preparation for manufacture with a goal of making the first production unit. NNSA plans to ramp to full production in FY2009, and the first life-extended W76 entered the stockpile in February 2009. P.L. 111-8 provided $205.0 million. Stockpile Systems. This program involves routine maintenance, replacement of limited-life components, ongoing assessment, and the like for all weapon types in the stockpile. The FY2008 budget was $340.1 million; the FY2009 request was $338.7 million. Of the eight warhead types listed, the two largest programs under stockpile systems are for the B61 and W76. P.L. 111-8 provided $328.5 million. Weapons Dismantlement and Disposition (WDD). The President and Congress have agreed on the desirability of reducing the stockpile to the lowest level consistent with national security, and numbers of warheads have fallen sharply since the end of the Cold War. According to NNSA, "Reducing the total number of U.S. nuclear weapons sends a clear message to the world that critical modernization programs do not signal a return to the arms race of the Cold War." WDD involves interim storage of warheads to be dismantled, dismantlement, and disposition, i.e., storing or eliminating warhead components and materials. The FY2008 budget was $134.7 million; the FY2009 request was $183.7 million. P.L. 111-8 provided $190.2 million. Within WDD, the major activity is the Pit Disassembly and Conversion Facility (PDCF). The "pit" is the fissile component (usually plutonium) of a nuclear warhead that initiates a thermonuclear explosion. As warheads are dismantled, pits may be stored, but for permanent disposition PDCF would convert the plutonium in pits to plutonium oxide for use in a Mixed Oxide Fuel Fabrication Facility (MFFF), where it would become fuel for commercial light-water nuclear reactors. The project also includes a Waste Solidification Building (WSB) to convert liquid wastes from PDCF and MFFF into solids for disposal off-site. (In FY2008, MFFF was transferred from NNSA to DOE's Office of Nuclear Energy. The FY2009 budget request would transfer the project to Other Defense Activities.) In FY2009, NNSA plans to begin construction of WSB and to continue design and technology development for PDCF. Stockpile Services. This category includes Production Support; R&D Support; R&D Certification and Safety; Management, Technology, and Production; Pit Manufacturing; and Pit Manufacturing Capability. Under Pit Manufacturing, NNSA plans to manufacture stockpile-quality pits for the W88 warhead at Los Alamos National Laboratory. NNSA established a capacity of 10 pits per year in FY2007, a figure it plans to increase to 50 to 80 pits per year. Closely related is Pit Manufacturing Capability, which develops processes to manufacture pits other than for the W88. The budget for Stockpile Services was $692.4 million for FY2008; $931.9 million was requested for FY2009. P.L. 111-8 provided $866.4 million. Reliable Replacement Warhead (RRW). This program seeks to develop a warhead initially to replace W76 warheads. The design would trade characteristics important during the Cold War, notably high warhead yield per unit of warhead weight, for features deemed more important now, such as ease of manufacture, enhanced use denial, reduced cost, and ease of certification without nuclear testing. Supporters assert RRW can meet these goals; critics raise technical concerns, argue that it could spur nuclear proliferation, and hold that the Life Extension Program can maintain existing warheads. Congress eliminated FY2008 funds for developing this warhead. For FY2009, NNSA requested $10.0 million to address certain questions on certifying RRW and to document work completed through FY2007. P.L. 111-8 provided no funds for RRW. (See CRS Report RL32929, The Reliable Replacement Warhead Program: Background and Current Developments , by Jonathan Medalia , and CRS Report RL33748, Nuclear Warheads: The Reliable Replacement Warhead Program and the Life Extension Program , by Jonathan Medalia.) In its report on FY2009 energy-water appropriations, the House Appropriations Committee recommended providing the requested funds for Life Extension Programs and Stockpile Systems. It recommended increasing Weapons Dismantlement and Disposition funds by $6.0 million, mainly to examine a capability with which an existing facility at Nevada Test Site could dismantle "small numbers of troublesome individual warheads" without interfering with large-scale dismantlement at Pantex. It recommended reducing Stockpile Services by $273.1 million to the level that the House passed for FY2008. It recommended eliminating RRW funds: The Committee supports trading off Cold War high yield [in nuclear warheads] for improved reliability, in order to move to a smaller stockpile requiring a smaller and cheaper weapons complex with no need for nuclear testing. That said, the Committee remains to be convinced that a new warhead design will lead to these benefits. The Committee will not spend the taxpayers' money for a new generation of warheads promoted as leading to nuclear reductions absent a specified glide path to a specified, much smaller force of nuclear weapons. In its FY2009 report, the Senate Appropriations Committee recommended full funding for Life Extension Programs and Stockpile Systems, eliminating funds for RRW, increasing funds for Weapons Dismantlement by $22.0 million, and reducing funds for Stockpile Services by $43.6 million. The Consolidated Security, Disaster Assistance, and Continuing Appropriations Act for FY2009, P.L. 110-329 , provides no NNSA funds for RRW. Section 104 states, "No appropriation or funds made available or authority granted pursuant to section 101 shall be used to initiate or resume any project or activity for which appropriations, funds, or other authority were not available during fiscal year 2008." Section 101 appropriates [s]uch amounts as may be necessary, at a rate for operations as provided in the applicable appropriations Acts for fiscal year 2008 and under the authority and conditions provided in such Acts, for continuing projects or activities (including the costs of direct loans and loan guarantees) that are not otherwise specifically provided for in this joint resolution, that were conducted in fiscal year 2008, and for which appropriations, funds, or other authority were made available in the following appropriations Acts: divisions A, B, C, D, F, G, H, J, and K of the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ). In turn, Division C of P.L. 110-161 , which provided appropriations for energy and water development, provided no NNSA funds for RRW. As noted, P.L. 111-8 provided no funds for RRW. Campaigns These are "multi-year, multi-functional efforts" that "provide specialized scientific knowledge and technical support to the directed stockpile work on the nuclear weapons stockpile." Many items within Campaigns have significance for policy decisions. For example, the Science Campaign's goals include improving the ability to assess warhead performance without nuclear testing, improving readiness to conduct nuclear tests should the need arise, and maintaining the scientific infrastructure of the nuclear weapons laboratories. Campaigns also fund some large experimental facilities, such as the National Ignition Facility at Lawrence Livermore National Laboratory, the Dual-Axis Radiographic Hydrotest Facility at Los Alamos National Laboratory, and the Microsystems and Engineering Sciences Applications Complex at Sandia National Laboratories. The FY2009 request included five Campaigns: Science Campaign. This campaign pursues the science underlying nuclear weapons performance and aging in an effort to better maintain confidence in the U.S. nuclear stockpile. Further, NNSA calls it "the principal mechanism for supporting the science required to maintain the technical vitality of the national nuclear weapons laboratories." Through it, NNSA seeks "a predictive capability for the entire nuclear explosive package by 2020." Congress established a component of this campaign, Advanced Certification, to improve the ability to certify warheads without testing despite changes to nuclear components. Another component of the Science Campaign is Test Readiness, the ability to conduct nuclear testing should that be deemed necessary. In FY2007, NNSA had achieved the ability to conduct a test within 24 months of an order to do so; because of budgetary pressures, that schedule increased to 24 to 36 months. The FY2008 budget for the Science Campaign was $287.6 million. For FY2009, the request was $323.1 million. P.L. 111-8 provided $318.7 million, including $5.4 million for test readiness. The House Appropriations Committee "commends NNSA for its outstanding Stockpile Stewardship program, which has performed better than expected and has created a technically superior alternative to nuclear testing." Further, "the Committee finds no evidence that nuclear testing would add a useful increment to the immense and expanding body of weapons knowledge arising from Stockpile Stewardship." It called nuclear testing "a non-executable mission." For these and other reasons, it recommended eliminating the $10.4 million requested for nuclear test readiness. The Senate Appropriations Committee recommended $331.1 million for this campaign, with an increase of $8.0 million to support subcritical and other experiments. The committee expressed its support for the Advanced Certification program "to increase the confidence in changes to warhead design to increase the safety and reliability margins of the stockpile without underground testing"; these were goals of the RRW program. The committee recommended reducing nuclear test readiness to $5.4 million. Engineering Campaign. This campaign develops capabilities to assess and improve nonnuclear components of nuclear warheads. It provides technologies to improve surety, which includes such nuclear weapon characteristics as safety, security, and use control; develops means to assess weapons design, manufacturing, and certification; provides the means to qualify components to meet requirements for high-radiation environments, such as from missile defenses; and develops capabilities to detect and assess stockpile aging at an early stage. The FY2008 budget for this campaign was $169.5 million. For FY2009, the request was $142.7 million and P.L. 111-8 provided $150.0 million. Within this campaign, the request for advanced surety was $35.6 million; the committee provided $70.0 million and barred use of the funds for RRW. The Senate Appropriations Committee recommended an increase of $20.0 million. It stated that this campaign "offers the best opportunity to explore, develop and deploy state-of-the-art use control and surety devices to our stockpile." These were also goals of the RRW program. The committee expressed its support for weapons surveillance sensors and encouraged NNSA to examine "broad applications beyond on-weapons controls" for these sensors. Inertial Confinement Fusion Ignition and High Yield Campaign. This campaign is developing the tools to create extremely high temperatures and pressures in the laboratory—approaching those of a nuclear explosion—to support weapons-related research and to attract scientific talent to the Stockpile Stewardship Program. The centerpiece of this campaign is the National Ignition Facility (NIF), the world's largest laser. While NIF was controversial in Congress for many years and had significant cost growth and technical problems, completion is expected in 2009, so the controversy over NIF has waned. The FY2008 budget for this campaign was $470.2 million. The FY2009 request was $421.2 million, which included no funds for NIF construction. P.L. 111-8 provided $436.9 million. The Senate Appropriations Committee recommended $453.2 million, an increase of $32.0 million, of which $30.0 million was mainly for operation of NIF and another facility. Advanced Simulation and Computing Campaign. This campaign develops computation-based models of nuclear weapons, which integrate data from other campaigns, past test data, laboratory experiments, and elsewhere to create what NNSA calls "the computational surrogate for nuclear testing," thereby enabling "comprehensive understanding of the entire weapons lifecycle from design to safe processes for dismantlement." It includes funds for hardware and operations as well as for software. Its FY2008 budget was $574.5 million. The FY2009 request was $561.7 million. P.L. 111-8 provided $556.1 million. The report on the bill stated, "The budget submitted by NNSA has a striking lack of detail regarding the NNSA's computing strategy … This raises the concern that the acquisition strategy for new [computing] platforms will not fit within the available budget." Accordingly, the report directed NNSA to provide a report on its computing strategy. The Senate Appropriations Committee recommended $573.7 million, but stated that it "is frustrated by the lack of information regarding the computing strategy for the NNSA laboratories in this budget," and accordingly requested NNSA to prepare a report on its shared computing strategy. The committee also expressed its concern "about the declining NNSA investment in computing platforms needed to sustain the computing capability at each of the three national security labs." Readiness Campaign. This campaign develops technologies and techniques to improve the safety and efficiency of manufacturing and reduce its costs. Subprograms focus on production of high explosives, nonnuclear components, and weapons components with special materials. Another subprogram, Tritium Readiness, "reestablishes and operates the Departmental capability for producing tritium." (Tritium, an isotope of hydrogen, is used to increase the explosive force of the first stage of a nuclear weapon.) The FY2008 budget for this campaign was $158.1 million. The FY2009 request was $183.0 million. P.L. 111-8 provided $160.6 million. The Senate Appropriations Committee recommended a reduction of $25.0 million, of which $11.0 million was from tritium readiness activities "due to unobligated balances in this account." Readiness in Technical Base and Facilities (RTBF) This program funds infrastructure and operations at nuclear weapons complex sites. The FY2008 budget was $1,637.4 million. For FY2009, the request was $1,720.5 million and P.L. 111-8 provided $1,674.4 million. RTBF has six subprograms. By far the largest is Operations of Facilities (FY2008 budget, $1,154.5 million; FY2009 request, $1,212.9 million). Others include Program Readiness, which supports activities occurring at multiple sites or in multiple programs (FY2008 budget, $70.1 million; FY2009 request, $73.8 million); Material Recycle and Recovery, which recovers plutonium, enriched uranium, and tritium from weapons production and disassembly (FY2008 budget, $71.6 million; FY2009 request, $72.5 million); and Construction (FY2008 budget, $285.0 million; FY2009 request, $308.5 million). The most costly and controversial item in Construction is the Chemistry and Metallurgy Research Building Replacement (CMRR) Project at Los Alamos National Laboratory (FY2008 budget, $74.1 million; FY2009 request, $100.2 million). CMRR would replace a building about 50 years old that, among other things, houses research into plutonium and supports pit production at Los Alamos. In considering the FY2008 budget, the House Appropriations Committee stated, "Proceeding with the CMRR project as currently designed will strongly prejudice any nuclear complex transformation plan. The CMRR facility has no coherent mission to justify it unless the decision is made to begin an aggressive new nuclear warhead design and pit production mission at Los Alamos National Laboratory." P.L. 111-8 provided $97.2 million for CMRR. In contrast, the Senate Appropriations Committee stated, "The current authorization basis for the existing CMR [facility] lasts only through 2010, as it does not provide adequate worker safety or containment precautions. However, deep spending cuts ... will likely result in delays that will require the laboratory to continue operations in the existing CMR facility." In its FY2009 report, the House Appropriations Committee stated, regarding CMRR and the Radioactive Liquid Waste Treatment Facility, "In the absence of critical decisions on the nature and size of the stockpile, which in turn generate requirements for the nature and capacity of the nuclear weapons complex, it is impossible to determine the capacity required of either of these facilities. It would be imprudent to design and construct on the basis of a guess at their required capacity." Accordingly, the committee recommended no funds for either project. It also recommended no funds for two other projects, stating, "Each is a new start in the absence of a strategy defining the requirements for the facility." The Senate Appropriations Committee recommended $1,703.7 million for RTBF, a reduction of $21.8 million. It recommended $16.4 million (in two accounts) for the TA-55 Reinvestment Project. It recommended reducing funds for the Uranium Processing Facility at the Y-12 Plant by $57.6 million, to $38.6 million, on grounds of inadequate justification. It recommended $125.0 million, an increase of $24.8 million, for CMRR "to make up for [previous] funding shortfalls." Other Programs Weapons Activities includes several smaller programs in addition to DSW, Campaigns, and RTBF. Among them: Nuclear Weapons Incident Response: provides for use of DOE assets to manage and respond to a nuclear or radiological emergency within the United States or abroad. The FY2008 budget was $158.7 million. The FY2009 request was $221.9 million. The Senate Appropriations Committee recommended the same amount. P.L. 111-8 provided $215.3 million. Facilities and Infrastructure Recapitalization Program (FIRP): "applies new direct appropriations to address an integrated, prioritized series of repair and infrastructure projects focusing on elimination of legacy deferred maintenance that significantly increases the operational efficiency and effectiveness of the NNSA nuclear weapons complex," according to NNSA. Its FY2008 budget was $180.0 million. The FY2009 request was $169.5 million. The Senate Appropriations Committee recommended a reduction of $6.0 million. P.L. 111-8 provided $147.4 million. Environmental Projects and Operations: seeks to reduce environmental and health risks at NNSA facilities and surrounding areas by operating and maintaining certain environmental cleanup systems and by conducting long-term environmental monitoring. Its FY2008 budget was $8.6 million. For FY2009, the request was $40.6 million. The Senate Appropriations Committee recommended a reduction of $12.3 million. P.L. 111-8 provided $38.6 million. Transformation Disposition: eliminates excess NNSA facilities through demolition, transfer, or sale in order to reduce the area (gross square feet) these facilities occupy, thereby reducing costs. It had no funds for FY2008. For FY2009, the request was $77.4 million and the House Appropriations Committee recommended that amount. The committee provided this amount "notwithstanding that it is a new start in the absence of the required overall strategy, because it is a strategy-independent commendable step toward reducing the cost of operating the complex." The Senate Appropriations Committee recommended eliminating the entire request. It "agrees with the goals of the new program," but noted its frustration with DOE and the Office of Management and Budget (OMB) for funding this program while reducing by hundreds of millions of dollars decommissioning and demolition (D&D) of radiologically contaminated buildings under the control of DOE's Office of Environmental Management. "On balance, the Committee does not see the logic in DOE and OMB's priorities between these two programs D&D activities." P.L. 111-8 provided no funds for this program. Safeguards and Security consists of three elements. (1) Secure Transportation Asset provides for the transport of nuclear weapons, components, and materials safely and securely. It includes special vehicles used for this purpose, communications and other supporting infrastructure, and threat response. The FY2008 budget was $211.5 million. For FY2009, the request was $221.1 million and the Senate Appropriations Committee recommended the same amount. P.L. 111-8 provided $214.4 million. (2) Defense Nuclear Security provides operations, maintenance, and construction funds for protective forces, physical security systems, personnel security, and the like. The FY2008 budget is $765.2 million (after deducting $34.0 million for security work for others). For FY2009, the request was $737.3 million. The Senate Appropriations Committee recommended the requested amount, and P.L. 111-8 provided $735.2 million. (3) Cyber Security. For FY2008, the budget was $100.3 million. The FY2009 request was $122.5 million, and the Senate Appropriations Committee recommended that amount. P.L. 111-8 provided $121.3 million. The Senate Appropriations Committee recommended $3.5 million for congressionally directed projects. P.L. 111-8 provided $22.8 million for that purpose. The cost of Safeguards and Security is a major concern for Congress and NNSA. In the wake of 9/11, the relevant threats and the Design Basis Threat changed. Ambassador Linton Brooks, then Administrator of NNSA, stated in 2005, "We must now consider the distinct possibility of well-armed and competent terrorist suicide teams seeking to gain access to a warhead in order to detonate it in place. This has driven our site security posture from one of 'containment and recovery' of stolen warheads to one of 'denial of any access' to warheads. This change has dramatically increased security costs for 'gates, guns, guards' at our nuclear weapons sites." In response, many changes have been proposed to reduce security costs, such as reducing the area to be guarded by reducing the footprint of several sites and by consolidating uranium and plutonium at fewer sites. Nonproliferation and National Security Programs DOE's nonproliferation and national security programs provide technical capabilities to support U.S. efforts to prevent, detect, and counter the spread of nuclear weapons worldwide. These nonproliferation and national security programs are included in the National Nuclear Security Administration (NNSA). Funding for these programs in FY2008 was $1.336 billion, compared with the FY2007 level of $1.683 billion. The reduction reflected moving two major construction projects, the Mixed-Oxide (MOX) plant and the Pit Disassembly plant, from the Fissile Materials Disposition program to other parts of DOE. (See below.) For FY2009, the Administration agreed to move those projects out of the Nonproliferation program, and requested $1.247 billion. The House bill recommended $1.530 billion. The Senate bill would appropriate $1.422 billion, and would also return the Mixed Oxide plant project from Nuclear Power programs to Defense Nonproliferation, adding $487 million for a total of $1.909 billion. The Nonproliferation and Verification R&D program was funded at $387.2 million for FY2008. The request for FY2009 was $275.1 million. The House bill recommended $276.0 million. S. 3258 would have appropriated $350.1 million. P.L. 111-8 would appropriate $364 million. Nonproliferation and International Security programs include international safeguards, export controls, and treaties and agreements. The FY2009 request for these programs was $140.5 million, compared with $150.0 million appropriated for FY2008. The House Appropriations Committee recommended $165.3 million. The Committee "explicitly denied" funding under this program for Global Nuclear Energy Partnership (GNEP) activities. (See " Nuclear Power 2010 " section, above.) The Senate bill would have appropriated $175.5 million, but the Senate report did not mention GNEP. P.L. 111-8 appropriates $150 million. International Materials Protection, Control and Accounting (MPC&A), which is concerned with reducing the threat posed by unsecured Russian weapons and weapons-usable material, was funded at $624.5 million in FY2008; the FY2009 request was $429.7 million. The House bill recommended $509.4 million; the Senate bill recommended the requested amount, $429.7 million. P.L. 111-8 appropriatse $400 million. The goal of the Fissile Materials Disposition program is disposal of U.S. surplus weapons plutonium by converting it into fuel for commercial power reactors, including construction of a facility to convert the plutonium to "mixed-oxide" (MOX) reactor fuel at Savannah River, South Carolina, and a similar program in Russia. However, funding for the U.S. side of the program has been controversial for several years, because of lack of progress on the program to dispose of Russian plutonium. For FY2008 the Administration requested $609.5 million for Fissile Materials Disposition, including $393.8 million for construction. The House Appropriations Committee, noting that Russia had decided in 2006 not to pursue plutonium disposition in light water MOX reactors but to build fast breeder reactors instead, declared the bilateral agreement a failure and asserted that the $1.7 billion previously appropriated for facilities to be used in the U.S. side of the plutonium disposal agreement was "without any nuclear nonproliferation benefit accrued to the U.S. taxpayer." The committee recommended transferring the MOX plant and another project, the Pit Disassembly and Conversion Facility (PDCF), both at Savannah River, SC, to the nuclear energy program and NNSA's weapons program respectively. The FY2008 omnibus funding act adopted the House position, transferring the MOX plant and PDCF to other programs. The net appropriation for the NNSA's Fissile Materials Disposition program was reduced to $66.2 million. For FY2009, the Bush Administration requested $41.8 million. The House and Senate bill recommended the same amount, but the Senate bill would have returned the MOX plant to the Nonproliferation program. P.L. 111-8 appropriates $41.8 million. Cleanup of Former Nuclear Weapons Production Facilities and Nuclear Energy Research Facilities The adequacy of funding to address human health and environmental risks resulting from the past production of nuclear weapons is a longstanding issue. In 1989, DOE established what is now the Office of Environmental Management to consolidate its efforts to administer the cleanup of former nuclear weapons sites. These "cleanup" efforts are expansive in scope, involving the disposal of substantial volumes of radioactive and other hazardous wastes, management and disposal of surplus nuclear materials, the remediation of soil and groundwater contamination, and the decontamination and decommissioning of excess buildings and facilities. Through this office, DOE also administers the disposal of wastes and remediation of contamination at sites where the federal government conducted civilian nuclear energy research. Altogether, over 100 federal facilities across the United States were involved in the production of nuclear weapons and nuclear energy research. The total land area of these facilities encompasses over 2 million acres, approximately the size of the states of Rhode Island and Delaware combined. Although cleanup is complete at over 80 of these facilities, DOE expects cleanup to continue at some facilities for many years, even decades at the larger and more complex facilities where substantial volumes of wastes are stored and contamination is more severe. DOE estimates that total outstanding costs to complete cleanup at all of the remaining facilities could range between $205.43 billion and $260.53 billion, and that the last facility, Hanford, in the state of Washington, may not be cleaned up until as late as 2062. DOE expects additional funds to be needed for long-term operation, maintenance, and monitoring activities at many facilities for additional decades after the initial cleanup work is completed to ensure protection of human health and the environment. All of these needs combined represent a substantial financial liability to the United States for many years into the future. Some of the facilities historically administered under the Office of Environmental Management have been transferred to other offices within DOE and to the Army Corps of Engineers. In 1997, Congress directed the Office of Environmental Management to transfer responsibility for the cleanup of smaller, less contaminated facilities under the Formerly Utilized Sites Remedial Action Program (FUSRAP) to the Corps. Once cleanup of a FUSRAP site is complete, the Corps is responsible for any long-term activities that may be needed only for the first two years after the initial cleanup work is completed. After that time, jurisdiction over the site is transferred to DOE's Office of Legacy Management to administer these activities. The Office of Legacy Management also administers any long-term activities that may be needed at facilities cleaned up under the Office of Environmental Management. FY2009 appropriations for each of these DOE offices and the FUSRAP program of the Corps are discussed below, including emergency supplemental appropriations provided in the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 , H.R. 1 ), as signed into law on February 17, 2009. Office of Environmental Management P.L. 111-8 provides a total of $5.99 billion for the three accounts that fund DOE's Office of Environmental Management. These accounts include the Defense Environmental Cleanup account, the Non-Defense Environmental Cleanup account, and the Uranium Enrichment Decontamination and Decommissioning (D&D) Fund account. The $5.99 billion in P.L. 111-8 is the total for these three accounts combined, after accounting for the offset for federal payment to the Uranium Enrichment D&D Fund from the Defense Environmental Cleanup account. The $5.99 billion is a $297 million increase above the $5.70 billion that Congress enacted for FY2008. The Bush Administration had proposed $5.53 billion for the Office of Environmental Management in its FY2009 budget request, submitted in February 2008. P.L. 111-5 provided $6.00 billion in FY2009 emergency supplemental appropriations for the Office of Environmental Management. This funding is in addition to the $5.99 billion in regular (i.e., non-emergency) appropriations in P.L. 111-8 , in effect more than doubling the funding that the Office has received in annual appropriations in recent years. The emergency supplemental funds are intended to stimulate the economy through the hiring of workers by private contractors that would carry out cleanup projects funded by DOE. (Contractors actually perform the work at cleanup sites with administration and oversight of the contracts by DOE personnel.) DOE is responsible for allocating the $6.00 billion in supplemental funds among individual projects, based on certain timing limitations and other conditions specified in P.L. 111-5 . For example, the funding must be obligated by the end of FY2010 (September 30, 2010), to speed the availability of these monies for individual projects. In contrast, regular appropriations for the Office of Environmental Management typically remain available until expended. DOE could face an administrative challenge in obligating such a substantial sum in less than two years. The time limit also raises questions about how the competitiveness of contracts may be affected if contract awards must be made more quickly before the funding authority expires. The adequacy of funding for the Office of Environmental Management to ensure compliance with cleanup "milestones" (i.e., deadlines) has been a prominent issue in the overall funding debate for FY2009. In presenting its FY2009 budget request in the 110 th Congress, the Bush Administration had acknowledged a $900 million shortfall for the Office of Environmental Management that could have resulted in missed milestones. Cleanup milestones can be critical in gauging efforts to address potential risks at individual facilities, as these milestones establish time frames for the completion of specific actions or steps within the cleanup process. Cleanup milestones are identified in written agreements among DOE, the Environmental Protection Agency (EPA), and state regulatory agencies. Although cleanup milestones are legally binding, the ability to meet specified deadlines depends upon the availability of funding to carry out necessary actions, the technical feasibility of those actions, and, in some cases, the resolution of other regulatory issues upon which a milestone may be based. Consequently, it should be noted that the availability of funds is not the sole factor that determines whether DOE can meet a cleanup deadline. Of the facilities still in need of cleanup, Hanford, noted above, is the largest and most complex facility administered under the Office of Environmental Management. This facility alone receives about one-third of the funding for the entire Office. P.L. 111-8 provides a total of $1.98 billion for Hanford in FY2009, including the Office of River Protection at Hanford that administers the cleanup of contamination and disposal of wastes along the Columbia River. The House amount is an increase above the Bush request of $1.83 billion, and the $1.86 billion enacted for FY2008. The adequacy of funding for Hanford has been particularly controversial for many reasons, including potential risks from radionuclides migrating through groundwater into the Columbia River. Related to this issue is the delayed construction of the Waste Treatment and Immobilization Plant. This plant is a key element in DOE's plans to treat the substantial volume of high-level radioactive waste to be removed from the underground tanks at Hanford, and to solidify that waste for permanent disposal in a geologic repository. This task is one of the more costly cleanup challenges facing DOE. Some of the tanks at Hanford are known or suspected to have leaked wastes that have migrated through groundwater that eventually discharges into the Columbia River. Similar high-level radioactive wastes also are in need of treatment and disposal at the Idaho National Laboratory and at the Savannah River facility in South Carolina, but the volume of these wastes is not as great as those at Hanford. The vast majority of the FY2009 emergency supplemental funds for the Office of Environmental Management were for defense facilities, such as Hanford. Considering the funding needs, DOE could allocate a relatively large portion of those funds to defense cleanup projects at Hanford, increasing the total amount available for FY2009 beyond the omnibus amount for the facility. Table 13 presents appropriations for the Office of Environmental Management enacted for FY2008, compared with President Bush's FY2009 budget request, FY2009 emergency supplemental appropriations enacted in P.L. 111-5 , and FY2009 omnibus appropriations in P.L. 111-8 . The table presents these respective amounts for the three statutory accounts that fund the Office of Environmental Management. A breakout of funds is provided for selected facilities and activities in which there has been broad congressional interest, with the exception of the emergency supplemental appropriations enacted in P.L. 111-5 . These supplemental funds were not broken out by individual facilities and activities within the three statutory accounts. As noted above, DOE is responsible for allocating the emergency supplemental funds within each account, based on certain timing limitations and other conditions specified in P.L. 111-5 . Formerly Utilized Sites Remedial Action Program The FUSRAP program addresses the cleanup of sites contaminated with low-level radiation that resulted from the processing and storage of uranium and thorium ores during the early years of the U.S. nuclear weapons program. Private companies owned and operated the majority of these facilities from the 1940s to the 1960s under contract with DOE's predecessors, the Atomic Energy Commission and the Manhattan Engineer District. The Atomic Energy Commission originally established FUSRAP in 1974 under authorities provided in the Atomic Energy Act. DOE later incorporated FUSRAP into the Office of Environmental Management when that Office was established in 1989. As discussed earlier, Congress directed DOE to transfer FUSRAP to the Army Corps of Engineers in 1997 to clean up the remaining facilities, and then to transfer the facilities back to DOE's Office of Legacy Management for any long-term activities that may be needed to ensure the effectiveness of cleanup actions into the future. Congress currently appropriates funding for FUSRAP under a dedicated account within the civil works accounts of the Corps. P.L. 111-8 provides $140 million for FUSRAP for FY2009, the same as enacted for FY2008 prior to rescissions. The Bush Administration had requested $130 million for FY2009. P.L. 111-5 provided $100 million in FY2009 emergency supplemental appropriations for FUSRAP. These funds are in addition to the $140 million in regular appropriations in P.L. 111-8 , substantially increasing the funding typically appropriated in a single fiscal year. Similar to the supplemental funds for DOE's Office of Environmental Management also provided in P.L. 111-5 , the $100 million for FUSRAP is intended to help stimulate the economy through the hiring of workers to carry out cleanup projects funded by the Corps. As with DOE, the Corps is responsible for allocating these supplemental funds among individual projects, based on certain timing limitations and other conditions specified in P.L. 111-5 . In addition to obligating the funds by the end of FY2010, the Corps is restricted to using the funds only for projects that can be completed with the $100 million and would not require additional budget authority to complete. The Corps also is required to submit quarterly reports to the House and Senate Appropriations Committees within 45 days of enactment, indicating the allocation, obligation, and expenditure of the funds. The $6.00 billion in supplemental funds for the Office of Environmental Management does not appear to be subject to these reporting requirements. Table 14 compares the FY2008 enacted appropriations for the FUSRAP program to President Bush's FY2009 budget request, FY2009 emergency supplemental appropriations enacted in P.L. 111-5 , and FY2009 omnibus appropriations in P.L. 111-8 . Office of Legacy Management As explained earlier, once a facility is cleaned up under DOE's Office of Environmental Management or the FUSRAP program of the Corps, responsibility for any necessary long-term operation, maintenance, and monitoring activities is transferred to DOE's Office of Legacy Management. This Office also manages the payment of pensions and post-retirement benefits of former contractor personnel who worked at these sites. As indicated in Table 15 , P.L. 111-8 provides $186.0 million for the Office of Legacy Management in FY2009, the same as President Bush had requested, but $2.9 million less than the $188.9 million enacted for FY2008. No emergency supplemental appropriations were provided for the Office of Legacy Management in P.L. 111-5 . In FY2009, all facilities administered under the Office of Legacy Management are to be funded under the "Other Defense Activities" account of DOE. The majority of these facilities were involved in the U.S. nuclear weapons program. Prior to FY2009, Congress had appropriated funding in a separate account for the relatively small number of non-defense facilities administered under the Office of Legacy Management. Funding for both types of facilities are combined into one account for FY2009. Although the appropriations for FY2009 are a slight decrease from the amount enacted for FY2008, the funding needs for the Office of Legacy Management are likely to grow significantly in future years, as more sites are transferred from the Office of Environmental Management and the FUSRAP program to perform long-term operation, maintenance, and monitoring activities after the initial cleanup work is completed. Power Marketing Administrations DOE's four Power Marketing Administrations (PMAs)—Bonneville Power Administration (BPA), Southeastern Power Administration (SEPA), Southwestern Power Administration (SWPA), and Western Area Power Administration (WAPA)—were established to sell the power generated by the dams operated by the Bureau of Reclamation and the Army Corps of Engineers. In many cases, conservation and management of water resources—including irrigation, flood control, recreation or other objectives—were the primary purpose of federal projects. (For more information, see CRS Report RS22564, Power Marketing Administrations: Background and Current Issues , by [author name scrubbed].) Priority for PMA power is extended to "preference customers," which include municipal utilities, cooperatives, and other "public" bodies. The PMAs sell power to these entities "at the lowest possible rates" consistent with what they describe as "sound business practice." The PMAs are responsible for covering their expenses and for repaying debt and the federal investment in the generating facilities. The Bush Administration's FY2009 request for the PMAs was $232.1 million. This is an overall reduction of $8.3 million (3.5%) compared with the FY2008 request. The individual requests for each PMA are: SEPA, $7.4 million; SWPA, $28.4 million; and WAPA, $193.3 million. In addition, $3.0 million was requested for Falcon and Amistad operations and maintenance. In FY2008 WAPA, SEPA, and SWPA proposed to assign "Agency Rates" to new obligations. The Agency Rate is the rate at which federal corporations and BPA borrow. This proposal was not enacted in FY2008 and was not included in the FY2009 request. BPA is a self-funded agency under authority granted by P.L. 93-454 (16 U.S.C. §838), the Federal Columbia River Transmission System Act of 1974, and receives no appropriations. However, it funds some of its activities from permanent borrowing authority, which was increased in FY2003 from $3.75 billion to $4.45 billion (a $700 million increase). BPA expects to use a net $269 million of borrowing authority in FY2008 ($510 million gross capital requirement minus $241 million in bond repayment) and estimates that it will use a net of $301 million ($560 million offset by $259 million in bond repayment) in FY2009. Any third-party funding agreements for capital projects may further restrict the agency's use of borrowing authority. BPA included no administrative proposals in the FY2009 budget request. In FY2008, BPA proposed to use secondary net revenues beyond $500 million to make advance amortization payments to the Treasury on BPA's bond obligations. The Appropriations Committees opposed that proposal and indicated that it hoped the Administration would not pursue a similar proposal in FY2009. The House Committee on Appropriations recommended funds at the requested level for FY2009 for each of the PMAs. Additionally, the Committee recommended no new borrowing authority for BPA in FY2009. The Senate Committee on Appropriations also recommended meeting the funding request for SEPA and SWPA, and concurred with the House regarding any additional BPA borrowing authority. However, the Senate panel recommended $218.3 million for WAPA, an increase of $25 million over the President's request and the House recommendation. The Senate Committee on Appropriations expressed concern that the President's request for WAPA relied too heavily on alternative financing methods—such as direct customer financing—for its Construction, Rehabilitation, Operations and Maintenance budget, which the Committee indicated may reduce WAPA transmission system reliability. The Committee also noted that drought and increased power prices may contribute to an increase in WAPA's funding requirements for Purchase Power and Wheeling. Title IV: Independent Agencies Independent agencies that receive funding from the Energy and Water Development bill include the Nuclear Regulatory Commission (NRC), the Appalachian Regional Commission (ARC), and the Denali Commission. Key Policy Issues—Independent Agencies Nuclear Regulatory Commission The Nuclear Regulatory Commission (NRC) requested $1.017 billion for FY2009 (including $9.0 million for the inspector general's office), an increase of $90.9 million from the FY2008 funding level. Major activities conducted by NRC include safety regulation and licensing of commercial nuclear reactors, licensing of nuclear waste facilities, and oversight of nuclear materials users. The House Appropriations Committee recommended boosting NRC's total funding to $1.070 billion, while the Senate panel recommended $1.032 billion. P.L. 111-8 provides a total funding level of $1.046 billion, including $10.0 million for the inspector general. The NRC budget request included $237.5 million for new reactor activities, largely to handle anticipated new nuclear power plant license applications. Until recently, no commercial reactor license applications had been submitted to NRC since the 1970s, but higher fossil fuel prices and incentives provided by the Energy Policy Act of 2005 ( P.L. 109-58 ) prompted electric utilities to announce plans for more than 30 reactor license applications over the next few years, with the first new application submitted September 20, 2007. NRC predicts that 21 reactor license applications will be submitted through the end of FY2009. NRC's proposed FY2009 budget also included $37.3 million for licensing DOE's planned Yucca Mountain nuclear waste repository, with the expectation that DOE would submit a repository license application in FY2008; the application was submitted June 3, 2008. The House panel boosted funding for NRC's review of the Yucca Mountain application to $73.3 million, and added $15.0 million for scholarships and $1.8 million for the NRC inspector general. The Senate Appropriations Committee added $15 million to the NRC request for a new Integrated University Program to be coordinated with DOE. P.L. 111-8 provides $49.0 million for Yucca Mountain licensing. For reactor oversight and incident response, NRC's FY2009 budget request included $279.0 million. Those activities include reactor safety inspections, collection and analysis of reactor performance data, and oversight of security exercises. (For more information on protecting licensed nuclear facilities, see CRS Report RL34331, Nuclear Power Plant Security and Vulnerabilities , by [author name scrubbed] and [author name scrubbed].) The Energy Policy Act of 2005 permanently extended a requirement that 90% of NRC's budget be offset by fees on licensees. Not subject to the offset are expenditures from the Nuclear Waste Fund to pay for waste repository licensing, spending on general homeland security, and DOE defense waste oversight. The offsets in the FY2009 request would have resulted in a net appropriation of $161.5 million. The House Appropriations Committee had recommended a net appropriation of $199.2 million, and the Senate panel would have provided a net level of $163.1 million. Net appropriations for NRC in P.L. 111-8 total $174.9 million, including the inspector general's office. For Additional Reading CRS Products CRS Report RL31975, CALFED Bay-Delta Program: Overview of Institutional and Water Use Issues , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33504, Water Resources Development Act (WRDA) of 2007: Corps of Engineers Project Authorization Issues , coordinated by [author name scrubbed]. CRS Report RL32064, Army Corps of Engineers Water Resources Projects: Authorization and Appropriations , by [author name scrubbed] and [author name scrubbed], CRS Report RS20866, The Civil Works Program of the Army Corps of Engineers: A Primer , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21331, Everglades Restoration: Modified Water Deliveries Project , by [author name scrubbed] (pdf). CRS Report RL31098, Klamath River Basin Issues: An Overview of Water Use Conflicts , by [author name scrubbed], [author name scrubbed], and [author name scrubbed] (pdf). CRS Report RL32131, Phosphorus Mitigation in the Everglades , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21442, Hydrogen and Fuel Cell Vehicle R&D: FreedomCAR and the President ' s Hydrogen Fuel Initiative , by [author name scrubbed]. CRS Report RL33558, Nuclear Energy Policy , by [author name scrubbed]. CRS Report RL34331, Nuclear Power Plant Security and Vulnerabilities , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33461, Civilian Nuclear Waste Disposal , by [author name scrubbed]. CRS Report RL32163, Radioactive Waste Streams: Waste Classification for Disposal , by [author name scrubbed] (pdf). CRS Report RL34579, Advanced Nuclear Power and Fuel Cycle Technologies: Outlook and Policy Options , by [author name scrubbed]. CRS Report R40202, Nuclear Waste Disposal: Alternatives to Yucca Mountain , by [author name scrubbed].

The Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers (Corps), the Department of the Interior's Bureau of Reclamation (BOR), the Department of Energy (DOE), and a number of independent agencies. Key budgetary issues for FY2009 involving these programs included the distribution of Corps appropriations across the agency's authorized planning, construction, and maintenance activities (Title I); support of major ecosystem restoration initiatives, such as Florida Everglades (Title I) and California "Bay-Delta" (CALFED) (Title II); a proposal by the Bush Administration to eliminate funding for DOE's Weatherization program for low income homes (Title III, Energy Efficiency and Renewable Energy); the Bush Administration's request for funding of DOE's Reliable Replacement Warhead (RRW) nuclear weapons program, which Congress had declined to fund for FY2008 (Title III, Nuclear Weapons Stockpile Stewardship); funding for the proposed national nuclear waste repository at Yucca Mountain, Nevada (Title III: Nuclear Waste Disposal); and the Bush Administration's Global Nuclear Energy Partnership to supply plutonium-based fuel to other nations (Title III: Nuclear Energy). In considering the FY2009 budget, both the House and the Senate Appropriations Committees voted to report out an Energy and Water Development appropriations bill. However, neither bill reached the floor in either house. On September 24, 2008, the House passed H.R. 2638, the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, which continued appropriations for Energy and Water Development, among other programs, at the FY2008 level (with some exceptions) until March 6, 2009. The bill passed the Senate September 27 and was signed by the President September 30 (P.L. 110-329). An extension through March 11, 2009, was signed March 6, 2009 (P.L. 111-6). Energy and Water Development funding for all of FY2009 is included in the Omnibus Appropriations Act, 2009 (H.R. 1105/111th Congress). The House passed the measure February 25, 2009, by a vote of 245-178. It was passed by the Senate without amendment on March 10, 2009, following a cloture vote of 62-35. President Obama signed the bill March 11, 2009 (P.L. 111-8).

The Earned Income Tax Credit1 The Earned Income Tax Credit (EITC) is a refundable tax credit available to eligible workers earning relatively low wages. Under current law there are two categories of EITC recipients: childless adults and families with children. Because the credit is refundable, an EITC recipient need not owe taxes to receive the benefits. However, a low-income individual or family must file a tax return to receive the EITC. An EITC-eligible family may also receive a portion of the credit in the form of advanced payments. Eligibility for, and the size of, the EITC is based on income, age, and the presence of qualifying children. Several policy and legislative issues are associated with the EITC: compliance, the use of refund anticipation loans, marriage penalty, and poverty relief (family size). Compliance Compliance with the EITC provisions has been an issue for the program since 1990, when the Internal Revenue Service (IRS), as part of the Taxpayer Compliance Measurement Program (TCMP), released a study on 1985 tax year returns with the EITC. The study concluded that there was an over-claim rate of 39.1%. The over-claim rate represents the percentage of claimed EITC that was invalid. Some of these over-claims were recovered after the study by IRS collection efforts. Later studies by the IRS have resulted in lower over-claim rates. The 1997 and 1999 tax return studies estimated that the unrecovered over-claim rates were 23.8% to 25.6%, and 27.0% to 31.7%, respectively. These studies presented the rates as upper- and lower-bound estimates because a number of individuals contacted as part of the studies did not respond. In the 1999 study, 24.9% of over-claims (with the errors known) were due to the child claimed not meeting the EITC requirements for a qualified child. The most common qualifying child error was that the child did not meet the residency test (living with the tax filer for at least six months in the case of certain blood relatives, or one year for other individuals). The second most common error was the child not meeting the relationship (to the tax filer) test, particularly in the case of foster children where the child did not live with the tax filers for the full year or was not cared for as the tax filer's own child. The definition of a child prior to tax year 2005 for the EITC was different from the definition of (or requirements to claim) a child as a dependent for the personal exemption. As a result, a single parent living in a multi-generational household may have been able to claim the child for the EITC, while the grandparent or the child's nonresident parent may have been able to claim the child for the personal exemption and child credit and not the EITC. To reduce the complexity created by the different definitions of a child, proposals were made by both the U.S. Department of the Treasury and the Joint Committee on Taxation to conform the definition of a child for purposes of the personal exemption, child credit, EITC, dependent care, and head of household filing status. The Working Families Tax Relief Act of 2004 ( P.L. 108-311 ) created a more uniform definition of a child for tax purposes, including the EITC. This new definition became effective with tax year 2005. In 2003, the IRS announced plans to conduct a pre-certification effort for the tax year 2003 returns, in which tax filers expecting to claim the EITC would need to pre-certify that any child claimed for the EITC met the residency requirement (had resided with the tax filer for at least half of the tax year). The pre-certification effort was converted to a study of approximately 25,000 returns expected to claim the EITC, and combined with two other compliance studies related to the EITC: (1) a study of filing status and (2) an automated underreporter (income) study. The Consolidated Appropriations Act of 2004 ( P.L. 108-199 ) required a report to Congress on the qualified child study (the pre-certification of a child for the EITC residency requirement). According to the IRS, the three studies uncovered and prevented payment of more than $275 million in erroneous claims for the EITC, with approximately $250 million of the $275 million from the automated underreporter study. In the automated underreporter study, the IRS manually reviewed 300,000 tax returns that claimed the EITC in tax year 2003, which also had indications of income misreporting for tax year 2002. Approximately 83% of the tax returns had a reduction or disallowance of the EITC as a result of the manual review. Paid Tax Preparers A large number of tax returns are completed by paid tax preparers (51.8% of individual tax returns received in the most recent (tax year 2011) current filing season, through June 8, 2012, were electronic returns prepared by tax practitioners). However, use of a paid tax preparer does not guarantee an accurate tax return as tax preparers vary in terms of training and experience. In an effort to improve the quality of services provided to taxpayers by paid tax preparers and to assist in compliance efforts, IRS began (on January 1, 2011) to require paid tax preparers to register and receive a Preparer Tax Identification Number (PTIN). Paid tax preparers must renew their registration each year. Beginning in 2012, certain paid tax preparers will have to pass a competency test and meet continuing education requirements. EITC recipients may use paid preparers for a number of reasons, including language differences, literacy problems, IRS's close review of EITC returns, less effort (work) by the tax filer, the belief that use of a paid preparer prevents errors, and the belief that refunds are received faster. Marriage Penalty The structure of the EITC may, depending on the relative income levels of both parties, impose a "marriage penalty" on single low-income parents if they choose to marry. For example, in tax year 2012, two single parents, each with one child and earned income of $15,000 would each receive an EITC of $3,169 for a total of $6,338. If they marry, their combined income is $30,000, and with two children, the EITC is $3,614. The EITC marriage penalty for the couple is $2,724 (the difference between $6,388 and $3,614). The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) provided marriage penalty relief for the EITC by raising the phase out income level of the EITC for married couples. The American Recovery and Relief Act of 2009 (ARRA; P.L. 111-5 ) temporarily increased the marriage penalty relief for the EITC by raising the phase out income level by $5,000 for married couples in 2009 and indexing the $5,000 for tax year 2010. While the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ) made the EGTRRA provisions for marriage penalty relief permanent, the increase in marriage penalty relief to $5,000 (indexed for inflation) made by ARRA was extended for only five years (the expansion will sunset on December 31, 2017). EITC and Poverty Relief The differential in the EITC based on the number of children, combined with the annual inflation adjustment, is designed to help families stay above the poverty threshold over time. However, because the EITC adjustment for family size is limited to two children, over time larger families may not be kept above the poverty threshold. As shown in Table 1 , for tax year 2011, married couples with children earning $25,000 a year have net income after taxes that is above the poverty threshold. However, the extent to which income exceeds the poverty threshold declines as the number of children increases. Certain low-income childless adults may not receive the EITC, even if working full time at the minimum wage. In tax year 2011, a childless adult working full-time (40 hours a week for 50 weeks) at the current minimum wage of $7.25 would earn $14,500. That adult would receive an EITC of $0. However, when combined with a tax liability before credits of $510, and payroll taxes of $819 (reflecting the temporary payroll tax holiday), the adult has an after tax income of $13,171. However, this is 114.7% of the 2011 poverty threshold for one person ($11,484). The ARRA ( P.L. 111-5 ) created a new credit rate for taxpayers with three or more eligible children, and this new credit rate was extended through tax year 2017 by ATRA ( P.L. 112-240 ). For tax years 2009 through 2017 only, taxpayers with three or more eligible children will use a credit rate of 45% to calculate their EITC. Expiring Provisions The EGTRRA ( P.L. 107-16 ) made several changes to the EITC that were scheduled to expire on December 31,2010. Changes to the EITC that were scheduled to expire include changing the definition of earned income for the EITC so that it does not include nontaxable employee compensation; eliminating the reduction in the EITC for the alternative minimum tax (AMT); and simplifying the calculation of the credit through use of AGI rather than modified AGI. ATRA ( P.L. 112-240 ) made these EGTRRA changes permanent. The ARRA created the category for families with three or more children, with a credit rate of 45%, for tax years 2009 and 2010 only. The ARRA also increased the phase-in amount for married couples filing joint tax returns so that it is $5,000 higher than for unmarried taxpayers in tax year 2009, and indexed for inflation beginning in tax year 2010. The ARRA changes were also scheduled to expire on December 31, 2010. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) extended the ARRA provisions for two years (through 2012). ATRA ( P.L. 112-240 ) extended the ARRA provisions for five years (through tax year 2017).

The Earned Income Tax Credit (EITC or EIC) began in 1975 as a temporary program to return a portion of the Social Security taxes paid by lower-income taxpayers, and was made permanent in 1978. In the 1990s, the program was transformed into a major component of federal efforts to reduce poverty, and is now the largest anti-poverty entitlement program. Tax year 2009 data show a total EITC amount of $59.7 billion for 27.2 million tax returns, yielding an average tax credit of $2,195. Most of the EITC (87.1%) was received as a refund (EITC exceeded tax liability) by low-income workers. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-116) made several changes to the credit, including simplifying the definition of earned income to reflect only compensation included in gross income; basing the phase-out of the credit on adjusted gross income (AGI) instead of expanded (or modified) gross income; and eliminating the reduction in the EITC for the alternative minimum tax (AMT). The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) created the category for families with three or more children, with a credit rate of 45%, for tax years 2009 and 2010 only. The ARRA also increased the phase-in amount for married couples filing joint tax returns so that it is $5,000 higher than for unmarried taxpayers in tax year 2009, and $5,010 in tax year 2010. The changes to the credit made by EGTRRA and ARRA were set to expire on December 31, 2010. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) extended the EGTRRA and ARRA provisions for two years (through 2012). The American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240) permanently extended the EGTRAA provisions, but extended the ARRA provisions for only five years. The expiration of the ARRA provisions for the EITC is one of the legislative issues for Congress. This report will be updated as legislative activity warrants.

Introduction Enforcement of child support often results in custodial parents and noncustodial parentsbeing in an adversarial relationship. From the perspective of the noncustodial parent it is often seenas an unbalanced relationship because the custodial parent is backed by the Child SupportEnforcement (CSE) agency and in many cases the "Welfare" agency as well. Although the CSEagency views itself as working for the state on behalf of dependent children, the custodial parent ineffect receives the benefits of federal/state intervention because the child is in her or his care. Thissituation is even more pronounced in the case of low-income custodial parents and children becausethey have a link to public welfare agencies. Thus, the custodial parent has access to a network offederal and state resources that are not available to the noncustodial parent. During the last several years Members of Congress and others have acknowledged that the"best interests of the child" are generally served when both parents are part of the equation. Theyhave commented that many low-income noncustodial parents have low levels of education, poorwork histories, and significant barriers to work. They have debated child support issues in terms of"dead broke" rather than "deadbeat" noncustodial parents and have remarked that responsibleparenthood involves both financial and emotional relationships with one's children. Some contendthat public policies are needed to support the father's role as nurturer, disciplinarian, mentor andmoral instructor. (1) Thisnew federal/state governmental perspective is seen in the CSE agency's funding of access andvisitation programs for noncustodial parents and in pending welfare reauthorization legislation( H.R. 240 and S. 667 , 109th Congress) that would provide funding formarriage promotion and responsible fatherhood programs. The pending welfare reauthorization legislation (mentioned above) contains incentives forstates to send more of the child support collected on behalf of custodial parents to the family itself,additional CSE enforcement tools, funding for programs designed to promote marriage amonglow-income persons as a way to improve the economic well-being and development of children, andfunding for programs designed to help noncustodial fathers meet both their financial and emotionalresponsibilities to their children. Supporters of the welfare reauthorization legislation claim that itspassage will result in more noncustodial parents paying child support. They contend thatnoncustodial parents who can afford to pay child support but who do not want to pay will not be ableto escape their duty because of the strong enforcement apparatus, and that noncustodial parents whocannot afford to pay will be offered services that may improve their financial ability to pay as wellas their willingness to pay. The reader should note that this new more forgiving attitude toward noncustodial parents hasbrought with it a wariness among custodial parents. Some mothers contend that an emphasis on theimportance of fathers may lead to undervaluing single-parent families maintained by mothers -- thatservices for fathers may be at the expense of services for mothers -- and that the "pro-fatherhood"discourse might give fathers' rights groups additional leverage in challenging child support, childcustody, and visitation arrangements. Although noncustodial parents often find themselves at loggerheads with custodial parentsand the CSE system with respect to paternity and child support, the situation is usually morecomplicated than deadbeat dad vs. dependent mom. Sometimes a noncustodial parent is really notthe father and sometimes noncustodial parents who are trying to meet their financial obligation totheir children have been burdened with a child support order that is too high. In these situations,some maintain that legal services providers should do more to help alleviate the problem. Supportersof this approach maintain that providing legal services to noncustodial parents may result in childsupport payments becoming a more reliable source of income for custodial parents becausenoncustodial parents would have had greater access to the legal system and be more satisfied that"they had their day in court" and thereby be more amenable to fulfilling their child supportobligations. The LSC is a private, non-profit, federally funded corporation that was established byCongress in 1974. Part of the LSC's mission is to provide high quality legal assistance to those whootherwise would be unable to afford adequate legal representation and to assist in improvingopportunities for such persons. The LSC is funded through congressional appropriations. The LSCdoes not provide legal services directly, but rather it provides grants to independent local legalservices programs selected through a competitive process. The primary responsibility of the LSCis to manage and oversee the congressionally appropriated federal funds that it distributes in the formof grants to local legal services providers that in turn provide civil legal assistance to low-incomeclients in the 50 states, the District of Columbia, and five U.S. territories. In FY2004, the LSCdistributed $316.6 million of its $335.3 million appropriation in the form of grants to 143 local legalservices programs. The remaining funds were allocated for management and administration,information technology, and its Office of the Inspector General. LSC funding accounts for about half of all funding in the United States for civil legal servicesfor the poor. In 2004, there were approximately 45 million persons who were potentially eligiblefor LSC-funded services, (2) but according to LSC surveys only about 20% of those eligible for and in need of services actuallyreceived services. Although low-income noncustodial parents who owe child support are among thepersons eligible for LSC-funded services, they aren't among the groups that have traditionally beenhelped by legal services programs and therefore may have a hard time accessing services that arealready in short supply. Child Support Issues Faced by Noncustodial Parents The Child Support Enforcement (CSE) program (Title IV-D of the Social Security Act) wasenacted in January 1975 ( P.L. 93-647 ). The CSE program is a federal/state program that promotesself-sufficiency of families in which one of the biological parents is living outside of the home byensuring that noncustodial parents meet their financial responsibility to their children. The CSEprogram provides seven major services on behalf of children: (1) parent location, (2) paternityestablishment, (3) establishment of child support orders, (4) review and modification of child supportorders, (5) collection of child support payments, (6) distribution of child support payments, and (7)establishment and enforcement of medical child support. All 50 states, the District of Columbia,Guam, Puerto Rico, and the Virgin Islands operate CSE programs and are entitled to federalmatching funds. While the federal government plays an important role in setting program standardsand policy, evaluating state performance, and providing technical assistance and training, states areresponsible for administering the CSE program (directly or through local CSE agencies and familyor domestic courts). Given that the main purpose of the CSE program is to act in the best interest of the child toobtain any financial support that a child is due, it usually is the case that the state and localgovernment along with the custodial parent are in an adversarial relationship with the noncustodialparent. In many instances the CSE agency collects owed child support via income withholding andno problems occur. In other cases, especially cases in which the parents were never married,paternity and a child support order must be established before the CSE agency can obtain childsupport on behalf of the custodial parent. In such cases, paternity may be contested and the financialability of the noncustodial parent to pay a specific amount of child support may be questioned. This section discusses some of the problems that noncustodial parents maintain that theyencounter; namely: (1) false allegations of fatherhood, (2) child support obligations that are unfairand unreasonable, (3) high arrearages that are financially beyond their capability to pay, (4)incarceration because of unreasonable child support demands, (5) loss of the means to theirlivelihood (e.g., driver's license, professional license, passport) because they fall behind in meetingtheir child support obligation, (6) poor relationships with their children, and (7) tenuous connectionto their families and with their community after serving time in jail or prison. Paternity Issues Some noncustodial fathers and alleged fathers contend that the paternity establishmentprocess in recent years has focused on efficiency, at the expense of the father's right to due processand his right to representation. They argue that in some instances alleged fathers are not fullyinformed about the consequences of voluntarily acknowledging paternity and do not fully understandthe implication of their statement before they are encouraged to legally acknowledge paternity. Some noncustodial fathers argue that they were deceived into believing that if they voluntarilyacknowledged paternity, any child support they paid would be helping their child. They contend thatthis is not so if the child's mother is receiving benefits under the Temporary Assistance for NeedyFamilies (TANF) block grant program because instead of directly benefitting their children, theirchild support payments are used to pay the state back for cash welfare payments that the family isreceiving or received in the past. (3) There is widespread agreement by the CSE and legal services communities that thedue-process rights of noncustodial parents should not be overlooked even if doing so could beinterpreted as being in the best interest of the child. Advocates for noncustodial parents maintainthat if there is a question about a child's paternity it should be addressed by blood or DNA tests (insome cases even if the parents were married). Although blood or genetic testing is the standardprocedure in contested paternity cases, many people view such tests as an affront to their integrityand an indication of a lack of trust. This situation is exacerbated in the case of an older child. According to some focus group discussants, for many couples, once one of the partners or allegedpartners indicates that a paternity test is needed, any future chance for cooperative parenting isgreatly diminished because of lingering animosity over the father not stepping forward and meetinghis financial responsibility or the mother not being honest about her fidelity or use of birthcontrol. (4) Federal law requires states to have procedures which create a rebuttable or, at the option ofthe state, conclusive presumption of paternity upon genetic testing results indicating a thresholdprobability that the alleged father is the actual father of the child. Most states have a rebuttablepresumption paternity threshold that ranges from 95%-99.9%. This means that in some states bloodtest results that indicate a 98% or greater probability of paternity are not rebuttable, which raises thepossibility that 2% of the putative fathers tested may be wrongly assigned paternity, and therebywrongly burdened with an 18-year financial obligation. For additional information on issues related to child support and paternity establishment, see CRS Report RL31467(pdf) , Paternity Establishment: Child Support and Beyond . Child Support Orders Established by Default If a noncustodial parent gets a notice or a summons about child support or paternityestablishment but does not appear in court at the stipulated date and time, the court can enter a childsupport order against the noncustodial parent by default. If the noncustodial parent does not showup to tell his or her side of the story, the court can decide that the evidence against that person mustbe true. Thus, a "no-show" by the noncustodial parent may result in the establishment of paternityand the establishment of a child support order, effective whether or not the noncustodial parentactually has a job or an income source. Further, if the noncustodial parent is not in court to provideinformation about his or her job/income, the court may base the child support order on informationprovided by the custodial parent or the CSE agency, even if this information is incorrect. Moreover,if the noncustodial parent is not in court to present his or her evidence, the court or CSE agency mayimpute the noncustodial parent's income (which may be based on incorrect assumptions). Some observers argue that the practice of using default judgments (i.e., judgments made inthe absence of the alleged father) has adversely affected many putative fathers who claim they arenot the father of the child in question but, for whatever reason, did not show up in court to deny theallegations. Many analysts and observers maintain that the standards governing default judgmentsshould balance the rights of the putative father to proper notice and the opportunity to be heardbefore paternity is established and a child support order is set, against the right of the child to obtaina determination of paternity and support (on a timely basis) from a father who knowingly fails toappear in court. (5) Child Support Arrearages Child support arrearages can be accumulated in several ways, depending upon the guidelinesestablished by the state. The first and most prevalent way is through nonpayment of child support. For each month that a noncustodial parent fails to meet the full child support obligation, the unpaidsupport is added to the amount the noncustodial parent owes (i.e., this is generally referred to aspast-due payments or arrearages). A second way that arrearages mount occurs because in manystates and localities child support orders remain payable and in effect even when the noncustodialparent is unemployed or incarcerated; further, in all states, arrearages remain due (for various timeperiods) even after the child reaches the age of majority. Another way that arrearages accumulateoccurs because in addition to current support, some states choose to establish retroactive supportwhen setting new orders. Depending on the state's policy, these retroactive arrearages may extendfrom two to six years prior, or they may be unlimited in their scope, extending back all the way tothe time of the child's birth. Arrearages can also be incurred for costs and fees; particularly attorneyfees, court filing fees, fees for blood tests associated with the determination of paternity, and thecosts associated with the child's birth. Finally, some states charge interest on arrearages therebyincreasing the amount owed. (6) Arrearages are enforced and pursued, usually through income tax intercepts and attachmentof property to encourage parents to meet their obligations regularly and on time and to send themessage that there are serious consequences for nonpayment of child support. In FY2004, $130.3 billion in child support obligations ($28.0 billion in current support and$102.4 billion in past-due support) was owed to families receiving CSE services, but only $23.2billion was paid ($16.5 billion current, $6.7 billion past-due). This meant that the CSE program onlycollected 18% of the child support obligations for which it had responsibility. If current collectionsare examined separately, the data indicate that the CSE program collected 59% of all currentcollections in FY2004. If collections on past-due support (i.e., arrearages) are examined separately, the data show that the CSE program collected less than 7% of arrearage payments in FY2004. Inother words, the total amount of arrearages reported in FY2004 for all previous fiscal years was$102.4 billion; but only $6.7 billion was collected in FY2004. Although only a relatively smallpercentage of arrearage payments were collected in FY2004, about 60% of obligors continued tomake payments on their child support arrearages. The CSE FY2003 Preliminary Data report states: In 1999, 53% of the child support cases had arrearagesowed. In 2003, the proportion was up to 68%. We obtained collections in 60% of these cases, so weknow that child support professionals are working hard on them and that obligors are trying to workon their debts. But we collected an average of $600 per arrearage case, while the average amountof arrears per arrearage case is $9,000. So, even though we're collecting significant amounts ofarrears, we don't seem to be making a dent in the problem, and the overall debt continues togrow. (7) In many cases, arrearages are quite high and often deter noncustodial parents from payingany child support. In fact, when noncustodial parents perceive that the system is unfair or that thedebt is too great to be overcome, the likelihood that they will pay any support decreases. (Foradditional information on child support arrearages, see CRS Report RL31167, Child SupportEnforcement and Low-Income Fathers: Arrearages, Current Support, and Compliance .) Modification of Child Support Orders Many noncustodial parents believe that if they fall behind in their child support payments ata time when they are legitimately unable to make the payments, the amount they owe can later bereduced or discounted by the court when an explanation for nonpayment is given. However, this isnot the case. If the noncustodial parent waits to explain his or her changed financial circumstances,the court will not be able to retroactively reduce the back payments (i.e., arrearages) that thenoncustodial parent owes. (8) Under the CSE program, states are given significant latitude regarding modifications andreviews of child support orders. Federal law requires that states give both parents the opportunityto request a review of their child support order at least once every three years, and states are requiredto notify the parents of this right. States can also request reviews for modification or shorten thetime period between reviews, but they are not required to review orders on a regular basis. (9) In order to prevent child support arrearages, especially for noncustodial parents who areunemployed or in jail, advocates have recommended that child support modification laws be changedso that they are more sensitive to periods of incarceration, unemployment, or injury/illness duringwhich the noncustodial parent's ability to pay child support decreases. Issues Related to Custody and Visitation There is near unanimous agreement among federal and state policymakers that denial ofvisitation rights should not be considered a reason for stopping child support payments. Historically,Congress has treated visitation and child support as legally separate issues, with only child supportenforcement activities under the purview of the federal government. However, in recent years,Congress has moderated its position against using federal CSE funds to promote enforcement ofvisitation rights. Many noncustodial parents argue that it is unfair to look at the child support issue only fromthe viewpoint of the custodial parent. Traditionally, they argue, courts have sided with mothers inawarding custody, and have paid insufficient attention to enforcing visitation rights of fathers. Asa result, they say, mothers have had the rewards and obligations connected with rearing children,while fathers have sometimes had no share in the rewards, but have the continuing obligation to paysupport. To be fair, they argue, federal laws and procedures should be reformed not only withrespect to enforcement of the child support obligation, but also with respect to visitation and custodyrights. Some advocates of increasing parental responsibility argue that it is now time for the federalgovernment to focus more attention on the "non-financial" benefits associated with preserving theconnection between noncustodial parents and their children. Many policymakers and analystsmaintain that a distinction must be made between men who are "dead broke" and those who are"deadbeats." They argue that the federal government should help dead broke noncustodial parentsmeet both their financial and emotional obligations to their children and vigorously enforce CSElaws against deadbeat parents. (10) Criminal Nonsupport Laws versus Civil Enforcement of Child Support All states have laws that enable them to bring charges of criminal nonsupport or civil orcriminal contempt of court against noncustodial parents who fail to pay child support. The crimeof nonsupport has been on the books in most states for many years. (11) There are two schools ofthought with regard to criminal nonsupport laws: One view holds that criminal nonsupport shouldbe used as a last resort, only after civil remedies fail. The other school of thought maintains thatnonpayment of child support is a serious offense often with dire consequences for the custodialparent and child; thus criminal nonsupport laws should be used whenever appropriate. The use ofarrests in criminal nonsupport cases and the outcome of those arrests varies widely by jurisdiction,making it difficult to document the magnitude of the practice. (12) Civil contempt charges are made when a noncustodial parent does not comply with a judge'sorder to pay child support. Payment of the child support debt results in compliance with the order,and freedom from jail. Although the time spent in jail for civil contempt is particularly hard to track,it represents a significant, if not routine, means by which low-income noncustodial parents land injail. (13) For noncustodial parents who miss several days of low-pay work in jobs where they can beeasily replaced by an employer, the consequences of even a short time in jail can be devastating. Needless to say for noncustodial parents who serve longer sentences based on a criminal convictionof nonpayment of child support, the consequences of a criminal record can often be veryfar-reaching. (See Issues Related to Incarcerated and Newly Released Noncustodial Parents below.) It also should be noted that with the enactment of the Child Support Recovery Act of 1992( P.L. 102-521 ), nonsupport is now also a federal crime. Building on the 1992 legislation, P.L.105-187 , the Deadbeat Parents Punishment Act of 1998, established two new federal criminaloffenses (subject to a two-year maximum prison term) with respect to noncustodial parents whorepeatedly fail to financially support children who reside with custodial parents in another state orwho flee across state lines to avoid supporting them. Issues Related to Incarcerated and Newly Released Noncustodial Parents According to a 2003 study by the Center on Law and Social Policy (CLASP) and CommunityLegal Services, Inc. of Philadelphia, (14) about 1.5 million children have parents who are currentlyincarcerated and more than 10 million children in the United States have parents who wereimprisoned at some point in the children's lives. The study stated that approximately 400,000mothers and fathers finish serving prison or jail sentences each year and return home to try toreestablish family ties. Most of these ex-offender parents lived with or had regular contact with theirchildren before going to prison. The study indicates that about 25% of inmates have open childsupport cases. Incarcerated noncustodial parents generally owe between $225 to $313 per month inchild support; and on average they go into prison owing about $10,000 in child support arrearagesand leave prison owing more then $23,000 in arrearage payments. (15) More than half of thesearrearages are owed to the state to repay welfare costs. Ex-offenders re-entering communities face a host of problems, such as employment barriersstemming from their criminal records (sometimes for many years after completing their jail time orprison sentences), denial of federally subsidized housing because of criminal records, denial offederal grants and student loans because of a conviction for possession or sale of controlledsubstances (even if the conviction occurred when the person was a minor), and denial of welfarebenefits if the person has a criminal record. Also, unrealistically high child support orders orarrearages may discourage ex-offenders from finding a regular job vulnerable to income withholding,tempting them to find jobs in the underground economy and thereby lessening their chances ofsuccessfully establishing ties with their families and communities. (In some cases, incarceration isconsidered "voluntary unemployment," which does not justify reduction of the child support order,thereby resulting in high arrearages.) Moreover, in some cases, dissolution of parental rights resultsfrom criminal convictions (even those unrelated to the parent's ability to care for the child). According to a report by the Center for Family Policy and Practice, (16) a felony conviction orincarceration was grounds for termination of parental rights in 42 states, and "failure to maintaincontact" was grounds for termination of parental rights in 36 states. Finally, in the case ofimmigrants with children who are U.S. citizens, criminal convictions may result in deportation ofthe immigrant parent. (17) President Bush in his 2004 State of the Union Address announced a new plan to bring localand faith-based groups together with federal agencies to help recently released prisoners make asuccessful transition back to society -- reducing the chance that they would be arrested again. Thisfour-year, $300 million initiative would have provided transitional housing, basic job training, andmentoring. (18) Althoughthis proposal has not yet been authorized, there is a federal program that provides mentoring servicesfor children of prisoners. (19) Legal Services and Noncustodial Parents Low-income noncustodial parents who owe child support have very few places to turn forassistance or support. However, one potential source of aid for noncustodial parents who owe childsupport is legal services. As mentioned earlier, the Legal Services Corporation (LSC) is a private, non-profit, federallyfunded corporation established in 1974 by Congress. Part of the LSC's mission is to provide highquality legal assistance to those who otherwise would be unable to afford adequate legalrepresentation and to assist in improving opportunities for such persons. The LSC-funded programs do not handle criminal cases, nor do they accept fee-generatingcases that private attorneys are willing to accept on a contingency basis. In addition, in 1996 a seriesof new limitations were placed upon activities in which LSC-funded programs may engage on behalfof their clients, even with non-LSC funds. Among them are prohibitions on class actions, challengesto welfare reform, collection of attorneys' fees, rule making, lobbying, litigation on behalf ofprisoners, representation in drug-related public housing evictions, and representation of certaincategories of aliens. The legal services delivery system is based on several principles: local priorities, nationalaccountability, competition for grants, and a strong public-private partnership. Local programs areindependent entities, governed by Boards of Directors drawn from the local bar and clientcommunity. All legal services programs must comply with laws enacted by Congress and theimplementing regulations promulgated by the LSC. LSC funding accounts for about half of all funding in the United States for civil legal servicesfor the poor. (20) TheLSC does not provide legal services directly, but rather it provides grants to independent local legalservices programs selected through a competitive process. In FY2004, the LSC distributed $316.6million of its $335.3 million appropriation in the form of grants to 143 local legal services programs. The remaining funds were allocated for management and administration ($13.2 million),information technology ($2.9 million), and the LSC Office of the Inspector General ($2.6 million). In FY2004, there were approximately 45 million persons who were potentially eligible forLSC-funded services. Data from the LSC suggest that only about 20% of persons eligible forLSC-funded services actually had access to those services when they needed them (based ongeographic boundaries, service areas, funding, local priorities, etc.). (21) According to the LSC's2003-2004 Annual Report: Despite LSC's current congressional support, the unmetlegal needs of America's poor remain staggering. To qualify for LSC-funded assistance, anindividual's annual income cannot exceed $11,638; a family of four's cannot exceed $23,563. Yetcurrent federal funding is clearly inadequate to serve the civil legal needs of the more than 45.2million poor Americans eligible for LSC-funded legal assistance. Millions of eligible clients areforestalled from pursuing justice every year. Still millions more -- whose incomes are just above thefederal poverty threshold but who nonetheless cannot afford adequate legal representation -- areeffectively denied access to the U.S. civil justice system as well. (22) LSC grantees close about 1 million cases annually in addition to handling another 4 million legalservice "matters" (such as helping self-represented (i.e., pro se ) litigants obtain the information theyneed to pursue their lawsuit, disseminating legal services materials in communities, referring clientsto appropriate services, providing mediation assistance, staffing courthouse help desks, etc.). During 2004, legal services attorneys closed 901,067 cases. Family issues such as childsupport, divorce, separation, and domestic violence were the substance of about 40% of caseshandled by legal services offices; housing issues, including eviction cases, homeownership problems,and public housing assistance comprised about 25% of cases; income maintenance issues, includingbenefit claims for veterans and senior citizens, and Medicaid and Social Security disability claimsrepresented another 15% of cases; and consumer, finance (including bankruptcy and debt reliefassistance), and individual rights issues comprised about 20% of cases. Most of the cases handledby legal services providers are resolved through advice and referral. Only about 14% of cases wereresolved in court, primarily because they involved family law issues (e.g., protective orders, childsupport, etc.) in which court action was required by state law. Local Priorities As noted above, the LSC does not provide legal services directly. Rather, it funds local legalservices providers, which are referred to by the LSC as "grantees." Grantees may include non-profitorganizations that have as a purpose the provision of legal assistance to eligible clients, privateattorneys, groups of private attorneys or law firms, state or local governments, and certain sub-stateregional planning and coordination agencies. Each local legal services program is headed by its ownboard of directors, of whom about 60% are lawyers admitted to a state bar and one-third are eligibleclients. Each local program must spend an amount equal to at least 12.5% of its basic grant toencourage participation by private attorneys in the delivery of legal services to low-income clients. Local programs establish their own eligibility criteria, which may not exceed 125% of the federalpoverty guidelines. Local programs hire staff, contract with local attorneys, and develop pro bonoprograms for the direct delivery of legal assistance to eligible clients. These local programs providelegal assistance to individuals based on locally determined priorities that meet local communityconditions and needs. Thus, to a certain extent, it is up to noncustodial parents to advocate on their own behalf andto make the communities in which they live aware of the problems that they face with regard tocountering unjustified allegations of paternity, obtaining fair child support orders, meeting their childsupport obligations, getting child supports orders modified when they have a change in financialcircumstances, seeking custody or visitation rights, and re-establishing family and community ties. With only an estimated 20% of eligible recipients receiving legal services (when they need suchservices), low-income noncustodial parents must compete to be included as customers in a programthat does not have the resources to serve all who are eligible for its services. Outreach Legal assistance is generally advisable in matters as serious and complex as paternityestablishment and child support. The outcome of such cases may result in significant redistributionof income from the noncustodial parent to the custodial parent and child for many years. However,most low-income noncustodial parents cannot afford to hire an attorney to help deal with thesecomplicated matters. For millions of Americans, legal services represent their only way to access the justicesystem. Legal services' clients are very diverse, encompassing all races, ethnic groups, and ages. They include families receiving public assistance, the working poor, veterans, family farmers,persons with disabilities, victims of domestic violence, and victims of natural disasters. Many ofthese persons were formerly middle class, and became poor because of age, unemployment, illness,or the breakup of a family. LSC-funded programs are intended to provide individuals with the legalinformation they need to help themselves and instruct clients on both their rights and responsibilitiesunder the law. LSC's help is intended to assist families to maintain their incomes, homes, healthbenefits, and ties to their children and their communities. (23) According to the LSC, about 70% of their clients are women,most with children, and another 10% are senior citizens. (24) Legal services providers have the ability to help noncustodial parents in a number of ways. They can provide information on the benefits and responsibilities of fatherhood before an allegedfather voluntarily acknowledges paternity. They can counsel alleged fathers to contest paternity ifthe man does not believe that the child is his. They can warn noncustodial parents of the negativeconsequences that often result from default judgments. They can advise noncustodial parents of thebenefits of appearing in court at the appointed date and time to present their side of the story inpaternity and child support cases. They can represent noncustodial parents in court, presentingevidence that counters the awarding of unreasonably high child support orders. They candisseminate information encouraging noncustodial parents to seek a modification of the child supportorder if their financial circumstances change because of a loss of a job, illness/disability, jail orprison sentence, or additional dependents. They can represent such persons in the modificationhearing. They can advocate on their client's behalf to get driver's licenses, professional licenses, orpassports reinstated. They can advise noncustodial parents of their rights regarding child custodyand visitation. They can petition the court for custody or visitation rights on the noncustodialparent's behalf. They can refer noncustodial parents to appropriate resources to help them meet theiremotional and financial responsibilities to their children. They can help noncustodial parents getarrest or conviction records expunged. The LSC has invested about $3 million over the last couple of years from its informationtechnology budget to provide that every state has a comprehensive legal services internet websitewhere clients can access important legal materials. Other information technology grants havesupported the creation of websites specifically designed to assist self-represented litigants by offeringdownloadable self-help materials, referrals to legal and social services providers, and other usefullinks. (25) Recent efforts on the part of legal services programs to coordinate and improve clientoutreach and community legal education provide one way for noncustodial parents to gain assistancein resolving many of their child support issues. Just as divorce, paternity issues, child custody,visitation, eviction, etc., are important issues for mothers who historically have received help fromlegal services, they also are pivotal for fathers as well.

Enforcement of child support often results in custodial parents and noncustodial parentsbeing in an adversarial relationship. Noncustodial parents often view it as an unbalancedrelationship, because custodial parents have access to a network of federal and state resources (e.g.,the Child Support Enforcement (CSE) agency and the welfare agency) that are not available to thenoncustodial parent. Pending welfare reauthorization legislation ( H.R. 240 and S. 667 )includes incentives for states to send more of the child support collected on behalf of custodialparents to the family itself, additional CSE enforcement tools, funding for marriage promotionprograms for low-income persons, and funding for programs designed to help noncustodial fathersmeet both their financial and emotional responsibilities to their children. Supporters of the welfarereauthorization legislation claim that its passage will result in more noncustodial parents paying childsupport. They contend that noncustodial parents who can afford to, but do not, pay child support willnot be able to escape their duty because of the strong enforcement apparatus, and that noncustodialparents who cannot afford to pay will be offered services that may improve their financial ability topay, as well as their willingness to pay. In situations in which noncustodial parents find themselves at loggerheads with custodialparents and the CSE system with respect to paternity and child support, some have encouraged legalservices providers to play a more "balanced" role. They maintain that providing legal services tononcustodial parents could result in child support payments becoming a more reliable source ofincome for custodial parents if noncustodial parents were provided better access to the legal systemand were satisfied that "they had their day in court" and thereby more amenable to paying childsupport. This report describes some of the child support issues faced by noncustodial parents anddiscusses areas in which legal services providers funded by the Legal Services Corporation (LSC)are authorized to support poor noncustodial parents. The LSC is a private, non-profit, federally funded corporation established by Congress toprovide financial support for civil legal assistance for persons unable to afford legal help. InFY2004, the LSC distributed $316.6 million of its $335.3 million appropriation in the form of grantsto 143 local legal services programs. Local programs provide legal assistance to individuals basedon locally determined priorities that meet local community conditions and needs. Thus, to a certainextent, it is necessary for noncustodial parents to advocate on their own behalf, that is, to make thecommunities in which they live aware of the problems that they face with regard to counteringunjustified allegations of paternity, obtaining fair child support orders, meeting their child supportobligations, getting child support orders modified when they have a change in financialcircumstances, seeking custody or visitation rights, and re-establishing family and community tiesafter incarceration. With only an estimated 20% of eligible clients receiving legal services (whenthey need such services), low-income noncustodial parents must now compete to be included asclients in a program that does not have the resources to serve all who are eligible for its services. This report will not be updated.

Background Over the last decade, international flows of capital have skyrocketed and now total over $6 trillion per day , or more than the total annual amount of U.S. exports and imports of goods and services. These flows are the prime mover behind exchange rates and global flows of goods and services. One part of these flows is foreign direct investment, or investment in businesses and real estate. On a cumulative basis, direct investment in 2011 totaled over $20 trillion world-wide, about 20% of which is associated with the overseas investment of U.S. firms, the largest share held by the firms of any nation. Preliminary data for 2012 indicate that foreign investment flows both into and out of the United States slowed in 2012, reflecting a similar trend in world-wide investment data. In addition to foreign direct investment in which firms take a direct equity stake in an investment project, multinational corporations are engaging in a broad array of activities, referred to as non-equity modes (NEM) of investment, that include partial ownership, joint ventures, contract manufacturing, services outsourcing, contract farming, franchising and licensing, and other forms of contractual relationships through which firms coordinate and control the activities of partner firms. The United Nations estimates that NEM investment generated $2 trillion in sales in 2010. While NEM investments can enhance the productive capacities of developing countries through integration into global value chains, employment in the affected industries can be highly cyclical and easily displaced. Foreign investment spans all countries, industrial sectors, industries, and economic activities and has become a major conduit for goods, capital, and technology between the developed and the developing economies. Foreign direct investment has become a much-needed source of funds for capital formation in developing countries and foreign investment accounts for important shares of employment, sales, income, and R&D spending in developing countries. The United States is the largest recipient of foreign direct investment and is the largest overseas investor in the world, owning about $4.5 trillion in direct investment abroad, or more than twice as much abroad as British investors, the next-most active overseas investors. This international expansion of business activity and overseas presence, however, often leads to a clash of cultures and values. In addition, conflicts are rising within the United States and within other developed countries over what role these global corporations should play in their respective home countries and over whose interests the corporations should serve. Traditionally, corporations have served the economic interests of a narrow group of shareholders by maximizing the return to the shareholders, or by maximizing the overall profits of the firm. Now, a broader group of "stakeholders," including customers, employees, financiers, suppliers, communities, and society at large, is pressing for comprehensive codes of conduct that recognize their interests. Defining codes of conduct is difficult, because such codes encompass a broad range of issues and myriad types of official and corporate activities that have defied attempts to reach a common agreement on the composition and nature of the codes. One way to view codes of conduct is by grouping them into three main categories: (1) externally generated codes of conduct that are developed by governments or international organizations, (2) corporate codes of conduct that represent individual companies' ethical standards, and (3) industry-specific codes. These categories often overlap and some codes that initially were adopted voluntarily by companies or industries have been incorporated into law by governments. In other areas, there are notable gaps in the coverage of codes of conduct. Since congressional activities relate most specifically to the first type of codes, or externally generated codes of conduct, they receive the greatest emphasis in this report. Congress has periodically considered issues related to corporate codes of conduct. In the 106 th Congress, for instance, the House considered a measure ( H.R. 4596 ) that would have required U.S. firms to adopt a Corporate Code of Conduct that covered a wide range of workers' rights and environmental issues, similar to the set of "model business practices" the Clinton Administration proposed in March 1995. Similarly, the Senate approved and the President signed on December 2, 1999, the Convention on Child Labor, which addresses various issues related to children in the workforce. The 106 th Congress also considered a number of measures that addressed issues of child labor and the importation of goods produced with child, sweatshop, and prison labor. In the 108 th , 109 th and 110 th Congresses, Congress considered various measures to protect children affected by poverty and natural disasters from trafficking, to protect children and minors from abusive labor practices, and to advance women's rights in developing countries. In the 111 th Congress, Representative Maloney and Senator Boxer introduced companion pieces of legislation ( H.R. 606 and S. 230 , respectively) that would have promoted the international protection of women's rights. In the 112 th Congress, Representative Maloney introduced H.R. 418 to promote the international protection of women's rights. External Codes of Conduct Since the 1970s, public and private expectations of multinational corporate behavior have grown commensurate with the boom in foreign investment. This change in expectations, however, has not resulted in a clear-cut set of directions for governments or businesses to follow in developing codes of conduct. At times, purely voluntary codes evolved into codes that subsequently were adopted as national legislation. For instance, in 1977, the United States adopted the Sullivan Principles and the Foreign Corrupt Practices Act (FCPA). Initially, the Sullivan Principles provided a voluntary set of standards for firms to follow to pressure the apartheid government of South Africa to improve the living conditions of black workers, their families, and their communities. In 1986, Congress adopted the Sullivan Principles as law. The FCPA followed a series of congressional hearings and legal actions against numerous U.S. corporations, and specified legal standards and penalties that were meant to prevent U.S. firms from bribing foreign officials in order to gain economic advantages. Following the financial crisis of 2008-2009, the United States adopted the Dodd-Frank Wall Street Reform and Consumer Protection Act to address issues of governance and regulation of the financial sector, and the European Union has similarly adopted wide-ranging directives to improve oversight of the financial sector and to provide guidance on executive compensation. Also, as the United Nations has noted, "codes of conduct have become increasingly significant for international investment, since they typically focus on the operations of large multinational corporations which, through their foreign investment and global value chains, can influence the social and environmental practices of businesses worldwide." While there appears to be a general consensus in the United States and abroad that favors international standards governing corporate business practices, attempts to reach an agreement on specific standards have proven to be less promising. In some cases, these efforts have fostered competition among countries for investment projects, have highlighted the remaining differences in national policies regarding foreign investment, and have created differences in the goals and objectives of negotiations between the developed and the developing nations. Most developed economies favor international rules, or codes of conduct, that could promote a "level playing field," or an environment in which investment decisions are based solely on competitive market factors. Developing economies, however, often view such efforts as attempts by the developed countries to promote rules and codes of conduct that effectively allow them to hoard foreign investments for themselves and to deny the developing countries the means to compete internationally for new investment projects. These and other differences have spurred nations and international organizations to adopt various approaches in order to promote international rules on foreign investment. One approach has been to negotiate legally binding agreements, whether they are narrowly or broadly cast, that impose a set of standards on multinational firms and that bring a large number of countries into compliance simultaneously. For example, after the United States adopted the FCPA, it supported efforts within the OECD to adopt the Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions (Convention on Bribery), which focuses on a narrow set of issues related to bribing public officials. Since the convention entered into force on February 15, 1999, 40 countries, including the United States, have passed national legislation implementing the convention. A similar approach that failed to gain agreement was a comprehensive agreement on foreign investment, known as the Multilateral Agreement on Investment (MAI). The MAI was expected to be a broad, legally binding, multi-faceted agreement that would have established an international set of rules on a wide range of foreign investment issues. Support for the agreement eroded over the course of the negotiations, which focused on provisions that proved to be too divisive to resolve. In addition, citizen and consumer groups opposed the proposed agreement, in part because they viewed it as too favorable to multinational corporations, and because of their concerns regarding what they believed would be the social, economic, and political impact of the agreement. In lieu of negotiating comprehensive multilateral agreements, many countries have resorted to adopting narrowly focused bilateral investment treaties that contain codes of conduct. Often, these codes resemble a general set of investment-related provisions and corporate "best practices," rather than a legally binding agreement. According to the United Nations, by year-end 2011, 174 countries had concluded 3,164 investment treaties and 2,833 bilateral investment treaties (ITs). Bilateral agreements dominate the number of new and existing investment agreements, but regional agreements are becoming more significant in terms of economic impact. Often these treaties are accompanied by some form of codes of conduct that are negotiated to cover a particular investment project or sector and tend to be highly specific to a company, project, or location. Other Agreements Some nations have used other types of multilateral treaties to promote codes of conduct for multinational firms. One type of agreement attempts to bring greater conformity in the treatment of foreign investment by prescribing changes in national laws governing foreign investment as one component of a broader arrangement that is geared toward economic cooperation and integration, such as the treaties that established the European Community and the North American Free Trade Agreement. There are other, legally non-binding, arrangements which cover foreign investment, the most prominent of which are: the OECD Guidelines for Multinational Enterprises; the OECD Principles of Corporate Governance; OECD Guidelines on Corporate Governance of State-Owned Enterprises; Code of Liberalization of Capital Movements (covering both long- and short-term capital movements); and the Code of Liberalization of Current Invisible Operations (covering cross-border trade in services). The OECD Guidelines comprise a set of voluntary recommendations in all the major areas of corporate citizenship, including employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation. The 2011 update of the Guidelines included new recommendations on human rights and corporate responsibility for their supply chains, the first such agreement in this area. In addition, the OECD has issued a basic statement on foreign investment, The Declaration on International Investment and Multinational Enterprises, which is a general statement of policy regarding the rights and responsibilities of foreign investors. The World Trade Organization (WTO) also supports the concept of a common set of rules on international corporate investment. In addition, the International Labor Organization's (ILO's) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy provides detailed guidance on the ways firms, both domestic and foreign, can maximize their contribution to economic and social development and minimize any negative effects. The United Nations lists 10 major principles that are recognized by international declarations and agreements that have been developed by the three main organizations, the UN, the ILO, and the OECD. These main principles comprise the UN Global Compact, which covers four main areas: human rights; labor standards; environment; and anti-corruption. The 10 principles of the UN Global Compact are: 1. Businesses should support and respect the protection of internationally proclaimed human rights. 2. Businesses should make sure that they are not complicit in human rights abuses. 3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining. 4. Businesses should uphold the elimination of all forms of forced and compulsory labor. 5. Businesses should uphold the effective abolition of child labor. 6. Businesses should uphold the elimination of discrimination in respect of employment and occupation. 7. Businesses should support a precautionary approach to environmental challenges. 8. Businesses should undertake initiatives to promote greater environmental responsibility. 9. Businesses should encourage the development and diffusion of environmentally friendly techniques. 10. Businesses should work against corruption in all its terms, including extortion and bribery. As part of the 1994 Uruguay Round on multilateral trade negotiations, the WTO adopted the agreement on Trade-Related Investment Measures (TRIMs), which recognized that certain investment measures restrict and distort trade; required signatory countries to apply national treatment; and required countries to provide a framework for reducing restrictions on foreign investment. In 1996, the WTO established a working group on investment, which has been studying the issue of investment rules, including technical regulations and standards that govern trade and investment. The Doha Declaration set out the goal of addressing foreign investment issues following the conclusion of the Fifth Ministerial in Cancun in September 2003. So far, these efforts have not succeeded in achieving the stated goal of developing a "multilateral framework to secure transparent, stable and predictable conditions for long-term cross-border investment, particularly foreign direct investment." G-20 Investment Measures During the early stages of the 2008-2009 financial crisis, national leaders, generally political heads of state, met as the Group of Twenty, or G-20, to address the crisis and to develop a reform agenda. As part of that agenda, the leaders committed to keeping markets open and liberalizing trade and investment. In addition, the G-20 leaders tasked the World Trade Organization (WTO), the Organization for Economic Cooperation and Development (OECD), and the United Nations Council on Trade and Development (UNCTAD) to monitor developments and report to the G-20 on a semi-annual basis on the progress in maintaining open markets. At the G-20 meeting in Los Cabos, Mexico, on June 19, 2012, the G-20 leaders indicated that they had grown "concerned about rising instances of protectionism around the world," and that they viewed regional and global "value chains" as relevant to world trade and recognized "their role in fostering economic growth, employment and development" and the need to enhance the participation of developing countries in value chains. The latest joint OECD-UNCTAD report on investment measures concluded that G-20 members "have continued to honor their pledge not to introduce restrictive measures. Nevertheless, the report warned that, "Despite this encouraging finding, persistent high unemployment, turbulence in financial markets and a weak economic recovery put intense pressure on governments to grant assistance to individual domestic companies and to preserve jobs. As a result, governments may resort to policies or practices that discriminate against foreign investors or discourage outward investment." Corporate and Industry-Specific Codes of Conduct A broad range of factors are influencing firms to adopt codes of conduct. Some firms see it as enlightened self-interest, while others see it as a necessary part of risk management. Corporate codes of conduct and industry-specific codes now exist in one form or another among most large multinational corporations and among most of the developed countries. A recent study by the OECD concluded that most corporate codes tend to be highly specific and to deal with the idiosyncrasies of a particular company, project, or location. Industry-specific corporate codes dealing with environment and labor issues appear to be the most common, and most U.S. manufacturers and retailers in the apparel industry have adopted corporate codes that prohibit using child, sweatshop, or prison labor. U.S. companies in such diverse industries as footwear, personal care products, photographic equipment and supplies, stationary products, hardware products, restaurants, and electronics and computers have adopted corporate codes of conduct. Multinational corporations generally support the concept of codes of conduct that standardize rules of corporate behavior across a broad range of countries and industries. While the motivation behind adopting corporate codes of conduct can be quite complex, multinational firms generally adopt codes of conduct because they believe they represent good business practices. Generally, multinational corporations desire national treatment as a basis for any investment agreement, but are concerned that standards negotiated in one agreement could be applied to their worldwide operations, regardless of the disparity in economic conditions between locations, local customs, jurisprudence, or differences in local business practices. Some firms also argue that codes which allow foreign groups to submit complaints to U.S. regulatory bodies concerning the overseas operations of the subsidiaries of U.S. firms could be used as a competitive tool to damage the worldwide reputations of U.S. firms. Industry-specific codes of conduct are as varied and as extensive as the multitude of industries they cover. Labor and environmental issues, however, are the two most frequently covered areas in the codes, regardless of industry. Environmental standards often comprise commitments from firms to be open to the concerns of the communities in which they locate. The most common labor codes include commitments for firms to provide a reasonable working environment, provisions against discrimination and a commitment to obey laws regarding child labor and compensation. Concerns over child and sweatshop labor, in particular, have spurred some public groups to take action on their own. The Workers' Rights Coalition, an alliance of 67 universities and colleges, pressured Nike and Reebok to investigate allegations of sweatshop labor conditions in a Mexican apparel factory. Concerns of Stakeholders While traditional economic theory holds that corporations strive to maximize their profits to benefit the stockholders, a broad group of "stakeholders" is pressing to have their interests represented as well. These stakeholders argue that corporations have responsibilities beyond the narrow scope of their legal charters, or that they should abide by a "social contract" that reflects society's changing social and cultural mores. The size of the group of stakeholders and the social responsibilities they expect varies with the size of the firm, the industrial sector it is involved in, and its products and operations. This group of stakeholders and the associated social responsibilities also become vastly larger for firms that operate in more than one country and can include issues beyond the common areas of workers' rights, environmental concerns, and business production or financing operations. At times, the issues sought by stakeholders in one country can clash with those sought by stakeholders in another country, for instance when workers in developed countries push for job security, health care and other benefits, and environmental issues, while workers in developing countries push for more local jobs and local managers, worker training and education, technology transfers, and higher levels of local production. Issues for Congress Governments, corporations, and the public generally support the concept of corporate codes of conduct. The complexity of the issue and the diversity of foreign investments, however, make it difficult in practice to negotiate international agreements with legally binding codes of conduct and likely will present Congress with at least two large, competing groups of interests. These groups basically represent the difference between economic efficiency as represented by corporations and equity, or social justice, as represented by a broad coalition of social and public groups. Generally, economic analysis indicates that legally binding codes of conduct that eliminate market-distorting activities promote market efficiency and, thereby, provide positive net benefits to consumers and to the economy as a whole. In most cases, however, there is a mismatch between those who benefit from greater market efficiency and those who bear the costs of economic adjustment. As a result, those who bear the highest costs are likely to be the most vocally opposed and to voice that opposition to Congress, whereas those who benefit are less likely to be motivated to express their support due to the perceived limited value of the benefits. There is no clear-cut method for determining the most equitable distribution within the economy of the costs and benefits associated with international investment. A broad coalition of public and social groups increasingly have come to view negatively the global spread of economic activity and to argue that voluntary corporate codes of conduct accomplish little. Beyond a narrow set of issues, there is less agreement on how Congress should proceed. Numerous labor and environment-related measures that garner support within the United States are opposed abroad, often by the very countries and groups the measures are intended to help. Moreover, consumer and labor groups have grown uneasy about their own economic well-being as a result of the recent slow-down in the rate of growth of the U.S. economy. As a result, they are arguing for including labor and environmental provisions in free trade agreements that are under consideration, and they may well urge Congress to adopt more restrictive measures concerning the labor and environmental impact associated with imports and foreign investment as a means of protecting domestic U.S. jobs.

The U.S. economy has grown increasingly interconnected with other economies around the world, a phenomenon often referred to as globalization. As U.S. businesses expand globally, however, various groups across the social and economic spectrum have expressed their concerns over the economic, social, and political impact of this activity. Over the past 20 years, multinational corporations and nations have adopted voluntary, legally enforceable, and industry-specific codes of conduct, often referred to broadly as corporate social responsibility (CSR), to address many of these concerns. Recent events, primarily the 2008-2009 financial crisis and related work by major international organizations, spurred Congress and governments in Europe to increase their regulation of financial firms. Indeed, the growing presence and influence of multinational corporations in the production of goods and services and in international trade through value chains has prodded governments to adopt measures that enhance the benefits of such activities through codes of conduct. Congress will continue playing a pivotal role in addressing the various issues regarding internationally applied corporate codes of conduct.

Introduction An evaluation may provide information at any stage of the policy process about how a federal government policy, program, activity, or agency is working. The resulting information may be used to better understand policy problems and to help inform the design, implementation, and oversight of policies. A variety of stakeholders may seek evaluation information and data to help them exercise their responsibilities, obligations, and rights in a representative democracy, including the establishment, implementation, oversight, and other requirements of a federal program or project. These stakeholders and interested parties include, among others, Congress, the President, federal agency officers and employees, state and local governments, interest groups, private sector contractors, the news media, and the general public. For a number of reasons, there is not necessarily a best way to design and carry out an evaluation of a particular program, activity, or operation. A program's context, including its longevity and the manner in which it is implemented, typically influences choices about evaluation design. In addition, stakeholders often have different needs and research questions about which they would like more information. One aspect of choosing how to carry out an evaluation involves deciding when some kind of "independence" would be a desirable attribute. In the context of evaluation, independence may apply to an evaluation or to an evaluator. On one hand, for example, the term may relate to independence of an evaluation from the policy preferences of an individual or group ("independent evaluation"), perhaps by prohibiting political appointees from revising an evaluation. Independence also may refer to an entity that conducts evaluations that also is located outside the immediate organization responsible for policy implementation ("independent evaluator"). There is some diversity of opinion regarding how to define independence and what makes an evaluator (or evaluation) independent. For example, an evaluator's "external" status, outside the organization that is implementing a program, does not necessarily equate with independence. Nor would an evaluator's "internal" status, inside the implementing organization, necessarily equate with a lack of independence for an evaluation (e.g., if an expert panel reviewed the internally produced evaluation for bias). There is also varying opinion concerning when independence is necessary, or possibly counterproductive, and what value it may bring. In some situations, there may be little need for independence in evaluations (e.g., when equipping a program with capacity to improve its own operations iteratively, or when "adaptively" managing a project to help restore an ecosystem). Nonetheless, instances of independent evaluators appear to be growing in number and variety. This report focuses on the characteristics of independent evaluators (IEs)—examples of which are described in the Appendix—when an evaluation is to be conducted by an entity outside the immediate organization that is responsible for policy implementation, and the IE is also intended to have one or more dimensions of independence. IEs and similar constructs that conduct independent evaluations, however, vary across a number of attributes: structure, jurisdiction, authority, resources, length of tenure, and specific duties and responsibilities. These differences, in turn, could affect their capabilities, effectiveness, and assistance to others, including their contributions to the oversight of a program or project by the executive or legislature. After an overview of such entities—which include newly and specially created units as well as existing ones, such as the Government Accountability Office (GAO) and offices of inspector general (OIGs)—this report suggests possible broad characteristics and criteria of independent evaluators or similar units. In situations when some extent of independence in an existing or proposed evaluator were deemed desirable, Congress might consider the different kinds and degrees of independence that could be pursued. The final section describes a number of such offices, along with citations to relevant materials for each example (public laws, legislative proposals, executive branch documents, and secondary analyses). Overview of Independent Evaluators and Similar Units Evaluation in the Federal Government Evaluation's roots have been characterized as reaching as far back as hundreds of years or, even more remarkably, thousands of years. This lengthy heritage notwithstanding, some observers describe the "modern era" of evaluation, and particularly "program evaluation" (focusing on government social programs), as emerging in the 1960s and growing appreciably since then. Expansion of social, economic, and environmental programs, among others, in many cases has been accompanied by legislation mandating and funding evaluation or by executive directives ordering such studies. These changes facilitated and increased the diversification of program evaluation, based on a perceived need to better inform the understanding of policy problems, formulate responses, and strengthen oversight by the executive and legislature over a growing expanse and complexity of federal programs. Accompanying this development, program evaluation has also become more sophisticated and selective in terms of its methods, methodology, type and level of operation, and subject or policy area. The 1990s gave added impetus to assessments, evaluations, and reviews of programs, activities, and operations through a number of laws, which remain on the books. Among these supporting evaluation efforts, directly or indirectly, are the Chief Financial Officers Act of 1990 (CFO Act; P.L. 101-576 , 104 Stat. 2838); Government Performance and Results Act of 1993 (GPRA; P.L. 103-62 , 107 Stat. 285); Information Technology Management Reform Act of 1996, later renamed the Clinger-Cohen Act (CCA; Division E of P.L. 104-106 , 110 Stat. 679, and P.L. 104-208 , 110 Stat. 3009-393); and Federal Financial Assistance Improvement Act of 1999 ( P.L. 106-107 , 113 Stat. 1486). These and other earlier relevant statutes, including the Inspector General Act of 1978 (IG Act), as amended, allow for flexibility in determining various evaluation requirements, particularly concerning individual projects and programs. GPRA, for example, defines "program evaluation" quite generally as "an assessment, through objective measurement and systematic analysis, of the manner and extent to which Federal programs achieve intended objectives." Independent Evaluators and Similar Units As noted earlier, independent evaluation oftentimes refers to the review and assessment of how well programs and projects are working that is conducted by a unit outside the program office itself. Such units have been expressly authorized to perform independent evaluations or have implied authority to do so under a broad mandate to oversee or review a program, project, activity, or operation. A Variety of Names and Titles Independent evaluation can be, and has been, carried out by positions under a number of different names and titles. Specific ones identified in this study include independent evaluator, independent auditor, interagency coordinating research institute, accountability board, peer reviewer, independent or peer review panel, program evaluator, program evaluation unit, research and evaluation institute, inspection and evaluation (I&E) unit in an office of inspector general (OIG), and various organizational groupings in the Government Accountability Office. These have been established within the parent agencies (but separate from the program office) or in outside organizations, public or private. In addition, such entities, whatever their name and wherever located, appear to be growing in number and in a variety of policy domains. Lack of a Precise, Agreed-Upon Definition The concepts of independent evaluator and independent evaluation, however, have led to generalized understandings, rather than a precise, detailed, agreed-upon definition. The broad notions lack specification, standardization, and uniformity. There appears to be no express, across-the-board definition of an "independent evaluation" or "independent evaluator" in federal statute or regulation. (Further discussion of these concepts appears below.) As a result, there are significant variations among offices which may fall under the same rubric or which conduct the same function. In other words, "independent," "evaluator," and "evaluation" are subject to different meanings among offices that use similar terminology. Considerable Diversity in Attributes and Characteristics The research for this analysis—which identifies a number of independent evaluators or similar entities and functions—found that none of the entities were identical. Although there were similarities governing several key characteristics in some cases, there were substantial differences of structure, organization, authority, jurisdiction, funding, staffing, length of tenure, or duties and responsibilities. Dissimilarities among these characteristics in IE-like positions and functions, in fact, appear to be more common than their similarities. This arises, in part, because of different rationales, expectations, research questions, and conditions surrounding the establishment of the positions. Because of this, the resulting independent evaluators lack standardization and uniformity across-the-board, and a number have been given substantial flexibility in organizing their own operation. Structural differences might also arise, at least in some cases, because the creator of the entity (the President, agency head, or Congress) intends to allow for discretion and flexibility at the implementing level (for the agency or IE, reflecting his or her expertise and experience). Along with this, the establishing authority for many positions—public law, executive order, or administrative fiat—often do not specify certain characteristics of the office, such as its funding, reporting requirements, tenure, or evaluation standards. Disagreements, moreover, have arisen over the value, importance, and means of supporting independence for evaluators. The Government Accountability Office (GAO), when it examined the Office of Management and Budget's (OMB's) guidance for the Program Assessment Rating Tool (PART) in 2005, found that a source of tension between OMB and agency evaluation interests was the evaluation's independence. PART guidance stressed that for evaluations to be independent, nonbiased parties with no conflict of interest, for example, GAO or an Inspector General should conduct them .... OMB subsequently revised the guidance to allow evaluations to be considered independent if the program contracted them out to a third party or they were carried out by an agency's program evaluation office. However, disagreements continued on the value and importance of this criterion. Furthermore, an evaluation scholar noted that independence may not be an important dimension of an evaluation if the objectives of the evaluation primarily focus on strengthening institutions or building "agency or organizational capacity in some evaluative area." Other considerations tie into program evaluation in general, no matter where it is carried out. These could extend to whether the subject of the evaluation is either (1) too large and broad an undertaking for the evaluator, thereby overwhelming him or her; or (2) to the contrary, too small and narrowly focused to be of utility apart from the immediate project (in developing, for instance, recommendations for best practices or the entire program). Along the same lines are concerns about whether the evaluation is integrated into the overall operation of a program and whether an evaluator might be perceived as "usurping" or competing with the prerogatives of a parallel office. Others, discussed further below, deal with selecting the most appropriate evaluation technique or method, especially in light of the diversity among them, as well as the right evaluator. Independent evaluation entities do not arise or exist in a vacuum. Their establishment, powers, performance, effectiveness, and impact are subject to a variety of influences. And because they are usually ad hoc and idiosyncratic, they differ in their structure and operation. IE-like offices range from modest efforts—beginning with a position without separate funding or staffing, evaluating only a single, short-term project—to major undertakings, extending to a separate unit composed of a number of individuals, with its own budget and resources, operating continuously throughout the life of a long-term, interagency, and sometimes intergovernmental program. In between these ends of the spectrum are a number of possible combinations. Variations exist even among units evaluating programs in the same broad subject area. Six of the examples below, for instance, deal with interagency, intergovernmental, and, in some cases, interstate waterway programs; yet the evaluation units differ from one another, sometimes significantly, in their main characteristics or in the specifications in their establishing authority. In sum, the characteristics of independent evaluators and similar constructs are determined by a number of formal and informal factors. Differences among evaluation constructs are reflected in the powers and protections in the authorities that established the IEs—public laws, executive orders, or administrative directives—as well as in their relationships with executive officials. Besides the variables already identified, other influences, some informal or intangible, add to this mixture. These include the expertise of the staff, competency and impartiality of the evaluator, and trust and confidence between an evaluator and the program office. These, in turn, affect the IEs' actual and potential independence, capacity, capability, and effectiveness—including their contributions to oversight by Congress and the executive—extending from the immediate program office to the parent agency, OMB, and the President. Possible Characteristics of Independent Evaluation Units As emphasized above, the terms "independent evaluator" and "independent evaluation" lack precise, standardized, agreed-upon definitions in public law or executive directive, and they vary considerably across a number of dimensions. Nonetheless, many possible criteria and attributes of an independent evaluator or similar construct can be identified, based on the research for this examination and on other sources, both public and private. These sources include the American Evaluation Association (AEA); evaluation reference works, such as the Encyclopedia of Evaluation ; the Joint Committee on Standards for Educational Evaluation (Joint Committee); and federal agencies that conduct and direct evaluations of programs, projects, activities, and operations. Illustrative agencies include the Government Accountability Office (GAO), the Council of the Inspectors General on Integrity and Efficiency (CIGIE) and its predecessors, and the Office of Management and Budget (OMB). Concepts, Understandings, and Specifications of "Evaluation" and "Independence" These different sources cover common ground, including the concepts of evaluation and independence, ways in which the terms may be understood, and how the concepts may be specified. Differences exist, especially in how detailed, specific, and elaborate these descriptions are, ranging from a short statement on a concept to a lengthy listing and interpretation of relevant standards. American Evaluation Association AEA, which promotes evaluation for public programs, adopts a broad understanding of the concept of evaluation, which can occur throughout the life of a program: "Evaluation is a field that applies systematic inquiry to help improve programs, products, and personnel, as well as the human actions associated with them." While recognizing that evaluators' work can vary greatly, AEA holds that the common ground for all evaluators is that they aspire to achieve accountability and learning by providing the best possible information that might bear on the value of whatever is being evaluated.... Evaluations prepared by professional, independent evaluators help prevent information gaps by: improving knowledge and understanding of how programs work, strengthening public accountability, assessing program effectiveness and efficiency, and identifying opportunities and pathways to achieving objectives, outcomes, and efficiencies. To support these goals, AEA specifies "several of the key elements of a national framework for evaluation practices." These benchmarks include using appropriate professional standards in conducting the work; stating program goals and objectives as specifically as possible; issuing performance measures when the program is being developed and modifying them as appropriate to reflect what has been learned; specifying necessary requirements and resources, which "should be embedded in the authorizing legislation and regulations"; supporting department-wide or government-wide (i.e., GAO) evaluators "with the resources, organizational independence, competencies, and authorities necessary for the effective evaluation and oversight of public programs"; using private evaluators "with a broad range of viewpoints and capabilities that can provide effective independent evaluation as well as input and feedback to internal evaluation efforts"; producing a wide range of studies, recognizing the advantages and limitations of various methodological approaches; and collaborating with stakeholders. In July 2004, AEA approved a set of guiding principles for evaluators, which interrelate with one another as well as with the foregoing standards. The five, each of which is detailed in its brochure, are: A. Systematic Inquiry: Evaluators conduct systemic, data-based inquiries. B. Competence: Evaluators provide competent performance to stakeholders. C. Integrity/Honesty: Evaluators display honesty and integrity in their own behavior, and attempt to ensure the honesty and integrity of the entire process. D. Respect for People: Evaluators respect the security, dignity and self-worth of respondents, program participants, clients, and other stakeholders. E. Responsibilities for General and Public Welfare: Evaluators articulate and take into account the diversity of general and public interests and values that may be related to the evaluation. Encyclopedia of Evaluation The Encyclopedia of Evaluation offers a working definition of "independent evaluation": For an evaluation to be considered independent, the evaluator must be impartial, objective, unencumbered, and balanced. Further, because perceived independence is as important as independence itself, the evaluator must be accountable for every step in the research process and able to document all key decisions and actions for the client organization, or other evaluators, and the community at large. Overall, external evaluations tend to hold more credibility than internal ones because the external evaluator appears to have less to gain or lose from the evaluation findings and is less likely to experience a conflict of interest. Notably, this definition does not appear to equate automatically an evaluator's "external" status with independence, or an evaluator's "internal" status with lack of independence. Joint Committee on Standards for Educational Evaluation The Joint Committee's standards for evaluating educational programs might be adapted to other fields. It posits that "sound evaluations of educational programs, projects, and materials in a variety of settings should have four basic attributes." The associated standards govern: Utility , which is intended "to ensure that an evaluation will serve the information needs of the intended user." These include stakeholder identification, information scope and selection, evaluator credibility, values identification, report timeliness and dissemination, report clarity, and evaluation impact. Feasibility, which is intended "to ensure that an evaluation will be realistic, prudent, diplomatic, and frugal." Specifics here cover practical procedures, political viability, and cost effectiveness. Propriety , which is intended "to ensure that an evaluation will be conducted legally, ethically, and with due regard for the welfare of those involved in the evaluation as well as those affected by its results." These concerns involve formal agreements, rights of subjects, complete and fair assessment, disclosure of findings, dealing with conflicts of interest (actual, perceived, potential), and fiscal responsibility. Accuracy , which is intended "to ensure that an evaluation will reveal and convey technically adequate information about features that determine the worth of merit of a program." The specifics here deal with: program documentation; context analysis; described procedures and purposes; defensible information sources; valid, reliable, and systematic information; analysis of quantitative information; justified conclusions; impartial reporting; and metaevaluation (that is, a means of comparing a particular evaluation against the standards developed for its field along with other pertinent standards, in order to examine its strengths and weaknesses). Government Accountability Office GAO explains the concept of program evaluation by including within its scope evaluations conducted by external entities, experts inside the agency that contains a program, and the employees responsible for implementing programs and policies: Program evaluations are individual systematic studies conducted periodically or on an ad hoc basis to assess how well a program is working. They are often conducted by experts external to the program, either inside or outside the agency, as well as by program managers. A program evaluation typically examines achievement of program objectives in the context of other aspects of program performance or in the context in which it occurs. Four main types can be identified, all of which use measures of program performance, along with other information, to learn the benefits of a program or how to improve it. Inspector General Community The 2008 Inspector General Reform Act has directed the new Council of the Inspectors General on Integrity and Efficiency to "develop plans for coordinated, Governmentwide activities that address these problems and promote economy and efficiency in Federal programs and operations, including interagency and interentity audit, investigation, inspection, and evaluation programs and projects to deal efficiently and effectively with those problems concerning fraud and waste that exceed the capability or jurisdiction of an individual agency or entity." This call to action to all IGs builds on a growing movement among individual offices to increase and enhance program evaluation. The IG community generally has considered evaluation as part of a more encompassing function of inspection: "An inspection is defined as a process that evaluates, reviews, studies, and/or analyzes the programs and activities of a Department/Agency" for a number of purposes. The CIGIE Inspection and Evaluation Committee, which drafted the standards, included among these purposes providing factual information to managers for decisionmaking; monitoring compliance; measuring performance; assessing the efficiency and effectiveness of programs and operations; sharing best practices; identifying where administrative action may be necessary; and making recommendations for improvements to programs, policies, or procedures. To accomplish this, the I&E Committee developed standards dealing with 14 separate matters: competency; independence; professional judgment; quality control; planning; data collection and analysis; evidence; records maintenance; timeliness; fraud, other illegal acts, and abuses; reporting; follow-up; performance measurement; and working relationships and communications. The Inspection and Evaluation Committee, however, qualifies the adoption of the standards: "While these standards are advisory, and compliance is voluntary, their consistent application is encouraged." The panel adds that "the inspection function at each Department/Agency is tailored to the unique mission of the respective Department/Agency." Although the inspection function did not originate when the IG Act was approved in 1978, it has grown over time in terms of complexity and diversity as well as size; that is, the number of OIG units, budget, and staff dedicated to it. The result is that most—but not all—IG offices conduct inspections; and these I&E units vary in expertise, location, type of work, longevity, staffing, and budget. Office of Management and Budget Over the past decade, OMB has also offered guidance on how to achieve independence and expertise in evaluations. Its directions and instructions, however, exhibit some differences in specifications and orientation between the Bush and Obama Administrations. George W. Bush Administration and PART Considerations about the independence and orientation of program evaluation were included in the operation of the Program Assessment Rating Tool (PART), which was developed during the Administration of George W. Bush but is no longer in effect. Although the guidance did not define independent evaluation or evaluator expressly, OMB referred to its role in several instances. One instance, about the scope and quality of "independent evaluations," stated, Purpose: To ensure that the program or agency conducts non-biased evaluations on a regular or as-needed basis to fill gaps in performance information. These evaluations should be of sufficient scope and quality to improve planning with respect to the effectiveness of the program. OMB added that such independent evaluations were to be of "high quality, sufficient scope, unbiased, independent, and conducted on a regular basis to support program improvements." As noted previously in this report, however, GAO discussed how disagreements arose in this context over how to define independence for an evaluator and whether independence was necessary or of value in some circumstances. OMB initially advocated for a separate, outside entity—in particular, statutory IGs or GAO—to conduct the evaluation. Agencies balked at this, insisting that experienced program evaluation offices within an agency, for instance, could conduct such evaluations with independence. OMB reconsidered its stand and allowed that "evaluations could be considered independent if the program contracted them out to a third party or they were carried out by an agency's program evaluation office." OMB also recognized a possible conflict between competing analyses: "The program should defend differences if an independent entity's analysis differs from the program's analysis." Barack Obama Administration After Barack Obama became President, the Office of Management and Budget issued several memoranda and a guidance dealing with independent program evaluation. OMB Director Peter R. Orszag issued two memoranda on the subject—one in 2009 and another the next year—which began with a nearly identical premise: "Rigorous, independent program evaluations can be a key resource in determining whether government programs are achieving their intended outcomes as well [effectively] as possible and at the lowest possible cost." By comparison to the PART pronouncements, the Obama OMB assumed a somewhat different stance on how to define independence. In the October 2009 memorandum, OMB concentrated more on the concept of independent evaluation instead of an independent evaluator. Notably, this memorandum made repeated reference to conducting "rigorous, independent studies that are free from political interference." The memorandum did not provide more detail on what constitutes political interference or what this sort of independence might look like. When an agency applied for Administration support in the President's budget for capacity-building funds, however, OMB required agencies to address explicitly their ability to conduct studies that are free from political interference. In its follow-up memorandum, OMB added to this in its "evaluation initiative for FY 2012," allocating, in the President's upcoming budget proposal, "approximately $100 million to support 35 rigorous program evaluations and evaluation capacity-building proposals across the Federal government." In so doing, the evaluation initiative repeated the earlier call for an "assessment of agency capacity to conduct rigorous, independent evaluations ... that are free from political interference." A complementary goal—which also suggested several ways to institutionalize independent evaluation within an agency—is to attract and retain talented researchers in an office with standing within the agency. Agencies are encouraged to propose changes or reforms that are needed to meet these objectives and may request funds to strengthen their internal evaluation expertise and processes. Several existing models may be worthy of consideration, including a congressionally chartered institute within an agency, or an office headed by a senior official reporting directly to the Secretary or Deputy Secretary. The 2009 memorandum had also announced an "increased emphasis" on program evaluations and, more specifically, "impact evaluations." The 2010 memorandum followed suit, recognizing the need to overcome the absence of completed or timely program evaluations for many federal programs. As a result, the Office called on agencies to include funding for FY2011 to conduct evaluations or build capacity, to correct these defects and strengthen program evaluation. Extending this orientation, another OMB memorandum emphasized a change in the objective of evaluations and their measurements. This OMB memorandum, also issued in mid-2010, states that the Administration is transitioning from a planning and reporting approach focused primarily on the supply of performance information to .... performance improvement strategies .... [with] Unrelenting attention to achieve the ambitious, near-term performance goals that agency leaders identify as High Priority Performance Goals ("Priority Goals") in the President's FY 2011 Budget; Establishing constructive performance review processes in agencies that are sustained over time; and Making Government Performance and Results Act documents useful. Government Accountability Office Review in 2010 A 2010 report by the Government Accountability Office, which was released before OMB's initiatives in the same year, examined attempts by both the Bush and Obama Administrations to improve government efficiency, including ways it connects to PART and its successor. GAO found that although "most programs developed an efficiency measure," most of these failed to adopt both input and output or outcome measures; and agency officials described "challenges to developing and using program-level efficiency measures and performance measures in general." Nonetheless, "officials for some programs stated that the efficiency measures reported for PART were useful" in a variety of ways, including "to evaluate proposals from field units." The GAO report also recognized improvements coming from both the Bush and Obama Administrations along with the lengthy history of legislative reform efforts that tie efficiency into program effectiveness, particularly in the Government Performance and Results Act. The two subsequent 2010 OMB memoranda recognized some of the same goals. Its memorandum on Evaluating Programs for Efficacy and Cost-Efficiency (2010), as the title suggests, dealt with the relationship between efficacy and efficiency and the need to measure both. And OMB's Performance Improvement Guidance added to this, specifying that evaluation should focus on "performance improvement strategies" in general and on "making GPRA documents useful" in particular. Possible Criteria and Attributes for an Independent Evaluation Unit or Function The aforementioned understandings of terms like "evaluation" and "independence" are not hard-and-fast rules. Rather, they might be considered as perspectives, some of which are similar. Using the perspectives and some of the examples cited later in this report, a number of possible criteria for an independent evaluator can be identified. These characteristics, which are not exhaustive, are intended only to identify a range of possibilities and options to consider for establishing an independent evaluator, modifying evaluative operations and organizations, or reviewing an evaluator's methodology and findings. CRS takes no position on the advisability of independence or the adoption of any particular characteristic. Possible Criteria Addressing the Independence of an Evaluator Based on the foregoing analysis and the examples cited later in this report, the following criteria illustrate a range of factors that could affect the independence of an IE-like entity, which, in turn, could help to determine the IE's capacity, capability, credibility, impact, and effectiveness. Well-defined jurisdiction . Specifying an independent evaluator's jurisdiction—over the subject matter, specific projects or programs, and the agencies to be covered—is especially important with regard to interagency, intergovernmental, and interstate programs. Clear separation from the program or project office . A range of options exist here. For instance, this might occur through an evaluation unit which is external to the office, its parent agency, or both. An outside unit could be established in a number of ways: setting up a new office, operating under standards and guidelines that protect its independence (e.g., prohibiting revision by political appointees or OMB); contracting with a private organization; making arrangements with a relevant government-chartered organization; or relying on an appropriate federal agency, such as an IG, an executive organization with relevant expertise and experience, or GAO. Another possibility involves an office within the agency. The independence of such an evaluation might also be protected if it were assigned to an in-house program evaluation office unconnected with the program or project implementer. Avoidance of a (potential) conflict of interest, actual or perceived . For an evaluator, this might mean, among other considerations, no direct ties to the program or project office, its implementing agents, or affected parties. Neutrality, objectivity, and impartiality in conducting an evaluation as well as in reporting and disseminating its findings, conclusions, and recommendations . Even if an evaluation entity were not housed separately from the program being implemented, third-party review of the evaluation, for example, might detect or deter bias, providing some assurance of independence. In addition, evaluations might be required to focus on several competing definitions of programmatic "success," if the proper goals of a government activity were contested. Appropriate criteria and standards for conducting an evaluation and for basing its conclusions . Such criteria and standards would be determined by the subject matter being assessed as well as by the extent and detail of the coverage called for. This attribute for an independent evaluation would serve to justify the validity and reliability of its findings and conclusions. Specified type(s) of evaluation . GAO identifies these as cost-effectiveness, implementation, impact, and outcome. Refinements of these and other possibilities might be considered as well. Designated responsibilities and duties . These could extend beyond assessing program performance, to developing appropriate measures, providing information and data to operational offices, monitoring compliance with program directives, issuing recommendations for corrective action, sharing best-practices, and responding to and reconciling concerns or criticisms from report subjects. Competency and expertise (in the subject area, in evaluation, or in both) . This applies to both the principal evaluator and staff. Sufficient resources . Resources for the IE or similar posts include funding, staff, and, if necessary, contracting authority, appropriate equipment and facilities, among other items. Access to and use of relevant information and data which are reliable and valid. Program evaluations—and their credibility—rely upon the reliability and validity of the data and information that they use and that are appropriate for the subject. Accounting for and documenting steps in the evaluation process . These extend to the measurements used as well as the selection of information and data relied upon, to defend decisions if necessary. R eport contents and timetables . These include what the reports should contain (findings, conclusions, and/or recommendations) and when they should be submitted (on a fixed time schedule, after certain conditions are met, at different stages of an evaluation, or at the end of the project or program). Report recipients, availability, and dissemination . This involves who is to receive the IE reports (Congress, the President, agency officials, or the general public) and how an IE report is to be made available (in what medium and at what cost, if any). Evaluation re sponses and report revisions . This specifies whether a report may be revised by the head of an agency, OMB, or the President, or whether responses from the evaluation's subjects are required. Responses to a report's findings, conclusions, and recommendations are particularly important from the program or project office. Means to resolve differences between an evaluator and the operational office. Various means might be considered to resolve or, alternatively, transparently report, any differences in the event that the program office disagrees with an evaluator's findings, conclusions, and recommendations. Possible Attributes When Designing or Reviewing an Independent Evaluation Unit These criteria also suggest a range of considerations in establishing a new IE entity, or reviewing and modifying an existing one. A number of choices about organizational design and operations might be considered that could support the independence, quality, reliability, and meaningfulness of an IE's studies and reports to a variety of stakeholders, including Congress, the President, agency employees, state and local governments, interest groups, private contractors, and the public. These outcomes are likely to be enhanced by clear and specific requirements regarding the purposes, responsibilities, and duties of the IE entities as well as protections for their officers. Posed as questions, these considerations, which closely relate to one another and in some circumstances may overlap, include the following: Selection Requirements: Are any requirements or criteria for an IE's selection specified in the authority creating the entity or position? If so, is he or she to be selected for relevant expertise or experience in the subject area or in evaluation? Appointing Authority and Requirements: Who appoints the individual who will lead the IE entity? If the independent evaluator is an individual, who will appoint the individual? Is the appointment made by a certain agency official (head of the agency or of a program office)? Is it an individual officer or a committee (in the case of an intra-agency, interagency, or intergovernmental unit)? If the appointment is made by the chair of a committee, is he or she directed to consult with other panel members? Is the appointing authority advised to or required to consult with inspectors general or with outside organizations in determining prospective candidates? Tenure : How long is an evaluation officer's tenure? Is it confined to a short-term project or a fixed deadline, such as six months or one year? Or does it extend indefinitely, throughout the life of an entire program? Funding: How is the entity funded? Are the funds from an administrative account at the discretion of an agency or program official? Or is the funding a specified amount or percentage of the overall budget of a program or project? Supervision: Who, if anyone, supervises the IE's operations? Purposes: Why exactly has an office been established, and what is it expected to accomplish? Is it to conduct an evaluation over a long-term broad program, a short-term narrow project, or a series of these? Is the unit to offer recommendations, as well as findings and conclusions? What roles is an evaluation unit expected to play in the ongoing operation of the program or project, in advising an overseer or program manager, or in the final assessment of the program? Are the IE's findings, conclusions, and recommendations expected to contribute to management and best-practices approaches, for instance, or to examine the effectiveness of the program itself, separate from its implementation? Substantive Considerations and Type of Evaluation : What substantive research questions is it to address? What type or types of evaluation is the entity to perform? How much discretion will be necessary to leave to the IE to make these decisions? Mandated Studies: What particular studies, if any, are mandated? Is an IE required to conduct certain studies (e.g., interims as well as a final) or does he or she have some discretion over the range and frequency of studies? Study Standards and Procedures : What standards, procedures, and guidelines, if any, is an IE expected to follow in conducting evaluations? Are these detailed in the unit's establishing authority? Consultation with Outside Organizations: Is an IE entity required to consult with other governmental or nongovernmental organizations in carrying out its responsibilities? In general, should the IE consult with private sector specialists in evaluation or with inspectors general; in scientific matters, with one of the relevant National Academies or private organizations; and in public administration matters, as an example, with the National Academy of Public Administration? Types of Reports: What types of reports are ordered? Are the reports limited to particular projects or stages thereof; are their contents outlined; and are the reports to contain recommendations for change? Reporting Schedules: When are the reports to be issued?—according to a fixed time schedule?—at the completion of a particular stage of a project or program?—at the end of the entire program?—or at the discretion of the IE? Report Recipients: Who is to receive the reports? Is it: the operational office?—the agency?—the President?—Congress?—another government entity, such as GAO or an inspector general?—the general public? Report Availability and Dissemination : How is the report to be publicized—by way of the IE's office, the affected agency or program office, a congressional panel which is a recipient, or the news media? How is it to be disseminated? Is it in hard-copy (from the IE or the Government Printing Office, for instance) or on the website of the IE, the affected agency, or another official recipient? Response Obligations : What obligations, if any, does an affected agency or program office have to respond to the IE's findings, conclusions, and possible recommendations? Considering or Resolving Differences: Is there a means to consider and possibly resolve differences on such matters, if disagreements arise between the IE and the program or project implementer? Jurisdictions: What is an IE's jurisdiction? Is it over a narrow, short-term project; a broad, long-range program; or some combination between these ends of the spectrum? Does the jurisdiction cover a single federal office or agency, a number of federal agencies, or a collection of federal, state, and local government entities? Does the jurisdiction cover a domain of public policy? Modes of Operation: What is the mode of operation of an independent evaluation unit? Is it in continuous session, monitoring and assessing a particular program on an on-going basis? Or does it operate sporadically, evaluating, for instance, several distinct projects or a program when it reaches certain stages? Or is it only active when certain conditions or a time schedule calls for its involvement? Concluding Observations In the understanding adopted here, truly independent evaluators are not found within the program office itself, because that location would (appear to) compromise their independence. Even with this qualification, however, independent evaluators of federal programs appear to have increased since the 1960s and continue to do so. IEs exist both inside the agency proper—in auditing offices, for instance, or, as a "model" raised by OMB, in a "congressionally chartered institute"—as well as outside it. Independent evaluators and comparable entities have been created as new, separate units, operating under a variety of names and titles. And evaluations have been undertaken by appropriate existing agencies, including the Government Accountability Office, offices of inspector general, or various other government constructs, such as NIST and the National Academy of Sciences. IEs and similar constructs, moreover, are multi-faceted and diverse, differing in their establishing authority, structure, organization, responsibilities, and requirements, among other characteristics. Such differences have come about for a number of reasons, including the following: No agreed-upon, precise, and detailed definition of what constitutes "independence" and "evaluation" exists. Suggested or recommended standards and criteria, although having commonalities, are not duplicative in all respects, with some being more detailed and expansive than others. Nonetheless, a number of criteria and attributes could be considered in creating or modifying an independent evaluator. A perceived need for flexibility in IE structure, organization, operations, and activities appears in some establishments, which allows the IE (or other officials) to determine the entity's features. By comparison, others are given detailed duties and directions upon their creation. Demands and expectations differ among IEs. The political context in which IEs are established differs over time and within and among policy arenas. Because of these and other factors, independent evaluators follow no single path or set of directions. Instead, they reveal numerous ways and directives for possible approaches to assess federal programs; provide relevant information and data to the executive, legislature, stakeholders, and the general public; enhance oversight of affected programs; and aid in the development of new legislation or executive directives. Appendix. Examples of Independent Evaluators and Similar Positions Following are descriptions of a number of independent evaluation entities, as set up by their establishing authority or proposed. These were selected through a search of public laws, executive orders, other administrative directives, and legislative proposals that specifically call for an "independent evaluation," "independent evaluator," or similar devices, including "peer review" or "independent study." The listing is not comprehensive. For instance, it does not include relevant reports from the Government Accountability Office, because of their substantial number. And it does not include relevant reports from inspectors general, unless these are specifically called for in legislation. Nonetheless, the descriptions of the selections illustrate the diversity of independent evaluation units and their adoption over time, particularly in the contemporary era. (For each entry, the title of the entity uses the lower or upper case as it appears in the authorization or proposal and is in bold type for emphasis.) Based on these examples, no single entity meets all the characteristics that could be addressed in its establishing authority, although some come close. The selections also demonstrate a wide range and diversity among entities which have been empowered to conduct evaluations. As a corollary, none of the evaluation offices are identical to any other in all respects. Differences are observable in the specifics associated with: appointment, tenure, jurisdiction, evaluation criteria and standards, consultation with outside organizations, reporting mandates, reports' recipients and responses, and funding and staffing, among other characteristics. Chesapeake Bay Protection and Restoration Independent Evaluator (Executive Order 13508) The independent evaluator called for in Executive Order 13508, "Chesapeake Bay Protection and Restoration," issued by President Obama on May 12, 2009, is to assist a new Federal Leadership Committee for the Chesapeake Bay in its oversight of the program. The committee, established in the order, comprises representatives from a number of federal departments and agencies; it was established "to begin a new era of shared Federal leadership with respect to the protection and restoration of the Chesapeake Bay." The committee's responsibilities are "to oversee the development and coordination of programs and activities," along with managing "the development of strategies and program plans for the watershed and ecosystem of the Chesapeake Bay and oversee their implementation." Among other things, the committee is to prepare and publish a strategy, following submission of relevant draft reports from lead federal agencies. The overarching strategy is to include, among other things: defining environmental goals; identifying key measurable indicators or environmental condition and changes; describing specific programs and strategies to be implemented; identifying the mechanism to assure that governmental and other activities, including data collection and distribution, are coordinated; and "describing a process for the implementation of adaptive management principles, including a periodic evaluation of protection and restoration activities." These requirements, directly or indirectly, tie into the functions of an independent evaluator called for in the executive order. In order to "strengthen accountability" over the program, [t]he Committee, in collaboration with State agencies, shall ensure that an independent evaluator periodically reports to the Committee on progress toward meeting the goals of this order. The Committee shall ensure that all program evaluation reports, including data on practice or system implementation and maintenance funded through agency programs, as appropriate, are made available to the public by posting on a website maintained by the Chair of the Committee. Key characteristics of the Chesapeake Bay Restoration independent evaluator position—based on this provision and portions of the Federal Leadership Committee's mandate—are: an interagency and inter-governmental jurisdiction, commensurate with the committee's jurisdiction; an indefinite tenure based on the life of the committee; reporting requirements that authorize the IE to report "periodically ... on progress in meeting the goals of this order" to the committee; and a directive to the committee to make these reports and relevant data available to the public. Proposed Chesapeake Clean Water and Ecosystem Restoration Act of 2009 Inspector General and Chesapeake Bay Program Scientific and Technical Advisory Committee This bill ( S. 1816 , 111 th Congress), which focuses on restoration of Chesapeake Bay, provides for the Inspector General of the Environmental Protection Agency to evaluate implementation of the enactment and for a special Scientific and Technical Advisory Committee . The legislation is intended to expedite and enhance the restoration of the Chesapeake water and ecosystem. It would reauthorize the Chesapeake Bay Program, expand state and local government authority, provide new grant authorizations, and strengthen enforcement tools. In so doing, it would augment existing legislation (the Federal Water Pollution Control Act); President Obama's Executive Order 13508 (described above); and the on-going Chesapeake Bay Program, which has been a federal, state, and local government charge since the mid-1980s. The Chesapeake Executive Council would direct the Program, in accordance with a Chesapeake Bay Agreement. The Council would develop and implement management strategies and plans for the Program. The operational Office of the Council would remain in EPA, providing support for it in a number of ways. These include implementing and coordinating science, research, monitoring, and data collection; developing and maintaining pertinent information; assisting the signatories of the Agreement in developing and implementing action plans; coordinating the activities of EPA and other entities in developing strategies to improve water quality and living resources of the Bay; and implementing outreach programs for public information, education, and participation to foster stewardship of the bay. Along with this, the EPA Administrator would be authorized to enter into agreements with other federal agencies to carry out these matters. If enacted, S. 1816 would provide for various grants to public and private entities, for technical and other assistance as well as implementation and monitoring. In accordance with E.O. 13508, S. 1816 would also require the EPA Administrator to issue an annual action plan—describing how federal funding in the President's budget submission to Congress would be used to protect and restore the Chesapeake Bay—and biennial progress reports assessing relevant developments and indicators. The bill also provides that the " Inspector General of the Environmental Protection Agency shall evaluate the implementation of this section on a periodic basis of not less than once every three years." No other particulars about such an evaluation are specified in the proposal. The legislation would also require the EPA Administrator to consult with several different entities about particular matters. One of these directives is "to consult with the Chesapeake Bay Program Scientific and Technical Advisory Committee regarding independent review of [certain] monitoring designs." Proposed Chesapeake Bay Accountability and Recovery Act of 2009 Independent Evaluator This proposed legislation ( H.R. 1053 , 111 th Congress) parallels some of the main provisions in E.O. 13508, both of which deal with the Chesapeake Bay restoration and include an Independent Evaluator . The House bill, as approved by the House Committee on Natural Resources, calls for an "interagency crosscut budget" for restoration activities in the Chesapeake Bay watershed, with funding, expenditures, and accounting requirements detailed (Sec. 1). This crosscut budget, composed by the various agencies involved in the restoration program, is to be submitted to Congress by the Director of the Office of Management and Budget, after consultation with the Chesapeake Bay Executive Council, the chief executive of each Chesapeake Bay State (the definition of which includes the District of Columbia), and the Chesapeake Bay Commission. In addition, H.R. 1053 (Sec. 3) requires that the Administrator of the Environmental Protection Agency (EPA), "in consultation with other Federal and State agencies, shall develop an adaptive management plan for the Chesapeake Bay Program and restoration activities that includes," among other matters: a definition of specific and measurable objectives to improve water quality, habitat, and fisheries; a process for stakeholder participation; monitoring, modeling, experimentation, and other research and evaluation practices; a process for modifying restoration priorities that have not attained or will not attain the aforementioned specific and measureable objectives; and a process for prioritizing restoration activities and programs to which adaptive management is to be applied. The EPA Administrator is also required to submit annual reports on the implementation of the adaptive management plan. The proposal adds an Independent Evaluator , appointed by the Administrator from among nominees submitted by the Chesapeake Executive Council. The IE is to "review and report on restoration activities and the uses of adaptive management, including on such related topics as are suggested" by the Council (Sec. 4). The IE "shall submit a report to the Congress every 3 years in the findings and recommendations of reviews" with regard to the adaptive management plans and their implementation (Sec. 4). As noted above, the plans' inclusions are: developing measurable objectives; monitoring, modeling, experimentation, and other research and evaluation practices; and processes for modifying restoration activities as well as prioritizing restoration activities and programs. Comprehensive Everglades Restoration Plan Independent Scientific Review Panel and Independent Peer Review The Independent Scientific Review Panel , established by a collective of interdepartmental and inter-governmental offices, is to be "convened by a body, such as the National Academy of Sciences, to review the plan's progress toward achieving the natural system restoration goals of the Plan." The panel is to produce a biennial report to Congress and members of the establishing body, that includes an assessment of the ecological indicators and other measures of progress in restoring the ecology of the natural system, based on the plan. In addition, the enactment calls for an independent peer review of methods for project analysis . The statute charges the Secretary of the Army to contract with the National Academy of Sciences (with a specified authorization of appropriations), to conduct a study that includes reviews of various methods used and a comparative evaluation of the basis and validity of relevant state-of-the-art methods. The report—to be issued not later than one year after the date of the contract and submitted to the Secretary and to specified congressional committees—is to include the results of the study and specific recommendations for modifying any methods being used in the project for conducting economic and environmental analyses of water resource projects. Prince William Sound (Alaska) Oil Spill Recovery Institute and Advisory Board The Oil Spill Recovery I nstitute , established by the Secretary of Commerce, is to conduct research and carry out educational and demonstration projects designed to develop the best available techniques, equipment, and materials dealing with oil spills. In addition, the institute is to complement federal and state damage assessment efforts as well as determine, document, assess, and understand the long-range effects of relevant oil spills. The institute is to publish and make available to any person the results of its research, educational, and demonstration projects; copies of all such materials are to be provided to the National Oceanic and Atmospheric Administration. The policies of the institute are determined by an Advisory Board, which also appoints the institute's chair. The Advisory Board, itself chaired by the Secretary of Commerce, consists of federal and state officials, representatives of relevant industries, representatives of Alaska Natives, and residents of local communities. The board may also request a scientific review of a research program it authorized every five years, to be conducted by the National Academy of Sciences. The board shall establish a Scientific and Technical Committee, composed of relevant specialists, to advise and make recommendations to the board regarding the conduct and support of research, projects, and studies. Oil Pollution Research Interagency Coordinating Committee The Oil Pollution Research Interagency Coordinating Committee includes representatives from a number of federal agencies. It is chaired by the representative of the United States Coast Guard and operates under a specified budget. The committee is to report to Congress on a plan dealing with oil pollution research, development, and demonstration program. At this initial stage, the enactment requires consultation with affected states on certain matters and contracting with the National Academy of Sciences for advice and guidance on preparing the plan and assessing its adequacy. Subsequently, the committee is to coordinate the establishment of a program for conducting oil pollution research and development, which includes requirements for monitoring and evaluating relevant aspects of the plan. The committee is also authorized to make recommendations for grants to the private sector to an appropriate granting agency represented on the committee; its recommendations are to ensure an appropriate balance within a region among various aspects of oil pollution research. The chairperson of the committee is to report to Congress every two years on its activities and on activities proposed and carried out under the act. Water Resources Development Independent Peer Review Panels Various project studies authorized by the act are subject to peer review by independent panels of experts . Some reviews are mandatory, while others are discretionary; the latter include ones requested by a governor of an affected state or certain federal agencies. For each project subject to a peer review, the Chief of Engineers of the Army Corps of Engineers is to contract with the National Academy of Sciences or a similar independent scientific and technical advisory organization to establish a panel of experts, who are to represent a balance of areas of expertise suitable for the review and who have no conflict or direct involvement with the project being reviewed. Specifications for the peer review include assessing the adequacy and acceptability of economic, engineering, and environmental methods, models, and analyses. Certain committees of Congress are to be notified of a project study for peer review prior to its initiation. In addition, the review panels are to submit a report to the Chief of Engineers not more than 60 days after the last day of public comment for a draft project study or later, if the chief determines an extension is necessary. The panels are also directed to submit to the chief a final report containing certain analyses. They may make recommendations, to which the chief shall issue a written response for any recommendation adopted or not adopted. Copies of the reports and the chief's responses are to be made available to the public by electronic means and transmitted to certain congressional committees. The enactment authorizes federal funds to be used for each panel; it imposes a ceiling of $500,000, which can be waived by the chief if he or she determines the waiver to be appropriate. American Recovery and Reinvestment Act (ARRA) of 2009 Recovery Accountability and Transparency Board and Independent Advisory Panel ARRA, sometimes referred to as the Recovery Act, provides for a number of oversight mechanisms. One is the Recovery Accountability and Transparency Board , established "to coordinate and conduct oversight of covered funds to prevent fraud, waste, and abuse." The board's membership includes ten specified inspectors general and "any other Inspector General designated by the President from any agency that expends or obligates covered funds." The President is authorized to appoint the chairperson of the board, to be selected from among three officers. The three are: the OMB deputy director for management, a federal officer who already has been confirmed by the Senate for another position, or an individual who would have to be confirmed by the Senate. (The President selected the sitting Inspector General of the Department of the Interior (a confirmed position) to be chairperson.) The B oard may request information and assistance from any agency or entity of the federal government. Supplementing this, the Board is given the same powers of inspectors general operating under the IG Act of 1978, as amended. It may conduct public hearings; enter into contracts as may be necessary to carry out its duties; and transfer funds for expenses to support administrative services and audits, reviews, or other oversight activities. The B oard is further empowered to "conduct its own independent audits and reviews relating to covered funds and collaborate on audits and reviews" with any inspector general. In addition, the board's detailed audit and review functions pertain to the following: covered funds for relevant purposes; the reporting and competition requirements associated with contracts and grants to determine whether these meet applicable standards; the adequacy and training of personnel to oversee the covered funds; and the extent of appropriate mechanisms for interagency collaboration, including coordinating and collaborating with the Council of the Inspectors General on Integrity and Efficiency. ARRA also directs the board to make recommendations to agencies with regard to preventing waste, fraud, and abuse of the covered funds. An agency must respond within 30 days of the receipt of the recommendations, stating whether it agrees or disagrees and whether any actions will be taken to implement them. The B oard is also authorized to issue a variety of reports to the President and Congress. These include "flash reports" on potential management and funding problems that require immediate attention; quarterly reports summarizing the findings of the Board and inspectors general of agencies; annual reports consolidating the quarterly reports; and such other reports that the Board deems appropriate. In general, all of these reports are to be made available to the public on the Board's website. The website, which is to be "user-friendly" and "public-facing," is to provide links to related websites as well as materials and information regarding the act itself; accountability matters, including findings of the Board's and IGs' audits; data on contracts and grants relating to covered funds; the use and allocation of covered funds by each federal agency; data on relevant economic, financial, grant, and contract information to enhance public awareness of the use of the covered funds; and to the extent practical, job opportunities afforded by the program and how to access these on appropriate federal, state, and local websites and locations. Supplementing the Board is a Recovery Independent Advisory Panel . Also established by ARRA, it is composed of five members appointed by the President, based on relevant expertise. The panel is to "make recommendations to the Board on actions the Board could take to prevent waste, fraud, and abuse relating to covered funds." The panel is authorized to hold hearings and to "secure directly from any agency such information as the Panel considers necessary to carry out" its duties. Federal Information Security Management Act (FISMA) Independent Evaluations FISMA directs that "each year, each agency shall have performed an independent evaluation of the information security program and practices of that agency to determine the effectiveness of such program and practices." The Director of OMB—except for "national security systems"—is to oversee the development of the relevant information security policies, principles, standards, and guidelines; review and (dis)approve agency security programs; and take certain actions to ensure compliance with relevant policies, standards, and principles. Under the statute, the Director—based on guidelines and standards developed by the National Institute of Standards and Technology (NIST)—is specifically authorized to issue information security guidelines and standards, including minimum standards, which "shall be compulsory and binding." The statute further stipulates that the "annual evaluation required by this section shall be performed by the Inspector General or an external independent auditor ," as determined by the Inspector General of the agency" or by the head of the agency if an IG has not been established by law. Such an independent evaluation is to include (1) a testing of the effectiveness of information security control techniques and (2) an assessment (made on the basis of the results of the testing) of compliance with the requirements. These annual reviews are to include the evaluator's findings and recommendations, which are communicated to the agency head; he or she then submits the results of the reviews to the Director of OMB, who, in turn, "shall summarize the results of the evaluations" and report these to Congress. Department of Defense Independent Study on Post-Traumatic Stress Disorder Efforts Under the National Defense Authorization Act for FY2010, the Secretary of Defense, in consultation with the Secretary of Veterans Affairs, is to provide for an independent study on the treatment of post-traumatic stress disorder. The study is to be "conducted by the Institute of Medicine of the National Academy of Sciences or such other independent entity as the Secretary shall select for purposes of the study." The legislation also spells out certain requirements of the study. These include a listing of each operative program and method available for the prevention, screening, diagnosis, treatment, or rehabilitation of the disorder; the status of studies and clinical trials involving innovative treatments; a description of each treatment program and a comparison of methods among them, at specified locations; current and projected future annual expenditures by DOD and VA in this matter; and a description of gender-specific and racial and ethic group-specific mental health treatment and services available for members of the Armed Forces. The entity conducting the study is to submit an initial report, due on July 1, 2012, to the Secretaries of Defense and of Veterans Affairs and appropriate congressional committees (specifically, the House and Senate Committees on Armed Services, Appropriations, and Veterans' Affairs; the House Committee on Energy and Commerce, and the Senate Committee on Health, Education, and Welfare). Responses by the Secretaries to the report—including any recommendations for on the treatment of the disorder based on the report—are required six months later. An updated report and responses are to be submitted by July 1, 2014, and January 1, 2015, respectively. Defense Science Board Independent Assessment of Improvements in Service Contracting The National Defense Authorization Act for FY2010 provided that "the Under Secretary of Defense for Acquisition, Technology, and Logistics shall direct the Defense Science Board [DSB] to conduct an independent assessment of improvements in the procurement and oversight of services by the Department of Defense." The assessment is to cover the quality and completeness of guidance relating to the procurement of services, the extent to which best practices are being developed for setting requirements, the contracting approaches and types used for the procurement of services, and whether effective standards to measure performance have been developed. The Under Secretary, who receives the DSB study, is "to submit to the congressional defense committees a report on the results of the assessment, including such comments and recommendations as the Under Secretary considers appropriate," by a specified date (March 10, 2010, following the law's enactment on October 28, 2009). National Academy of Sciences Review of National Security Laboratories The National Defense Authorization Act for FY2010 also directs the Secretary of Energy to "enter into an agreement with the National Academy of Sciences to conduct a study of" three specified laboratories. The study is to include for each laboratory an evaluation: of the quality of the scientific research and the engineering being conducted there, of the criteria used to assess the scientific research and engineering, of the relationship between the quality of the science and engineering and the contract for managing and operating the laboratory, and of the management of work conducted by the laboratory for entities other than the Department of Energy. The NAS is "to submit to the Secretary of Energy a report containing the results of the study and any recommendations resulting from the study." By a specified date (January 1, 2011, following the October 28, 2009, enactment), the Secretary of Energy is to submit to the appropriate committees of Congress the NAS report and "any comments or recommendations of the Secretary with respect to that report." Federal Transit Administration State Safety Oversight Program for Rail Transit The Federal Transit Administration (FTA), a part of the Department of Transportation (DOT), oversees the safety and security of rail transit agencies which operate "rail fixed guideway mass transportation systems" (e.g., metrorail and subways) and which receive federal funds. Part of the process includes an oversight body for each jurisdiction. The program is designed, according to a GAO summary, "as one in which FTA, other federal agencies, states, and rail transit agencies collaborate to ensure the safety and security of rail transit systems." In most cases, each rail transit agency exists within a state, although a few extend to multi-state and other jurisdictions in such locales as the Washington, DC metropolitan area (which includes the District of Columbia, Maryland, and Virginia). Under federal law, each state or covered area designates a State authority as having responsibility—(A) to require, review, approve, and monitor the carrying out of each safety plan; (B) to investigate hazardous conditions and accidents on the systems; and (C) to require corrective action to correct or eliminate those conditions (49 U.S.C. 5330(c)). As an enforcement mechanism, the DOT Secretary is authorized to withhold funds if a state does not comply with these responsibilities. The FTA program requires each state or other appropriate jurisdictions to establish an oversight body to oversee the safety and security of its system. These oversight units are responsible for developing a program standard that transit agencies must meet and for reviewing performance of the transit agencies against that standard. The oversight agency safety and security review lays out the process and criteria to be used, at least every three years, in conducting a complete review of each affected rail transit agency's implementation of the plan. The FTA rail safety oversight program, operating through state and local oversight entities, involves several federal agencies, including components in the Department of Homeland Security and others in DOT; jurisdiction over states and metropolitan areas and agencies; oversight units that are separate from the transit operating authorities; program implementation reviews and assessments; and time schedules for reporting. A 2006 GAO report, however, found deficiencies in the system, including a failure to meet the three-year review schedule, to develop performance goals for the program, and to be able to track performance. In addition, GAO reported that expertise varied across the oversight entities, which, in some cases, suffered from inadequacies in funding and qualified staff. Reinforcement of some of these and other findings came about after a serious accident on the Washington Metropolitan Area Transit Authority (WMATA) Metrorail system in mid-2009, which revealed short-comings of its Tri-State Oversight Committee (TOC). The Committee, for instance, lacked its own e-mail address, mailing address, telephone number; more importantly, it had limited resources, staff skills, and expertise. Additional problems included ineffective and inadequate communications with the WMATA and the absence of a process to evaluate corrective action plans and alternatives to TOC proposals. These defects and deficiencies, in turn, generated plans from the administration and proposals from legislators to correct them, not only in the TOC but throughout the federal transit safety system. Forensic Science Study Conducted by an Independent Forensic Science Committee Established by the National Academy of Sciences The Science, State, Justice, Commerce, and Related Agencies Appropriations Act of 2006 authorized the "National Academy of Sciences [NAS] to conduct a study of forensic science, as described in the Senate report," accompanying the legislation. The Senate report, which authorized NAS to establish an "independent Forensic Science Committee," recognized that there exists little to no analysis of the remaining needs of the [criminal justice and law enforcement] community outside of the area of DNA. Therefore .... the Committee directs the Attorney General to provide [funds] to the National Academy of Sciences to create an independent Forensic Science Committee. This Committee shall include members of the forensics community representing operational crime laboratories, medical examiners, and coroners; legal experts; and other scientists deemed appropriate. The Senate report then set forth a series of charges to the Committee. These included assess the present and future resource needs of the forensic science community, make recommendations for maximizing the use of forensic science techniques, identify potential scientific advances, make recommendations for programs that will increase the number of qualified forensic scientists and others related professions, disseminate best practices and guidelines concerning the collection and analysis of forensic evidence, and examine the role of forensic science in homeland security. The NAS follow-up study reported on the members of the Committee; participants in hearings and meetings; literature reviewed; issues covered; and findings, conclusions, and recommendations. Improving America's Schools Act of 1994 Independent Evaluation This enactment establishes or expands on a number of educational programs, some of which are required to undergo an independent evaluation . The portion of the act dealing with the "Even Start Family Literacy Programs," for instance, directs the Secretary of Education to provide for an independent evaluation of programs assisted under this part—(1) to determine the performance and effectiveness of programs assisted under this part; and (2) identify effective Even Start programs assisted under this part that can be duplicated and used in providing technical assistance to Federal, State, and local programs (Sec. 1209). No Child Left Behind (NCLB) Act of 2001 Independent Evaluations, Reviews, and Studies, as well as Peer Reviews The NCLB Act includes numerous provisions for program evaluations, often done by state agencies involved in the programs, as well as for various independent evaluations, reviews, and studies. In some of these, the Secretary of Education: is allocated a specified funding amount, to "conduct an independent evaluation of the effectiveness" of the Early Reading Program, which specifies the contents of an interim and a final report (Sec. 1226). is allocated certain funds to provide for an independent evaluation of Even Start programs for several designated purposes: to determine the performance and effectiveness of them; to identify effective programs that can be duplicated and used in providing technical assistance to federal, state, and local programs; and to provide state educational agencies and relevant entities with technical assistance to ensure that local evaluations provide accurate information on the effectiveness of programs (Sec. 1239). is to conduct a national assessment of Title I (Improving the Academic Achievement of the Disadvantaged), adhering to an extensive set of criteria and standards, with the assistance of an independent review panel . It is composed of various specialists, education practitioners, parents and school board members, and technical experts, with a requirement to ensure diversity among the groups; the panel is to consult and advise the Secretary on methodological and other issues, including adherence to the highest standards of quality with respect to research design, statistical analysis, and the dissemination of the findings, and on the use of valid and reliable measures to document program implementation. A final report is to be reviewed by two independent experts in program evaluation, who may come from the review panel; they are to evaluate and comment on the degree to which the report meets the criteria and standards set forth and their comments are to be transmitted with the report (Sec. 1501(d)). is to conduct an independent study of assessments used for state accountability purposes and for making decisions about the promotion and graduation of students. Components of the study, not to last more than five years, are identified; and its purposes are spelled out: to synthesize and analyze existing research, evaluate academic assessment and accountability systems in State and local educational agencies and schools; and make recommendations to the Department of Education and specified congressional committees. The Secretary is authorized to award a contract for the study, through a peer review process , to an organization or entity capable of conducting rigorous, independent research (Sec. 1503). And is directed to use a peer review process to review whether a state has failed to make adequate yearly progress for a specified program (Sec. 6162), and may do so to review certain applications (Sec. 7142). Agricultural Research, Extension, and Education Reform Act of 1998 Cooperative State Research, Education, and Extension Service Peer and Merit Reviews and Advisory Board Review This 1998 act establishes several review mechanisms connected with various grant programs. One calls for the Secretary of the Department of Agriculture (USDA) to "establish procedures that provide for scientific peer review of each agricultural research grant administered on a competitive basis," by the USDA Cooperative Extension Service. These procedures are to include "a review panel [which] shall verify, at least every 5 years, that each research activity of the Department and research conducted under each research program of the Department has scientific merit." The enactment directs the review panel to consider "the scientific merit and relevance of the activity or research .... and the multistate significance of the activity or research." To help ensure its expertise and independence, the panel is to be "composed of individuals with scientific expertise, a majority of whom are not employees of the agency whose research is being reviewed," and who, to the maximum extent practicable, are to be selected from colleges and universities. As part of the consideration of the scientific merit for each research activity, the enactment sets up procedures for a "merit review of each agricultural extension or education grant administered on a competitive basis," by the Cooperative Extension Service. To be eligible for a grant, relevant institutions are to "establish a process for merit review of the activity and review the activity in accordance with the process." The results of the panel reviews are to be submitted to an Advisory Board , which is to review annually the relevance of priorities for such programs and adequacy of funding for them. The Secretary is required to consider the results of the Advisory Board's review "when formulating each request for proposals, and evaluating proposals" involving such programs. Fund for the Improvement of Post-Secondary Education (FIPSE) Independent Outside Evaluator FIPSE, operating under a project director, provides grants connected with relevant projects. An independent outside evaluator (IOE) is called for in the legislation. Hired by the project director, the IOE "must be someone who does not stand to gain personally or professionally from the project results." According to the department's guidance, the IOE is to attend the project director's meeting on evaluating a FIPSE grant and "to assist the Director in completing the initial evaluation plan/chart, due three months after the start of the grant." The IOE is also to assist the director in a number of matters, including offering advice about: which project objectives would lend themselves to measurement and evaluation, which baseline data should be collected, which measurement instruments could be used, what data might be collected from a possible comparison or control group, and how the director might disseminate evaluation results to interested parties. The independent outside evaluator is also to assist the project director in designing the evaluation instruments and to write the evaluation reports. The Carl D. Perkins Vocational and Technical Education Assistance Act Independent Advisory Panel and Independent Evaluation This legislation creates an Independent Advisory Panel (IAP) —appointed by the Secretary of Education and consisting of representatives from a broad range of experts and affected parties—to advise him or her on the implementation and assessment of the programs authorized by the act. The Secretary is also authorized to collect relevant information from states and localities which can be used in an evaluation. To assist in this, the Secretary "shall provide for the conduct of an independent evaluation and assessment of vocational and technical programs under this Act through studies and analyses conducted independently through grants, contracts, and cooperative agreements that are awarded on a competitive basis." The enactment also details the contents of such an assessment. These extend to: the efforts and effects of state, local, and tribal entities on such programs; impact of federal expenditures that address program improvements in relevant educational programs; preparation and qualifications of teachers in the fields; academic and employment outcomes of the education; employer involvement and satisfaction with such educational programs; use and impact of educational technology and "distance learning" in the field; and effect of state adjusted levels of performance and state levels of performance on the delivery of relevant services. The Secretary is also to submit to specified congressional committees an interim report on the assessment and a final report summarizing all studies and analyses related to the assessment. These reports "shall not be subject to any review outside the Department of Education" prior to their submission to Congress. But "the President, Secretary, and advisory panel .... may make such additional recommendations to Congress with respect to the assessment" as each determines appropriate. Occupational Information To Be Collected by the Social Security Administration (SSA) Independent Evaluation Under this highly specialized, narrowly focused request, the SSA sought the services of an "Independent Evaluator (IE)" regarding "pre-award and post-award evaluations of occupational information and methodology employed by private sector entities." The IE was expected to help revise and update existing coverage published by the Department of Labor. Both pre-award and post-award evaluation services and requirements are detailed in the SSA request itself and in its attachments.

Congress and the executive, as well as outside organizations, have long been attentive to the evaluation of federal programs, with frequent interest paid to the independent status of the evaluator. This interest continues into the current era, with numerous illustrations of the multi-faceted approaches adopted and proposed. An evaluation may provide information at any stage of the policy process about how a federal government policy, program, activity, or agency is working. Congress has required evaluations through legislation (or requested these via its committee and Member offices); and the executive branch has pursued evaluations through presidential or agency directives. Part of choosing how to carry out an evaluation involves deciding if some kind of "independence" would be a desirable attribute. Observers often see independence as a means of avoiding or deterring bias and ensuring an objective, impartial assessment. In the context of evaluation, independence may apply to an evaluation or to an evaluator. On one hand, for example, the term may relate to independence of an evaluation from the policy preferences of an individual or group ("independent evaluation"), perhaps by prohibiting political appointees from revising or evaluating a program. Independence may refer to an entity that conducts evaluations that also is located outside the immediate organization responsible for policy implementation ("independent evaluator"). There is some diversity of opinion regarding the definition of independence and how it might be ensured. For example, an evaluator's "external" status, outside the organization that is implementing a program, does not necessarily equate with independence. Nor would an evaluator's "internal" status, inside the implementing organization, necessarily equate with a lack of independence for an evaluation (e.g., if an expert panel reviewed the internally produced evaluation for bias). There is varying opinion concerning when independence is necessary, or possibly counterproductive, and what value it may bring. The differences of opinion among definitions and perceived need notwithstanding, instances of independent program evaluators appear to be growing in number and variety at the federal level. This report focuses on examples of independent evaluators (IEs): when an evaluation is to be conducted by an entity outside the immediate organization that is responsible for policy implementation, and the entity also is intended to have one or more dimensions of independence. IEs and similar constructs, however, vary across a number of characteristics and attributes: structure, jurisdiction, authority, resources, length of tenure, and specific duties and responsibilities. These differences, in turn, could affect their capabilities, effectiveness, and assistance to others, including their contributions to the oversight of a program or project by Congress and the executive branch. After an overview of such entities—which encompass new units created specifically for conducting an evaluation as well as existing ones, such as the Government Accountability Office and offices of the inspectors general—this report suggests possible broad characteristics and criteria of independent evaluators or similar units, which could be valuable in oversight or legislative endeavors. The Appendix describes a number of such offices—past, present, and proposed—along with citations to relevant official documents and other materials for each example (public laws, legislative proposals, executive branch directives, and secondary analyses). This report will be updated as conditions warrant.

Introduction and Overview(1) The increasing globalization of markets, including in agriculture, has brought not onlyopportunity, but also uncertainty, to U.S. farmers and ranchers, rural communities, and thebusinesses that sell to them and market their products. Up until 30 or 40 years ago, clearerdistinctions could be made between domestic and foreign markets for the products of agriculture -and early federal farm policy reflected this distinction. Farm support programs were initiallydeveloped primarily to support farm income and commodity prices through government spending. These programs were often combined with supply management measures that included importrestrictions. U.S. export competitiveness and impacts on world trade relations and patterns were lessimportant considerations. Mounting productivity has enabled U.S. agriculture to produce far more than needed simply to meet domestic demand, which is relatively stable. Foreign markets, once viewed more as an outletfor surplus production, are increasingly becoming the foundation of agriculture's prosperity (see"U.S. Agricultural Exports," below). A robust world economy and strong demand (particularly inthe developing world where consumer incomes and populations are rising) suggest strong exportprospects and positive farm returns. Conversely, when exports decline, farm income suffers - asoccurred after 1998 when the Asian financial crisis signaled the start of a wider recession that hurtU.S. agricultural exports. (Congress subsequently provided billions of dollars in federal farm aidto bolster farm incomes.) Even when world economic conditions are favorable, U.S. agriculture enters the global marketplace facing stiff competition from foreign exporting nations like Canada, Australia,Argentina, and Brazil, where production costs may be competitive with those in the United States,and the European Union (EU) and China, where strong government support in the form of subsidiesand/or other aids also play an important and often trade-distorting role, according to many analysts. Furthermore, the EU and China, along with others like Russia, Japan and Korea, have imposed whatU.S. interests consider to be unjustified sanitary and phytosanitary (SPS) and technical measures(labeling rules, segregation of imported from domestic product, etc.), high tariffs, and other importbarriers that choke access to their markets. These countries are, and are expected to remain, leadingcustomers for U.S. farm products - not only bulk grains but, increasingly, higher-value products likemeats, poultry, fruits and vegetables, and processed food products. Furthermore, their views aboutagricultural markets influence the views of policymakers in developing countries. Farm groups and agribusinesses are well aware that many world factors influence U.S. agricultural exports. They count on lawmakers and Administration officials to develop and promoteU.S. trade policies that (1) aggressively reduce foreign-imposed barriers (including tariffs, non-tariffbarriers, domestic subsidies, and export subsidies) to U.S. farm products, (2) hold other countriesaccountable for commitments they have already made in existing trade agreements, (3) resolvefestering agricultural disputes with major trading partners, and (4) fully use USDA export and foodaid programs. Some U.S. farm groups point out that, by maintaining barriers to U.S. imports and their own high export subsidies and internal farm supports, not all countries have fully honored existing tradeagreements. Such concern has on occasion dampened U.S. agriculture's enthusiasm for entering intonew trade agreements. Even when the United States wins a case in dispute settlement, as it did in1997, when the World Trade Organization (WTO) ruled in favor of the United States that the EUcannot ban, without scientific justification, beef produced with hormones, a country may not complywith the decision. In the beef case, the United States was authorized to impose retaliatory tariffs butU.S. beef still cannot enter the EU. Although U.S. officials say more trade disputes are resolvedfavorably than unfavorably (often through negotiation at lower levels rather than formal disputeresolution), there is a perception among some farmers that established international trading ruleshave not always worked to their benefit. Moreover, some U.S. producer groups (particularly those representing import-sensitive commodities) have pressed for continued protection of their own commodities, and for morerestrictions on foreign farm and food imports into the United States. The U.S. average tariff onagricultural imports (12%) is much lower than the global average tariff (62%) imposed on similarimports. However, the United States along with other developed countries restricts the entry of"import-sensitive" agricultural products to protect certain domestic producers from foreigncompetition and the economic adjustments that such imports might entail. U.S. tariff-rate quotasallow zero or low duty access for specified amounts of foreign beef, sugar, peanuts, cotton, tobacco,and dairy products. Imports above the quota may enter, but face prohibitively high tariffs. Thisusually makes such imports uncompetitive in the U.S. market. Safeguards (involving the temporaryuse of higher tariffs and/or quotas) allow producers of an affected commodity or product sectoradditional time to adjust to increased import competition. Such adjustments will be more severe inareas whose production must compete with imported products. In recent years, the United States hasimposed safeguards on imports of lamb meat and wheat gluten to allow U.S. producers of thoseproducts time to adjust to foreign competition. (2) Foreign trading partners argue that such efforts are ill-advised because free trade must flow in all directions, including into the United States. In some cases, other countries are using tradenegotiations and, sometimes, dispute settlement procedures in the WTO, to enhance their access tothe U.S. market for agricultural products, or to reduce competition in third-country markets fromsubsidized U.S. production. For example, both the lamb and wheat gluten safeguard actions weresuccessfully challenged by other WTO member countries in WTO dispute settlement and were notrenewed by the United States. More recently, in September 2002, Brazil initiated a case at the WTOagainst certain aspects of the U.S. cotton program. Many developing countries are particularly concerned about what they see as limited access tothe U.S. market for the above import-sensitive and other commodities. Such countries also see highdomestic farm supports in richer countries like the United States and EU member states astrade-distorting and are seeking substantial reductions in such support in multilateral negotiations. It is within this context of competing U.S. agricultural interests and other countries' concerns, that agricultural trade issues are likely to be taken up in legislation, congressional-executive branchconsultations on trade negotiations, or in oversight hearings during the 108th Congress. Among themost prominent are the following, which are discussed in more detail later in this report: Agriculture in Bilateral and Regional Free Trade Agreements. Unique to free trade agreements (FTAs), as illustrated by the NorthAmerican Free Trade Agreement (NAFTA), are provisions designed to fully liberalize trade (e.g.,reduce and eliminate tariffs and quotas) between partners within an agreed- upon time period. Provisions affecting agricultural trade are found in two bilateral FTAs the Bush Administrationconcluded with Chile and Singapore late in 2002. Agriculture also will likely prove to be acontentious issue in negotiating other FTAs the Administration has initiated, including withAustralia. While some agricultural commodity groups and food product manufacturers welcome themarket openings these agreements may provide, producers of import-sensitive commodities (e.g.,sugar, dairy products, meats) will carefully monitor and seek to shape those provisions that affectthem. The Administration also has placed a high priority on negotiating an agreement to remove all trade barriers within the Western Hemisphere. The Free Trade Area of the Americas ( FTAA) isintended to go beyond NAFTA to encompass all trade and services among all of the region'scountries (except Cuba), and eventually supersede both NAFTA and regional trading agreements,including the free trade agreement the United States has just negotiated with Chile and the FTAbeing negotiated with Central America. Crafting rules for liberalizing agricultural trade andnegotiating the fine details among the region's 34 countries by 2005 will be difficult and contentious. Agricultural Negotiations in the World Trade Organization. The United States is engaged in a new round of multilateral tradenegotiations, one of whose aims is further liberalization of global agricultural trade. According tothe declaration agreeing to a new trade round, the objectives for agriculture are to substantiallyimprove market access for agricultural products, reduce and phase out export subsidies, andsubstantially reduce trade-distorting domestic support. Most U.S. agricultural interest groups supportthe inclusion of agriculture in a broader multilateral trade round. These groups believe thattrade-offs possible in a comprehensive negotiation would result in improved market prospects forU.S. agricultural exports. Others, such as producers of import-sensitive crops, who feeldisadvantaged by previous trade agreements (e.g., NAFTA) or threatened by possible newagreements, are not as enthusiastic about U.S. participation in a new round. The agriculturalnegotiations have important implications for farm bill programs that provide price and incomesupport to farmers and for export and food aid programs. There are also important differences innegotiating positions among WTO member countries, especially between the United States and theEuropean Union, and between those two WTO members and the developing countries. Biotechnology and Agricultural Trade. Differences between the United States and its trading partners over genetically engineered (GE)crops and food products that contain or are derived from them pose a potential threat to, and in someinstances have already disrupted, U.S. agricultural trade. Corn and soybean exports are the mostseriously threatened crops. Underlying the conflicts are pronounced differences, reflected inconsumer attitudes and regulatory systems, between the United States and several important tradingpartners about GE products and their potential health and environmental effects. China and U.S. Agriculture. There is mounting concern from U.S. producer groups, Administration officials, and other trading partners that Chinahas been slow to implement, only partially implemented, or in some instances has failed to complywith agricultural trade commitments made under recent international trade agreements. The speedand manner with which China implements its trade commitments are critical to the development ofU.S.-China agricultural trade. While U.S. agriculture and trade officials have been working toresolve these differences, progress has been slow. Country-of-Origin Labeling. The 2002 farm bill ( P.L. 107-171 ) soon will require many food stores to provide country-of-origin labeling (COOL) onfresh fruits, vegetables, red meats, seafood, and peanuts. Proponents of COOL argue that U.S.consumers have a right to know the origin of their food, particularly during a period when foodimports are increasing, and will continue to increase under both existing and future trade agreements,and when there are concerns about food safety. Critics of the new law, however, argue that suchlabeling does not increase public health protection by telling consumers which foods are safer thanothers: all food imports already must meet equivalent U.S. food safety standards, which are enforcedvigorously by U.S. officials at the border and overseas. Scientific principles, not geography, mustbe the arbiter of safety, they add. Some critics are urging the 108th Congress to revisit the newlabeling law, on the grounds that implementation will be extremely costly and hinder rather than helpU.S. producers' competitive advantage. Proponents maintain that the expected benefits to U.S.farmers, ranchers, and consumers will outweigh implementation and compliance costs. Agricultural Exports to Cuba. U.S. policy is to exempt commercial sales of agricultural and medical products from U.S. unilateral sanctionsimposed on foreign countries, subject to specified conditions and prohibitions. Debate continues,though, among policymakers on the scope of restrictions that should apply to agricultural sales toCuba. Bilateral Trade Disputes. The United States is engaged in a variety of trade disputes involving individual countries. The outcome of a number ofthese could prove critical to future application and recognition of WTO farm subsidy rules, disputesettlement procedures, and other world trade issues of importance to U.S. agriculture. Among thedisputes are: A WTO case, instituted in September 2002, by Brazil against certain aspects of the U.S. cotton program . Subsequent consultations between the United States andBrazil inDecember and January failed to resolve the dispute. Continuation of the WTO dispute settlementprocess could lead to a "final" panel decision for or against the complaining country. Resolution ofthe case in Brazil's favor could result in WTO recommendations concerning implementation of U.S.cotton program provisions. Non-compliance with such provisions on the part of the United Statescould result in compensation or possible limited trade sanctions. A U.S. complaint that Canadian wheat trading practices, particularly theexport practices of the Canadian Wheat Board (CWB), are inconsistent with Canada's WTOobligations and disadvantage U.S. wheat exporters in Canadian and international markets. Canadamaintains that Canadian import practices and the CWB wheat export practices comply fully withinternational trade rules and its WTO obligations. Successful resolution of this dispute in favor ofthe United States could result in greater competitiveness for U.S. wheat vis-a-vis Canadian wheatin international markets and in U.S. wheat having improved access to the Canadianmarket. Import barriers by Russia, Mexico, the EU, and Japan, affecting U.S. meat and/or poultry exports . The United States is one of the world's leaders in meat and poultry trade. Meat and poultry products are among the fastest growing components of U.S. agricultural exports. However, at the same time that the industries' reliance on foreign markets is increasing, countrieshave instituted barriers that have disrupted exports, threatened future growth, and heightened tradetensions. Longstanding sweetener trade disputes between the United States and Mexico . Mutual recognition that NAFTA sugar provisions have not worked prompted U.S. andMexican negotiators to intensify efforts in mid-2002 to resolve two key issues: market access forMexican sugar in the U.S. market, and market access and sales of U.S. high fructose corn syrup inMexico. However, talks have been stalled. Appropriations for Agricultural Export and Food Aid Programs. Congress is currently considering FY2004 appropriations for USDA'sinternational activities. At issue are funding levels for agricultural export subsidies, export marketdevelopment programs, export credit guarantees, and foreign food aid. Congress and theAdministration have been at odds over the use of Commodity Credit Corporation (CCC) funds tofinance food aid programs and over the Administration's decision in 2003 to begin phasing out foodaid based on surpluses. U.S. Agricultural Exports Agricultural exports, which totaled $53.5 billion in FY2002, are important to both the farm andnon-farm economy. (3) The U.S. Department ofAgriculture (USDA) estimates that the share of U.S.production volume exported is 43.5% for wheat, 53.3 % for rice, 20% for corn, 43.1 % for soybeansand products, and 45% for cotton. An estimated 25% of gross farm income comes from exports. According to USDA, each dollar received from agricultural exports (in 2001) stimulates another$1.47 in supporting non-farm activities. Agricultural exports generated an estimated 740,000full-time civilian jobs, including 444,000 jobs in the non-farm sector. Agricultural exports accountfor 7.36% of U.S. merchandise exports and are the third largest component of such exports afterelectrical machinery (9.88%) and vehicles (7.45%). (4) U.S. agricultural trade has consistentlyregistered a positive, though recently declining, balance. Nearly every state exports agricultural commodities. In FY2001, the leading agricultural exporting states were (in order) California, Texas, Iowa, Kansas, Illinois, Nebraska, Minnesota,Washington, Indiana, and North Carolina. These 10 states accounted for nearly 60% of the totalvalue of U.S. agricultural exports. After growing rapidly in the 1970s, U.S. agricultural exports reached a high of $43.8 billion in FY1981, but then declined by 40% to $26.3 billion by FY1986. A decade later, exports hadrecovered and reached a new peak of nearly $60 billion (FY1996), but then began a decline thatdipped to $49 billion by FY1999. Main reasons for the decline were continuing financial turmoilin East and Southeast Asian markets, and increased competition for corn, wheat, and soybeans inglobal markets. Exports since then have recovered, rising to $52.7 billion for FY2001, and anestimated $53.5 billion in FY2002. USDA currently forecasts FY2003 export value at $57 billion. The commodity composition of U.S. agricultural exports has changed over time. For years, bulk commodities such as grains, oilseeds, and cotton were the mainstay of U.S. agricultural exports. Since FY1991, however, higher value products have accounted for a growing share of totalagricultural exports. These higher value exports, which include intermediate products such as wheatflour, feedstuffs, and vegetable oils and consumer-ready products such as fruits, nuts, meats, andprocessed foods, accounted for 65% of the total value of U.S. agricultural exports in FY2001. Many variables interact to determine the level of U.S. agricultural exports: income, populationgrowth, and tastes and preferences in foreign markets; U.S. and foreign production and commodityprices; and exchange rates. U.S. agricultural export and food aid programs, domestic farm policiesthat affect output and price, and trade agreements with others also influence the level of U.S.agricultural exports. U.S. Agricultural Imports The United States is also a major importer of agricultural commodities and food products. USDA classifies these as either non-competitive or competitive imports. Non-competitive productsinclude primarily tropical products (coffee, cocoa, bananas, rubber, and spices) that generally are notproduced domestically. Imports that compete against domestic output include red meats (primarilybeef), fruits and juices, vegetables and preparations, wine and beer, certain grains and feeds, certainoilseeds, sugar and related products, and dairy products. USDA estimates the import share of allU.S. food consumption was 8.8% in 2000. Agricultural imports have risen by 83% over the lastdecade, from $22.7 billion in FY1991 to $41 billion in FY2001. Factors contributing to this growthin import demand include the extended U.S. economic expansion during this period, low commodityprices, the strong U.S. dollar which made imports cheaper, and the effects of trade agreements.Non-competitive imports (about $6.6 billion) accounted for 17% of all agricultural imports inFY2001. The value of competitive imports was nearly $33 billion (83% of the total). Though a large share of agricultural imports-about 80% on average of total agriculturalimports-compete against U.S. products, they also generate economic activity in the U.S. economy. These imports provide additional income to, and increased employment at, businesses involved infood processing and in providing transportation, trade, and related services. Consumers also benefitfrom agricultural imports if they result in lower prices, and from a wider choice of products andoff-season availability of some foods, particularly fruits and vegetables. (For more information see CRS Report 98-253 , U.S. Agricultural Trade: Trends, Composition, Direction, and Policy .) Agriculture in Bilateral Free Trade Agreements (5) Issue Unique to free trade agreements (FTAs), as illustrated by the North American Free Trade Agreement (NAFTA), are provisions designed to liberalize trade by reducing and eliminate tariffs,quotas, and nontariff barriers) between partners within an agreed- upon time period. Provisionsaffecting agricultural trade are found in two bilateral FTAs the Bush Administration concluded withChile and Singapore late in 2002. Agriculture also will likely prove to be a contentious issue innegotiating other FTAs the Administration has initiated. While some agricultural commodity groupsand food product manufacturers welcome the market openings these agreements may provide,producers of import-sensitive commodities (e.g., sugar, dairy products, meats) will carefully monitorand seek to shape those provisions that affect them. Producers are concerned about the transitionperiods before agricultural products would be granted free access into the other country's market,and about rules of origin, safeguards against import surges, and the terms under which sanitary andphytosanitary (SPS) rules are applied. Background and Analysis In 2002, U.S. agricultural exports to the 14 FTA candidate countries (including Chile and Singapore) totaled $5.0 billion, and accounted for almost 9% of all U.S. agricultural exports. Halfof these sales were to the five Central American countries, a growing U.S. market. Combined U.S.agricultural imports from these 14 countries totaled $5.2 billion, and represented over 12% of allagricultural imports. Imports from the Central American candidates totaled $1.9 billion (more thanone third of the import value entering from all FTA candidates). The largest single country supplierwas Australia (selling $1.9 billion in farm goods), followed by Chile ($1.2 billion). Chile . In the Chile FTA, negotiating the agricultural provisions - especially the terms of market access for sensitive farm products and the application of some SPS rules - proved to beamong the most contentious issues. These were resolved when top trade officials from bothcountries became involved in the process to bring the negotiations to a conclusion. Both the UnitedStates and Chile agreed to phase out tariffs - the primary means of border protection - on asubstantial portion of agricultural products traded between them by 2007, but compromised to adopta 12-year transition period before each market is fully open to import-sensitive products enteringfrom the other country. The market access provisions will apply to all traded merchandise - noagricultural product is excluded. The agreement eliminates the use of export subsidies onagricultural trade between both countries, but allows the United States to respond if third countriesuse subsidies to displace U.S. products in the Chilean market. It also includes an agriculturalsafeguard provision sought by the United States to protect agricultural producers from sudden surgesin Chilean imports. Both sides also have committed to resolve outstanding SPS issues that have, forexample, limited U.S. sales of meat products and some fruits to Chile. The U.S. Trade Representative (USTR) states the FTA's provisions will grant duty-free status to more than 75% of U.S. agricultural exports (valued at $111 million in 2002) to Chile within 4years. Such treatment will apply to U.S. pork and products, beef and products, soybeans and soybeanmeal, durum wheat, feed grains, potatoes, and processed food products (i.e., french fries, pasta,distilled spirits and breakfast cereals). Chilean tariffs on all other products will be phased out within12 years. The agreement requires Chile to phase out with respect to imports from the United Statesits price-band system designed to protect domestically-produced wheat, wheat flour, vegetable oils,and sugar. Chile also committed to recognizing the U.S. meat grading system - allowing for the saleof U.S. beef and pork products with the USDA prime and choice labels in that market. Chile views improved market access for its agricultural products to the large and growing U.S. market as important to its economic growth, because agricultural exports ($1.2 billion in 2002)represent about one-third of Chile's total exports to the United States. Its negotiators soughtimmediate reductions in U.S. tariffs on horticultural and other products, as well as changes in howU.S. anti-dumping and countervailing rules are applied. U.S. producers of apricots, mushrooms,cling peaches, fruit juices, and other horticultural products, however, asked to be excluded from theFTA's coverage or sought long transition periods before tariffs on their products were eliminated. According to Chile's Foreign Minister, the agreement grants 95% of Chile's exports duty-free statusto the U.S. market within four years. With wine an important Chilean export, Chile agreed to reduceits tariff on wine imports to the lower U.S. level, after which both countries will eliminate tariffs onwine. Negotiating Chile's terms of access for agricultural products viewed as "sensitive" by somesegments of U.S. agriculture reportedly were difficult to conclude. Details that took time to resolvein creating tariff-rate quotas (TRQs) for dairy, sugar, and horticultural products were the size of eachquota, the pace at which the over-quota tariff rate is phased out, the growth rate for each quotacreated, and whether the within-quota tariff would be low or zero. Access for sugar reportedly willdepend on Chile (now a sugar importer) becoming a net exporter (i.e., produces a surplus availablefor export). Negotiations on SPS barriers proceeded along a track parallel to the market access talks, but the FTA agreement appears to leave them unresolved. With U.S. exporters having faced SPSobstacles in recent years in selling pork, beef, dairy and poultry products, and certain fruit to theChilean market, the United States pressed to resolve outstanding SPS issues so that they would notaffect U.S. exporters' access to the Chilean market once the FTA takes effect. Negotiatorsapparently did not resolve SPS issues relating to U.S. beef and pork exports. The final textreportedly does not include language sought by the United States that Chile would accept the U.S.meat inspection system as equivalent to its own. U.S. trade officials indicated last December thatthe Administration will not submit the FTA to Congress for approval until Chile accepts the U.S.position. The private-sector Agricultural Policy Advisory Committee (APAC) on February 28, 2003, reported to USTR that the FTA with Chile "will improve U.S. exports of agricultural products byopening the Chilean market and providing reciprocal access for U.S. products, [and] ... provides asensible timetable for the elimination of agricultural tariffs for import sensitive products includinga gradual phase out of tariffs and an import safeguard." Some of the commodity advisorycommittees, though, in their separate reports raised concerns about some provisions of the FTA. They complained, for example, that not being provided with the text of the agreement by USTRhampered their ability to assess potential impacts. Singapore . Being primarily urban, this city state produces little of its own food. Reflecting this, its tariffs applied on imported agricultural commodities and food products (except for beer,wine and spirits) are currently zero. U.S. agricultural and food exports in 2002 totaled $240 million,compared to $56 million in similar imports. Top U.S. agricultural exports were fruit and relatedproducts, vegetables and related products, cooking oils, snack foods, and poultry meat. Purchasesof cocoa paste and butter, snack foods, rubber and related products, and spices from Singaporeaccounted for more than half of agricultural imports. Because Singapore is a major shipping hub, some U.S. commodity groups sought the inclusion of rules of origin in the FTA to prohibit duty-free treatment of food products transhipped throughits port from neighboring agricultural producing countries in Southeast Asia. The APAC reportedto USTR on February 26, 2003, that the agreement's "rules of origin will protect U.S. producersfrom imports of ineligible products from third countries through Singapore." The majority on thesweeteners and related products advisory committee, however, raised concerns about whether theserules are written in such a way to prevent access to the U.S. market for sugar-containing productsshipped from Singapore. APAC's report further stated that this FTA achieves U.S. negotiatingobjectives of eliminating tariffs and securing market opportunities "by permanently opening theSingapore market for U.S. agricultural products," making them eligible for duty free access. Other FTAs . As part of its overall trade strategy, the Bush Administration has initiated, or shortly will begin, FTA negotiations with four other countries or regional blocs: five CentralAmerican countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua), Morocco, theSouthern African Customs Union (South Africa, Botswana, Lesotho, Namibia, and Swaziland), andAustralia. Some U.S. agricultural interests concerned about the competitive pressures expected from free trade with these countries oppose negotiating FTAs, preferring that the Administration instead focuson efforts to secure multilateral trade liberalization in the WTO's trade negotiations. As examples,the U.S. sugar industry advocates this strategy, since Central America, Australia, and South Africaare major sugar exporters. The U.S. beef and dairy industries also are concerned about Australia'sability to supply the U.S. market, and oppose an FTA with that country. U.S. food manufacturers,though, see opportunities in FTAs with Central America, Morocco, and South Africa. Role of Congress The President notified Congress January 30, 2003 of his intent to sign free trade agreementswith Singapore and Chile, initiating a 90-day period mandated by the Trade Act of 2002 ( P.L.107-210 ), after which the United States can sign the agreements. The 2002 act further requires thatthe Administration consult with the House and Senate Agriculture Committees, particularly on thepotential impact of free trade on U.S. import-sensitive agricultural products, as these FTAnegotiations proceed. Once agreements have been signed, the President and Congress will developdraft implementing legislation which would be handled by Congress on an expedited or fast trackbasis according to procedures established in P.L. 107-210 . For More Information CRS Electronic Briefing Book, Agriculture Policy and Farm Bill, Agriculture in the U.S. - Chile Free Trade Agreement. CRS Electronic Briefing Book, Trade, U.S.-Chile Free Trade Agreement . CRS Electronic Briefing Book, Trade, U.S.-Central America Free Trade Agreement . CRS Electronic Briefing Book, Trade, Singapore-U.S. Free Trade Agreement . CRS Electronic Briefing Book, Trade, U.S.-Southern African Customs Union (SACU) Free Trade Agreement. CRS Report RL31709 , The U.S.-Singapore Free Trade Agreement . CRS Report RL31144 , The U.S.-Chile Free Trade Agreement: Economic and Trade Policy Issues . Agriculture in the Free Trade Area of the Americas (FTAA) (6) Issue The Administration has placed a high priority on negotiating an agreement to remove all trade barriers within the Western Hemisphere. The FTAA is intended to go beyond NAFTA to encompassall trade and services among all of the region's countries (except Cuba), and eventually supersedeboth NAFTA and regional trading agreements, including the free trade agreement the United Stateshas just negotiated with Chile and the FTA being negotiated with Central America. Crafting rulesfor liberalizing agricultural trade and negotiating the fine details among the region's 34 countries by2005 will be difficult and contentious. Background and Analysis U.S. agricultural exports to the markets that an FTAA would open (the countries of South America, Central America, and the Carribean) were $4.457 billion or 8.4% of U.S. global farmproduct sales in 2002. Commodity and food imports from these three regions, by contrast, accountedfor $6.814 billion, nearly 17% of U.S. agricultural imports. At the third Summit of the Americas in April 2001, hemispheric leaders ratified dates for concluding the FTAA negotiations (January 2005) and making the agreement effective (December2005). They further committed to make the negotiating process more transparent and accessible. Trade officials reached agreement on the modalities (formulas, targets, or schedules) to be followedfor making tariff reductions in late August 2002. They agreed that all countries (except CARICOMmembers - comprising most Caribbean islands, Belize in Central America, and Guyana andSuriname in South America) could start tariff cuts from current applied rates rather than from thehigher bound rates that all WTO members adopted in the last multilateral negotiating round.CARICOM countries will be allowed to identify those agricultural and other products where themaximum bound rate could be used as the reference point for reducing tariffs. The November 1,2002, meeting of trade ministers in Ecuador finalized the negotiating pace and process to be followedover the 2003-2004 period. These final stages of the FTAA negotiations are being co-chaired byBrazil and the United States. All FTAA countries met the February 15, 2003, deadline for presentingtheir initial tariff reduction offers. Each country will respond to these in the form of market accessrequests, due by June 15, 2003. Revised offers would then follow this "request-offer" process. USTR's Ambassador Zoellick, on February 11, 2003, laid out the scope of the U.S. tariff reduction offer on agricultural and other products. In unveiling this offer, he said that the UnitedStates is prepared to grant immediate duty-free access on 56% of the agricultural products that enterfrom non-NAFTA countries once the agreement takes effect. On politically-sensitive farm products,Ambassador Zoellick stated that the United States proposes to eliminate tariffs with specifictimetables that would differ between countries or regional groups. Transition periods could be 5 or10 years, or even longer, depending upon a country's size and its level of economic development,and the type of agricultural product. Ambassador Zoellick indicated all agricultural products are onthe table and subject to negotiation (i.e., no exclusions), and that the United States will move forwardwith other countries willing to take the same position. Hemispheric free trade in agriculture by about 2020 is envisioned if negotiators reach agreement on an FTAA in 2005. The agricultural component of the FTAA negotiating process, though, couldbecome problematic once negotiators begin to apply negotiating modalities to specific commoditiesand food products that each country historically has protected. Some Latin American countries,particularly Brazil, seek increased access to the U.S. market for competitive products such as beef,citrus, and sugar. U.S. commodity groups and agribusiness seek additional openings for theirproducts in the rapidly growing Latin American market. They also seek legal assurances that allcountries will abide by sanitary and phytosanitary (SPS) rules with respect to agricultural imports. Though the United States will emphasize eliminating tariffs and other barriers to agricultural trade,Brazil and other countries have signaled they want the negotiating agenda to also address the issueof domestic agricultural support (i.e., farm price and income support). They have suggested linkingreductions in their higher tariffs to a concession by the United States on the domestic support issue. The United States has countered that this issue is not one of the agreed-upon FTAA objectives, andshould instead be addressed jointly by all FTAA countries in the ongoing multilateral WTOagriculture negotiations. Role of Congress Congress would take up any agreement that results from negotiations to establish the FTAA under fast track procedures (in P.L. 107-210 ) for congressional consideration of legislation toimplement trade agreements. In the meantime, according to the procedures established in P.L.107-210 , Congress and the Administration will be consulting as negotiations proceed. For More Information CRS Report RL30935 , Agricultural Trade in the Free Trade Area of the Americas . CRS Report RS20864 , A Free Trade Area of the Americas: Status of Negotiations and Major Policy Issues . Agricultural Negotiations in the World Trade Organization (7) Issue The United States is engaged in a new round of multilateral trade negotiations, one of whoseaims is further liberalization of global agricultural trade. According to the declaration agreeing toa new trade round, the objectives for agriculture are to substantially improve market access foragricultural products, reduce and phase out export subsidies, and substantially reduce trade-distortingdomestic support. Most U.S. agricultural interest groups support the inclusion of agriculture in abroader multilateral trade round. These groups believe that trade-offs possible in a comprehensivenegotiation would result in improved market prospects for U.S. agricultural exports. Others, suchas producers of import-sensitive crops, who feel disadvantaged by previous trade agreements (e.g.,NAFTA) or threatened by possible new agreements, are not as enthusiastic about U.S. participationin a new round. The agricultural negotiations have important implications for farm bill programsthat provide price and income support to farmers and for export and food aid programs. There arealso important differences in negotiating positions among WTO member countries, especiallybetween the United States and the European Union, and between those two WTO members and thedeveloping countries. Background and Analysis At the World Trade Organization (WTO) Fourth Ministerial Conference in Doha, Qatar, in November 2001, trade ministers agreed on a declaration to begin a new round of multilateral tradenegotiations (MTNs), including negotiations on agriculture. This new round, because of its emphasison integrating developing countries into the world trading system, is called the Doha DevelopmentAgenda (DDA). A first phase of agricultural trade negotiations had been underway since early 2000. The DDA incorporates those negotiations into a comprehensive multilateral trade negotiation andbegins a second phase of negotiations on agriculture. For agriculture, the Doha Ministerial Declaration states that "building on the work carried out to date (in the sectoral negotiations)" and "without prejudging the outcome of the negotiations, wecommit ourselves to comprehensive negotiations aimed at: substantial improvements in marketaccess; reductions of, with a view to phasing out, all forms of export subsidies; and substantialreductions in trade-distorting domestic support." The Declaration also provides that "special anddifferential treatment for developing countries shall be an integral part of all elements of thenegotiations." The Declaration takes note of "non-trade concerns reflected in negotiating proposalsof Members" and confirms that " non-trade concerns will be taken into account" in thenegotiations. During 2002, WTO member countries discussed the issues of market access, export competition, and domestic support. The United States, the Cairns Group of agricultural exportingcountries, (8) the European Union (EU), Japan, andseveral developing countries submitted negotiatingproposals during 2002. (9) The DDA called forreaching an agreement by March 31, 2003 on "modalities" (e.g., formulas, targets, timetables) for achieving the objectives mandated by the DohaDeclaration, but that deadline was missed. Now, negotiations on modalities will continue butprobably not be completed until the September WTO Ministerial Conference scheduled forSeptember 2003 in Cancun, Mexico. Negotiating modalities has not been easy. Member countries differ sharply in their choice of modalities. For example, some want to reduce high tariffs more rapidly than lower tariffs, whileothers will want to protect "sensitive" products by slowing the pace of tariff reduction. Similarly,some want rapid reductions in export or domestic subsidies while others will want longer timetablesfor reductions. Once an agreement on modalities is reached, WTO member countries would beginto negotiate individual country schedules or lists of commitments. The U.S. position, first tabled in June 2000 and amplified in a July 2002 proposal, includes the elimination of agricultural export subsidies; substantial reductions in tariffs (with no country'sindividual tariff exceeding 25%); 20% increases in tariff-rate quotas on agricultural imports;disciplines on state trading enterprises; and reductions in "amber box" spending (trade distortingdomestic support) to no more than 5% of the value of each country's total agricultural production- the objective being to make all countries' domestic support levels comparable in relative terms(i.e., harmonized). (10) Most of these changeswould be phased in over 5 years. Ultimately, accordingto the U.S. proposal, tariffs and domestic support also would be eliminated. The Cairns Groupproposal, which is strongly supportive of the U.S. position, also calls for deep cuts in tariffs anddomestic support and the elimination of export subsidies. Many in Congress have expressed supportfor the U.S. negotiating proposal, but have made their support contingent on reduction andharmonization of tariffs and subsidies by other WTO members, especially the EU. In sharp contrast to the U.S. position, the EU calls for applying formulas used in Uruguay Round agriculture negotiations (1986-1994) as modalities. Such an approach would yieldprogressive reductions in tariffs and subsidies but not harmonization or elimination. The EUalso has conditioned its support for export subsidy reduction on negotiating disciplines forexport credit programs and food aid programs. The EU negotiating proposal, along withthose of Japan and Korea place greater emphasis on so-called non-trade concerns likeprotecting the environment, animal welfare, and rural development. Those WTO membersare seeking exemptions from WTO reduction commitments and disciplines for subsidiesprovided to promote such non-trade concerns. The U.S. position is silent on non-tradeconcerns, but U.S. trade negotiators express fears that payments to producers to promotenon-trade concerns would be disguised trade-distorting measures. Some suggest that the success of the agriculture negotiations depends on the pace of agricultural policy reform in the EU and the United States. A recent agreement betweenFrance and Germany to maintain EU domestic farm support at current levels and postpone anyreductions in support until after 2007 may make it more difficult for the EU to agree toagricultural trade reforms in the current round. In the EU, efforts to reform its CommonAgricultural Policy face considerable opposition from several EU member states. Thesereforms, which include substantial de-coupling of income support from production andreductions in price supports, could, if adopted, facilitate the EU's ability to accept cuts intrade-distorting domestic support or the elimination of export subsidies. In the United States, the President on May 13, 2002, signed into law a farm bill ( P.L. 107-171 ) to replace the 1996 Federal Agricultural Improvement and Reform, or FAIR, Act)that, many critics say, could raise trade-distorting domestic support above U.S. WTOcommitments to reduce such spending and also undermine the U.S. position in the new round. However, the farm bill stipulates that the Secretary shall, to the maximum extent possible,make adjustments in U.S. farm subsidies to ensure that it does not exceed levels allowableunder the WTO Agreement on Agriculture. Moreover, U.S. trade officials insist that theUnited States has not wavered from its negotiating objective of securing substantialreductions in domestic subsidies, including U.S. subsidies, that distort trade, and thatcongressional support for the U.S. negotiating proposal remains strong. Developing countries who constitute the majority of WTO members are calling for rapid dismantling of developed countries' trade barriers and the elimination of production-linkeddomestic subsidies. Developing countries are also seeking exemptions for developingcountry domestic support deemed essential for economic development. Developing countriesare a large and diverse group with many different position on negotiating issues, but many,especially those that are exporters of agricultural products, have targeted both U.S. and EUsubsidies for elimination in the negotiations. While developing countries are seekingsubstantial reductions in agricultural tariffs of developed countries, they are resistant to theidea of reciprocal tariff reductions, preferring instead to be accorded special and differentialtreatment which would entail maintaining tariffs or phasing them down over lengthy timeperiods. To facilitate the process of reaching agreement on modalities, the chairman of the Agriculture Negotiating Group, Stuart Harbinson, issued on February 17, 2003 and revisedslightly on March 20, 2003, a draft paper with various proposals for modalities. Harbinson's"modalities " report attempted to steer a middle course between the U.S. and EU negotiatingpositions, while according special and differential treatment to developing countries. Chairman Harbinson's report dealt with the three so-called pillars of the agriculturenegotiations: market access, export competition, and domestic support. On market access,he proposed that for tariffs greater than 90% ad valorem the simple average would be reducedby 60% subject to a minimum cut of 45% per tariff line; for agricultural tariffs lower than orequal to 90% but greater than 15%, the simple average reduction would be 50% subject to aminimum cut of 35% per tariff line; and for all agricultural tariffs lower than or equal to 15%,the simple average reduction would be 40% subject to a minimum cut of 25% per tariff line. On export competition, Harbinson's modalities report recommends that export subsidies be eliminated over a ten-year period. Export credit and food aid programs would also becovered by new rules. Repayment terms for export credits would be limited to a maximumof six months but developing countries would be allowed longer repayment periods. Onlygrant food aid would be permitted under the Harbinson recommendations. However, food aidprovided in kind for development projects could be provided through United Nations foodagencies or UN food agency projects operated by non-governmental or charitableorganizations. On domestic support, the modalities report calls for a 60% reduction in trade-distorting (or amber box) support. The report also suggested that trade-distorting support tied toproduction limits (blue box support used primarily by the EU) be capped and then reduced by50% over five years. The modalities report also included an option for eliminating the bluebox altogether by including it in the amber box category and subjecting it to a 60% reduction. While U.S. trade negotiators indicated they considered the modalities report as a reference point for further negotiations, they were highly critical of specific proposals. At ameeting of WTO trade ministers in Tokyo (February 14-16) where a draft of the report wasconsidered, the United States and the Cairns Group said the recommendations fell far shortof their earlier proposals. U.S. criticisms, among others, were that the market accessprovisions did not result in harmonization of tariff levels and that the application of theHarbinson approach would still leave very high tariffs on many products, especially meatproducts. While the U.S. trade officials welcomed the elimination of export subsidies, theynoted that the ten-year phase-out schedule should be considerably shortened. According toU.S. participants in the Tokyo meeting, reduction proposals for amber box support wouldenable the EU to maintain trade-distorting blue box payments and to continue to provideconsiderably more trade-distorting amber box support than could the United States. U.S.amber box support is capped at $19 billion annually, while the EU's is capped at $67 billion. Under the Harbinson proposal, U.S. amber box support would fall to around $8 billion peryear, while the EU's would be capped at $27 billion per year. Not only the Administration, but many in Congress reacted negatively to the Harbinson proposals for the agriculture trade negotiations. A particular concern was that the Harbinsonproposal for a 60% reduction in trade-distorting or amber box support, did not "level theplaying field" between the United States and the EU. Permitted EU trade distorting subsidieswould still be more than three times the level of permitted U.S. subsidies. Also in the 2002Trade Act, Congress had made preserving export credit guarantee programs a majornegotiating objective. The Harbinson proposals for tightening export credit programdisciplines are thus likely to come under intense congressional scrutiny. The EU also reacted negatively to the Harbinson proposals. In the EU view, they were unbalanced and placed most of the burden of adjustment on the EU. The EU was particularlyconcerned that, with the exception of adding animal welfare subsidies to the category ofnon-trade distorting (or green box) subsidies, the Harbinson report ignored non-tradeconcerns. The EU criticized the report's call for the elimination of export subsidies withoutsimilarly disciplining export credit programs, such as U.S. export credit guarantees. EUofficials argued also that blue box subsidies are less trade distorting than amber box supportand should not be subject to the same reduction requirements as amber box support. Missing the deadline for agreeing to modalities, some observers suggest, indicates that the agriculture negotiations are stalled with neither side prepared to compromise. Some evensuggest that the inability to agree on a way forward for agriculture imperils the entire Doharound. However, both U.S. and EU negotiators are maintaining that an agreement onmodalities can be reached by the time of the Cancun Ministerial and that the missed deadline,though serious, will not forestall concluding the round by January 1, 2005. Role of Congress Congress would take up any agreements that results from the Doha round of trade negotiations under fast track procedures (in P.L. 107-210 ) for congressional consideration oflegislation to implement trade agreements. In the meantime, according to the proceduresestablished in P.L. 107-210 , Congress and the Administration will be consulting asnegotiations proceed. Interaction during the period of consultation between Congress and theAdministration on negotiating positions and strategies will lay the groundwork forcongressional consideration of an agreement. Meeting the 2005 deadline for completing negotiations in the new trade round is critical as are the consultations with Congress required by the Administration under the 2002 TradeAct. Congressional fast track procedures will expire by June 1, 2005, but could be extendedif the President satisfies the consultation requirements in P.L. 107-210 and if progress is beingmade in meeting the negotiating objectives set forth in the Trade Act of 2002. For More Information CRS Electronic Briefing Book, Trade, Agriculture Negotiations in the World Trade Organization. CRS Electronic Trade Briefing, Trade, The World Trade Organization: the Doha Ministerial. CRS Issue Brief 98928, The World Trade Organization-Background and Issues , updated regularly CRS Report RS21085, Agriculture in WTO Negotiations CRS Report RS21085, Agriculture in WTO Negotiations . Biotechnology and Agricultural Trade (11) Issue Differences between the United States and its trading partners over genetically engineered (GE) crops and food products that contain or are derived from them pose apotential threat to, and in some instances have already disrupted, U.S. agricultural trade. Cornand soybean exports are the most seriously threatened crops. Underlying the conflicts arepronounced differences, reflected in consumer attitudes and regulatory systems, between theUnited States and several important trading partners about GE products and their potentialhealth and environmental effects. Background and Analysis Widespread farmer adoption of bio-engineered crops in the United States makes consumer acceptance of GE crops and foods at home and abroad critical to U.S. producers,processors, and exporters. U.S. farmers, who use GE crops to reduce production costs ormake field work more flexible, planted 66% of the estimated 145 million acres planted to GEcrops worldwide in 2002, according to the International Service for the Acquisition ofAgri-Biotech Applications. Supporters of GE crops maintain that the technology reduces theuse of environmentally damaging chemical inputs. U.S. consumers, with some exceptions,have been generally accepting of the safety of GE foods. More attention has been paid in theUnited States to the allegedly adverse environmental impacts of planting GE varieties. Incontrast, in the European Union (EU), Japan, South Korea, and elsewhere, consumers,environmentalists, and some scientists maintain that the long-term effects of GE foods on bothhealth and the environment are unknown and not scientifically established. The EU, inparticular, insists that precaution should be used in approving and regulating GE foods. Elsewhere, China has announced new regulations for approving and labeling GE products,which, U.S. officials and exporters contend, could be potential trade barriers. In the EU, a de facto moratorium, in effect since 1998, on approvals of GE crops haseffectively eliminated U.S. corn exports. Industry and USDA estimates are that $300 millionof corn exports are lost annually as long as the moratorium is in effect because the EU has notapproved GE varieties of corn produced in the United States-varieties which EU scientificcommittees that advise the EU Commission have found to be safe for consumption and forthe environment. Although China's regulations for GE crops threaten U.S. soybean exports,so far soybean exports, which have averaged around $900 million per year (2000-2002), havenot been disrupted. Supporters of GE crops maintain also that the technology holds promise for enhancing agricultural productivity and improving nutrition in developing countries. There are,however, many technical, legal, social and other obstacles to be overcome before the potentialcontribution of biotechnology to food security in developing countries could be realized. Inthe meantime, concerns about the possible health, environmental, and commercial risksassociated with GE crops have posed some difficulties in meeting urgent food aid needs insouthern Africa. One country suffering from severe food shortages in that region has rejectedfood aid shipments containing GE corn, while others in the region have required that GE cornin food aid be milled, thus adding to the costs of providing relief. Other developing countriescomplain about the lack of international standards and procedures for assuring that health andenvironmental risks associated with GE crops are manageable and acceptable, thusminimizing commercial risks from producing and exporting GE crops. U.S. regulations for GE foods have facilitated their introduction into U.S. agriculture and food processing. The principle has been that GE foods are "substantially equivalent" tonon-GE foods; therefore, existing regulations for approving foods are appropriate andadequate. Labeling with respect to GE content is not required, except where there is asignificant difference between the conventional and the GE food product (for example, thepresence of an allergen). The EU, Japan, South Korea, China, Australia, and New Zealandeither have or are establishing mandatory labeling requirements for products containing orderived from GE ingredients. Japan, the EU, China, and South Korea are respectively thesecond, fourth, fifth, and sixth largest overseas markets for U.S. agricultural exports. Now that the EU has approved further EU-wide legislation for approving and regulatingGE products, for tracing GE crops through the marketing chain, and for labeling products thatcontain or are derived from GE ingredients, there appears to be some possibility that themoratorium would be lifted. The new regulations are expected to be in place by mid-2003. Some EU member states, however, might still object to such approvals. Meanwhile,Administration officials are considering whether to challenge the EU's moratorium onapprovals of genetically engineered crop varieties in WTO dispute settlement. A number ofU.S. agricultural interest groups and Members of Congress have been urging the United Statesto bring the EU into WTO dispute settlement on the biotechnology issue. The U.S. challengewould be based on the argument that there is no legal basis for a moratorium under WTOrules. The U.S. food and agriculture sector faces the challenge of responding to consumer demand, especially overseas, for products differentiated as to their GE or non-GE content. U.S. agribusinesses also are seeking to influence EU regulations for tracing GE foods throughthe marketing chain and for labeling GE foods. U.S. industry is assessing the costs andbenefits of separating GE from non-GE crops and of preserving crop identity in the marketingchain. U.S. regulators are making changes to facilitate voluntary labeling or enhance systemsfor certifying statements about the GE content of foods. Role of Congress The House and Senate Agriculture Committees, the House Ways and Means and the Senate Finance Committees will be among those closely watching biotechnologydevelopments in the EU and elsewhere and the Administration's response. A number ofcongressional leaders, including the Speaker of the House and the Chairman of the HouseAgriculture Committee, have publicly urged the Administration to formally challenge the EUpolicy before the WTO. Whether new legislation will be offered and advanced in the 108thCongress which promotes actions to support U.S. exports of GE products remains to be seen. The 107th Congress passed several measures of this type, including the following provisions in the 2002 farm bill ( P.L. 107-171 ): a biotechnology and agricultural tradeprogram, aimed at barriers to the export of U.S. products produced through biotechnology(Section 3204); competitive grants for biotechnology risk assessment research (Section 7210);agricultural biotechnology research and development for developing countries (Section 7505);and a program of public education on the use of biotechnology in producing food for humanconsumption (Section 10802). Also, legislation that gives the President trade promotion (or"fast track") authority ( P.L. 107-210 ) contains language calling on U.S. trade negotiators tonegotiate rules and dispute settlement procedures that will eliminate unjustified restrictionsand requirements, including labeling, of biotechnology products. Some bills introduced in the 2nd session of the 107th Congress that took other approaches to, or address other aspects of, biotechnology might be reintroduced in the 108th. Such bills included H.R. 4814 , which called for mandatory labeling of GE foods. Other bills in the 107th ( H.R. 4812 , H.R. 4813 , and H.R. 4816 ) dealt respectively with legal issues raised by cross-pollination withGE plants, a study of the safety of GE foods, and liability for injury caused by GE organisms. For More Information CRS Electronic Briefing Book Page, Biotechnology and Agricultural Trade . CRS Electronic Briefing Book Page, Agricultural Biotechnology . CRS Report RS21381, Adoption of Genetically Modified Agricultural Products. China and U.S. Agriculture(12) Issue There is mounting concern from U.S. producer groups, Administration officials, and other trading partners that China has been slow to implement, only partially implemented, orin some instances has failed to comply with agricultural trade commitments made underrecent international trade agreements. The speed and manner with which China implementsits trade commitments are critical to the development of U.S.-China agricultural trade. WhileU.S. agriculture and trade officials have been working to resolve these differences, progresshas been slow. Background and Analysis China (including Hong Kong) represents an important market for U.S. agricultural products with prospects for strong growth. During FY2001 and FY2002, U.S. agriculturalexports to China (including Hong Kong) averaged $3 billion per year making it the fifthlargest market for U.S. farm products. U.S. agricultural imports from China averaged over$800 million. To maintain access to this trade potential, to help ensure China's integrationinto the global economic community, and to bring China's trade regime under internationalrules and standards, the United States successfully negotiated the bilateral U.S.-ChinaAgricultural Cooperation Agreement (ACA) in November 1999. The United States alsogranted China permanent normal trade relations status, approved by the 106th Congress andsigned into law ( P.L. 106-286 ) in October 2000. The market access commitments negotiatedunder the ACA provided the eventual basis for China's Protocol of Accession to the WorldTrade Organization (WTO) in December 2001. Under these agreements, China made very specific market access commitments regarding the reduction of tariffs for agricultural products; the conversion of non-tariff trade barriers totariffs including the establishment of tariff-rate quotas (TRQs) for bulk agriculturalcommodities; and the allocation of a growing share of within-quota imports to private sectorimporters. China agreed also to comply with WTO rules for sanitary and phytosanitary (SPS)and technical measures, to eliminate export subsidies, to stop discriminating betweendomestically produced and imported products, and to make its trade and policy regulationspublic and more transparent. China's progress in implementing its trade commitments is affected by a number of factors including complications inherent in switching from a heavily regulated, secretivecentrally planned economy to an open market-based economy. Difficulties in coordinatinglocal or provincial with national interests also slow progress. Both the U.S. Government andthe WTO have established mechanisms to monitor China's implementation of its accesscommitments including those on agriculture. Several compliance issues have surfaced andremain unresolved. TRQ Implementation. China repeatedly delayed announcement of regulations for the 2002 TRQ allocations (its first full year of WTOmembership). When finally announced in May 2002, they did not appear to provide themarket access that the United States and other exporting countries had anticipated underChina's WTO agreement. A key feature of China's TRQ commitments included distributingquota shares to private enterprises rather than through the tightly-controlled state tradingenterprises (STEs). However, U.S. officials complain that U.S. exporters have been unableto identify clearly which users in China have received TRQs and how much. In addition, U.S.exporters have reported additional problems including delays in the issuance of importpermits; supplementary requirements that a portion of TRQ imports be destined for re-exportin processed products, thus shielding the domestic market; quota allocations restricted tounit-sizes smaller than viable quantities for bulk commodities; unexpected contractualprerequisites for TRQ eligibility; and additional import licensing requirements by the StateAdministration of Quality Standards, Inspection and Quarantine (AQSIQ). Tariffs. China agreed that, with accession, it would gradually reduce its tariffs for agricultural products from an average level of 22%to an average of 17% by 2004. "Bound tariff rates" were incorporated as part of China'sschedule of concessions to provide ceilings for individual commodity tariff rates. However,several cases have been reported by U.S. firms exporting to China where the advalorem -equivalent tariffs applied in 2002 (based upon actual Chinese import data for severalagricultural products) have exceeded the scheduled tariffs. Value-Added Tax (VAT). Special tax treatment given to domestically produced agricultural products appears inconsistent withWTO commitments. U.S. agriculture officials have reported instances where China hasapplied its VAT at a higher rate to imports than to domestic production. Biotechnology Regulations. A temporary import regime governing rules for approval and labeling of farm products containinggenetically modified organisms (GMOs) is presently in place. Under the regime, geneticallyengineered products are supposed to be acceptable if exporting countries have approved themand they are undergoing Chinese testing and approval procedures. U.S. producers haveexpressed concerns about overly vague rules, uncertainties over how the import regime willfunction, and likely extensive paperwork requirements. The U.S. soybean industry isparticularly concerned that this new regime may disrupt trade and cause economic harm. China has been the second-largest destination for U.S. soybean exports over the past threeyears (FY2000 - FY2002) averaging nearly $900 million annually in value. To date, U.S.soybean exports to China have not been disrupted. Export Subsidies. Although China had canceled direct export subsidies since joining the WTO, other policies appear to have replacedthem according to a report by USDA's Economic Research Service. As a result, China's cornexports have continued at a near-record pace through 2002 at prices significantly belowex-warehouse prices in China's production areas. The principal destination for China's cornexports is South Korea. Generally a buyer of U.S. corn, South Korea's imports of U.S. cornfor the first eight months of 2002 were down 70 percent from a year earlier. Other Problems. U.S. exporters have also expressed concern over the imposition of additional handling requirements and other hurdlesfor Pacific Northwest wheat; access denied for other U.S. farm and food products on SPSgrounds including fresh potatoes, avocados, peaches, pears, and certain apple varieties; andnew restrictions for fertilizers. Although these irregularities are inconsistent with WTO rules, the Chinese authorities have offered various explanations. For example, China claims that the slow issuance ofimport permits is intended to limit smuggling. U.S. exporters acknowledge problemsassociated with smuggling, but prefer solutions that don't infringe on the timely handling ofTRQ allocations. Also, China claims that public identification of enterprises that have appliedfor or received TRQ allocations would violate commercial confidentiality, a contention thatU.S. authorities dispute. The U.S. Government and the WTO have set up mechanisms to monitor and review China's progress in implementing its trade commitments. China's Protocol of Accession tothe WTO included the establishment of a Transitional Review Mechanism (TRM) whichdetails a procedure for reporting on and evaluating the implementation by China of its WTOcommitments. The United States used the TRM, in September 2002, to submit an extensivelist of questions to China via the WTO's reviewing bodies. The list of questions identifiedmany of the disputed trade practices highlighted above. To date, the Administration hasfollowed a course of pursing bilateral discussions to remedy non-commitment, rather thanmultilateral dispute settlement. However, the potential use of the WTO dispute settlementmechanism remains a viable tool for resolving disagreements over implementation issues andmaintains steady pressure on China to meet its obligations. In late July 2002, Agriculture Secretary Veneman spent 3 days in China to discuss these issues, and appointed USDA Senior Trade Counsel David Hegwood to lead a working groupon biotechnology with China. Administration officials are continuing to meet with theirChinese counterparts in efforts to resolve problems. USTR chairs the Trade Policy Staff Committee (TPSC) Subcommittee on China WTO Compliance. The TPSC works closely with the various U.S. government departments andtheir agencies involved in international contacts with U.S. industries operating in China aswell as with Chinese government officials. During his February 2003 visit to China, U.S.trade Representative Robert Zoellick, expressed strong concern over non-compliance but alsoexpressed optimism about China's willingness to engage in discussions intended to resolvethe many issues surrounding its WTO trade commitments. Role of Congress Given the huge market potential of China, and the importance of adherence to trade commitments, Congress will be closely monitoring developments in China's implementationof its WTO obligations. Under Section 421 of the U.S.-China Relations Act of 2000 ( P.L.106-286 ), the USTR is required to report annually to Congress on compliance by China withcommitments made in connection with its accession to the WTO, including both multilateralcommitments and any bilateral commitments made to the United States. During the 108thCongress, congressional oversight and consultation with the Administration about China'scompliance with its WTO commitments will be the major vehicles for Members to monitordevelopments and express their views on the issues. For More Information CRS Report RS21292(pdf) , Agriculture: U.S.-China Trade Issues . CRS Report RS20169, Agriculture and China's Accession to the World Trade Organization. CRS Electronic Trade Briefing Book, China's Accession to the WTO. Gale, Fred. China Corn Exports: Business a Usual, Despite WTO Entry , FDS-1202-01, Economic Research Service, USDA, December 2002. http://www.ers.usda.gov/publications/fds/dec02/fds1202-01/ Country-of-Origin Labeling (13) Issue The Farm Security and Rural Investment Act (FSRIA) of 2002 ( P.L. 107-171 ) soon will require many food stores to provide country-of-origin labeling (COOL) on fresh fruits,vegetables, red meats, seafood, and peanuts. Proponents of COOL argued that U.S.consumers have a right to know the origin of their food, particularly during a period whenfood imports are increasing, and will continue to increase under both existing and future tradeagreements. Such information is particularly important to consumers whenever specifichealth and safety problems arise that may be linked to imported foods, proponents add. Theycite, as examples, the 1997 hepatitis outbreak linked to strawberries grown in Mexico, andconcerns about the safety of some foreign beef due to outbreaks of bovine spongiformencephalopathy (BSE or "mad cow disease"). Critics of the new law, however, argue that such labeling does not increase public health protection by telling consumers which foods are safer than others: all food imports alreadymust meet equivalent U.S. food safety standards, which are enforced vigorously by U.S.officials at the border and overseas. In fact, they note, several serious outbreaks of food borneillness in recent years have been linked to contaminants in perishable agriculturalcommodities produced in the United States, including the bacteria e. coli 0157:H7 and salmonella . Scientific principles, not geography, must be the arbiter of safety, they add. Somecritics are urging the 108th Congress to revisit the new labeling law, partly on the grounds thatimplementation will be costly and hinder rather than help U.S. producers' competitiveadvantage. Proponents maintain that the expected benefits to U.S. farmers, ranchers, andconsumers will outweigh implementation and compliance costs. Background and Analysis Federal law has long required most imports, including many foods, to bear labels informing the "ultimate purchaser" of their country of origin. The 2002 farm law (FSRIA)extends new COOL requirements to ground and muscle cuts of beef, lamb and pork,farm-raised and wild seafood, peanuts, and fresh and (fresh frozen) fruits and vegetables -which were among the raw agricultural products generally exempt from the existing COOLrequirements. Starting September 30, 2004, supermarkets and many other food stores mustinform consumers of these products' country 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 to consumers." Thelaw exempts the products if they are ingredients of processed foods, and it also exempts foodservice establishments, such as restaurants and cafeterias. USDA's Agricultural Marketing Service (AMS) issued guidelines for the prescribed voluntary phase of COOL on October 8, 2002; rulemaking on the mandatory phase isscheduled to begin in April 2003. The voluntary guidelines have reignited debate over anumber of policy issues, among them: Will COOL provide U.S.-raised products with a competitive advantage over foreign products, because U.S. consumers can more easily identify and choose freshfoods of domestic origin? Or will industry (including on-farm) compliance costs outweighany potential benefits - particularly for beef, lamb, and pork producers competing withpoultry, whose products are not subject to COOL? As the AMS voluntary guidelines imply, will "every person" whoprepares, stores, distributes, or supplies the covered commodities for retail sale - extendingback to the farm or ranch - have to maintain detailed records, and even track the identity ofeach animal (or plant) from birth (harvest) through retail sale because they might be criminallyor at least contractually liable for non-compliance? Or will record-keeping be far lessonerous, partly because modern production and marketing methods already incorporate manyaspects of this information? Is the AMS preliminary estimate of recordkeeping costs, at $2 billion in the first year, evidence of a huge burden industry is facing (or as some critics suggest, aninsufficient burden), or are the figures grossly exaggerated, as COOL supportersbelieve? Is the new COOL law deliberately intended to increase costs for importers - thereby undermining U.S. efforts to break down other countries' trade barriers,and violating existing U.S. trade obligations? Or is it simply extending to raw products thesame U.S. requirements that almost all other imported consumer products, from automobilesto most other foods, already must meet - and that many foreign countries themselves nowimpose on food and farm products? To what extent is COOL comparable to EU proposalsfor mandatory labeling of GE products? Role of Congress Some food industry and producer trade associations are calling for a re-examination of the new COOL requirements, and its impacts on industry costs and competitiveness. A fewhave suggested that the law should be changed or even repealed. As of early March 2003, nosuch legislation had been introduced. Some observers anticipate that Congress will at leastbe asked to hold hearings on the matter. At the same time, those who pressed for passage ofthe law can be expected to defend its necessity and efficacy. For more information CRS Report 97-508, Country-of-Origin Labeling for Foods . Agricultural Exports to Cuba (14) Issue U.S. policy is to exempt commercial sales of agricultural and medical products from U.S. unilateral sanctions imposed on foreign countries, subject to specified conditions andprohibitions. Debate continues, though, among policymakers on the scope of restrictions thatshould apply to agricultural sales to Cuba. Background and Analysis The Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) codified the lifting of U.S. sanctions on commercial sales of food, agricultural commodities, and medicalproducts to Iran, Libya, North Korea, and Sudan, and extended this policy to apply to Cuba. TSRA's provisions place financing and licensing conditions on sales to these countries. Those applicable to Cuba are more restrictive than for the other countries, and are permanent. Including Cuba in this exemption to U.S. unilateral sanctions policy generated the mostcontroversy. Proponents argued that the prohibition on sales to Cuba (a sizable nearbymarket) harmed the U.S. agricultural sector, and that opening up limited trade would be oneway to pursue a "constructive engagement" policy. Opponents countered that such anexemption would undercut current U.S. policy designed to keep maximum pressure on theCastro government until political and economic reforms are attained. In the compromiseadopted by conferees, opponents succeeded in inserting the permanent restrictive provisionsthat apply uniquely to Cuba. Cuban officials initially stated that no purchases would be made under TSRA's conditions; however, food stock losses due to devastation caused by a hurricane in late 2001prompted a reversal. This development, and Cuba's strategy to use this issue as one way toremove the longstanding U.S. embargo, led to $170 million in cash purchases of U.S. farmcommodities and food products from late 2001 through 2002. Another $50 million in salesmade at a trade fair last fall will be shipped through April 2003. The President, on May 20, 2002, in a major Cuba policy speech reiterated his opposition to any repeal of the prohibition on private financing of agricultural sales, stating it "would justbe a foreign aid program in disguise, which would benefit the current regime." Bush statedhe would veto legislation that relaxes the embargo in any way until the Cuban governmentintroduced reforms. The Administration has held to this stance, and with its allies inCongress, succeeded in dropping provisions added to the 2002 farm bill and FY2003 spendingbills that would have repealed the prohibition on the use of private financing on agriculturalsales to Cuba and limited Treasury's ability to enforce TSRA's trade and travel restrictions,respectively. Role of Congress Proposals that some Members of Congress have indicated they will pursue in the 108th Congress include: streamlining or eliminating U.S. export licensing and reportingrequirements, shipping restrictions, and other bureaucratic regulations to make it easier to sellfood, medicine, and medical products to Cuba; expanding the types of products that may besold to include agricultural equipment and supplies; and permitting private (but not public)financing for commercial transactions (e.g., food sales) now allowed on a cash-only basis. Two bills introduced in the 108th Congress ( H.R. 187 and S. 403 )reflect some of these proposals. For More Information CRS Issue Brief 10061, Exempting Food and Agriculture Products from U.S. Economic Sanctions: Status and Implementation, updated regularly. CRS Electronic Briefing Book, Trade, Cuba Sanctions . U.S. - Brazil WTO Cotton Dispute (15) Issue In September 2002, Brazil initiated a case at the WTO against certain aspects of the U.S. cotton program. Subsequent consultations between the United States and Brazil in Decemberand January failed to resolve the dispute. Continuation of the WTO dispute settlementprocess could lead to a "final" panel decision for or against the complaining country. Resolution of the case in Brazil's favor could result in WTO recommendations concerningimplementation of U.S. cotton program provisions. Non-compliance with such provisions onthe part of the United States could result in compensation or possible limited trade sanctions. The outcome of this case is also critical to future interpretation of WTO farm subsidy rules since it represents the first formal challenge to the protection otherwise affordeddomestic commodity support programs under the "peace clause" provision (see below) of theWTO Agreement on Agriculture. Background and Analysis Brazil argues that the United States is supplying domestic and export subsidies to its cotton sector in excess of its WTO commitments; that the subsidies provided to U.S. cottongrowers have led to significant overproduction and a huge increase in U.S. cotton exports; andthat the larger world cotton supplies have contributed to a steep decline in world cotton pricesand have caused serious injury to Brazilian cotton exporters. U.S. trade officials argue thatthe subsidies provided to U.S. cotton growers have been within the allowable WTO limits andare consistent with WTO obligations. The key to Brazil's case against U.S. domestic cotton subsidies is its argument that the United States is no longer exempt from WTO dispute proceedings under Article XIII, theso-called "peace clause," of the WTO's Agreement on Agriculture. Article XIII(b) exemptsdomestic support measures that comply with the Agreement on Agriculture's requirementsfrom being challenged as illegal subsidies through dispute settlement proceedings, as long asthe level of support for a commodity remains at or below the benchmark 1992 levels. Brazilargues that U.S. cotton subsidies were about $2 billion in 1992 (other sources suggest a figurecloser to $1.9 billion) compared with over $4 billion in 2001. Brazil also argues that both the "Step-2" provisions of the U.S. cotton program and the favorable terms provided under U.S. export credit programs function as export subsidies andare inconsistent with U.S. WTO obligations regarding export subsidies. (Step 2 payments aremade to U.S. cotton users and exporters when U.S. cotton prices are higher than world prices.) The United States notifies to the WTO any Step-2 payments as "amber" box (trade distorting)domestic support payments and not as export subsidies. U.S. trade officials also contend thatU.S. export credit program operations are consistent with WTO obligations. U.S. trade officials argue that the immunity granted by the peace clause is important, however, and that even if a country is no longer in compliance with the peace clause, it is stillincumbent on the complaining party to prove there has been injury. Brazil claims that injuryto its economy due to low cotton prices, measured as the sum of individual negative impactson income, foreign trade revenue, fiscal revenues, related services (transportation and ginning)and employment, exceeded $600 million in 2001 alone. Once a WTO dispute settlement process is initiated, it must adhere to a disciplined time frame that will produce a final panel decision within one year without appeal or 15 monthswith appeal. However, the WTO process welcomes an "out-of-court" settlement between theprincipal parties at any time during this process. The 12-month WTO dispute settlementperiod was initiated on December 3, 2002, when Brazil and the United States held their firstconsultations in Geneva to discuss the dispute over U.S. cotton subsidies. The consultations were unsuccessful and on February 19, 2003, Brazil requested the establishment of a dispute panel to rule on its complaint. In accordance with WTO rules, theUnited States, as potential defendant, successfully objected to formation of the panel. However, Brazil has announced its intentions to request the formation of a panel a secondtime at the March 18 meeting of the WTO Dispute Settlement Body. Second requests areapproved automatically. The panel would be formed within 45 days (by May 2). Onceformed, the panel has 6 months to hold hearings and gather testimony before issuing its finalreport to both parties. If the panel decides that the disputed policy measure does break a WTOagreement or an obligation, it recommends that the measure be made to conform with WTOrules. The panel may suggest how this is to be done. Either side can appeal a panel's ruling, although appeals have to be based on points of law such as legal interpretation-they cannot reexamine existing evidence or examine newevidence. Once the case has been decided, the losing "defendant" is to bring its policy intoline with the ruling or recommendations. If complying with the recommendation within "areasonable time" proves impractical, Brazil and the United States would have to enter intonegotiations in order to determine mutually-acceptable compensation (e.g., tariff reductionsin areas of particular interest). If the two sides are unable to agree on compensation, thecomplaining side may ask the Dispute Settlement Body for permission to impose limited tradesanctions against the other side. Role of Congress Given the importance of cotton in the U.S. agricultural economy, Congress will be closely monitoring developments in the U.S.-Brazil cotton dispute. Under fast track, or TradePromotion Authority, legislation, Congress will be engaged in consultations with theAdministration on negotiations of the Free Trade Agreement for the Americas and theagriculture negotiations in the WTO. Such consultations will be a major vehicle for Membersto monitor developments in this dispute and the negotiating issues it raises. For More Information WTO. "Settling Disputes." Chapter 3, Trading into the Future: Introduction to the WTO , 2ndEd., March 2001, pp. 38-42. http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp0_e.htm For listings of WTO Dispute Cases see: http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm For text on the WTO Agreement on Agriculture see: http://www.wto.org/english/docs_e/legal_e/14-ag.pdf For text on the WTO Agreement on Subsidies and Countervailing Measures see: http://www.wto.org/english/docs_e/legal_e/24-scm.pdf U.S.- Canada Wheat Trade Dispute (16) Issue U.S. trade officials contend that Canadian wheat trading practices, particularly the export practices of the Canadian Wheat Board (CWB), are inconsistent with Canada's WTOobligations and disadvantage U.S. wheat exporters in Canadian and international markets. Canada maintains that Canadian import practices and the CWB wheat export practices complyfully with international trade rules and its WTO obligations. Concern over alleged unfair trade practices has led to numerous investigations and charges by U.S. trade officials about the wheat trading practices of Canada and the CWB. Arecent finding under a countervailing duty investigation by the U.S. International TradeCommission (ITC) resulted in the imposition of preliminary punitive duties being levied onCanadian durum and hard red spring wheat imports. Perhaps more significantly, the UnitedStates recently initiated a WTO trade dispute settlement procedure against the wheat tradingpractices of Canada and the CWB. Successful resolution of this dispute in favor of the UnitedStates could result in greater competitiveness for U.S. wheat vis-a-vis Canadian wheat ininternational markets and in U.S. wheat having improved access to the Canadian market. Itcould also establish precedent under WTO dispute settlement procedures for regulating theactivities of state trading enterprises. Background and Analysis In accordance with Canadian law, the CWB has the exclusive right to purchase and sell Western Canadian wheat (durum and nondurum) and barley for export and for domestichuman consumption. While Canadian farmers are free to choose the crops that they grow eachyear, all Canadian producer sales of wheat and barley must be to the CWB. Critics argue thatsuch monopsony (single buyer) power gives the CWB extraordinary market power,particularly in the North American markets for durum and hard spring wheat. Representatives of the U.S. wheat industry, as well as U.S. agriculture and trade officials, also complain that the CWB's "monopoly" control over Canada's wheat trade permits it topractice discriminatory pricing in international markets, thereby gaining unfair competitiveadvantage over other wheat exporters. Because the CWB does not publicly report the termsand conditions of individual sales these charges have been difficult to prove. This allegedlack of transparency by the CWB has long been the subject of criticism in the United States. The CWB does not engage in wheat imports. However, according to U.S. trade officials, theGovernment of Canada has certain rules and regulations in place that discriminate againstimported grains at grain elevators and within Canada's rail transportation system. These multiple allegations against Canadian wheat trading practices have led to a series of investigations by U.S. agriculture and trade authorities at various levels. In October 2000,the U.S. Trade Representative (USTR) initiated an investigation under Section 301 of theTrade Act of 1974 concerning the acts, policies, and practices of the CWB. The investigationwas in response to a petition filed by the North Dakota Wheat Commission which chargedthat certain wheat trading practices of the Government of Canada and the CWB areunreasonable, and that such practices burden or restrict U.S. commerce. In April 2001, the ITC initiated an investigation (No. 332-429, under Section 332(g) of the Tariff Act of 1930 as amended) which culminated in a December 2001 report thatidentified several features of the CWB which, as a State monopoly, afford it "unfair" marketadvantages over U.S. wheat exporters. Several members of Congress followed up on the ITCreport with a January 21, 2002 letter to the USTR highlighting the key findings of the ITCreport and recommending that the CWB be held accountable for its alleged unfair tradepractices. In October 2002, the ITC initiated a countervailing duty and antidumping investigation on durum and hard red spring wheat imports from Canada. The ITC investigation was inresponse to petitions filed by the North Dakota Wheat Commission, the Durum GrowersTrade Action Committee, and the U.S. Durum Growers Association. U.S. millers and pastamakers dispute the allegations of price discounts on Canadian wheat and have expressedconcern over potential trade restrictions that might limit their access to high quality grainsupplies. On March 4, 2003, the U.S. Department of Commerce issued a preliminary findingof illegal CWB transportation subsidies and loan guarantees in the countervailing dutyinvestigation, and imposed a provisional 3.94% punitive duty on Canadian durum and hardred spring wheat imports. A final determination is due July 15. In May, the CommerceDepartment is scheduled to decide whether to impose anti-dumping duties as well. In December 2002, U.S. trade officials submitted a request for dispute settlement consultations with Canada via the Dispute Settlement Body of the WTO. U.S. trade officialshave insisted that WTO trade provisions governing the trade behavior of state tradingenterprises require them to undertake trade in a manner consistent with the general principlesof non-discriminatory treatment as prescribed in the GATT 1994 (Article XVII). Consultations were held on January 31, 2003. During the consultations Canada expressed nowillingness to make any modifications to its wheat trading practices. On March 6, the USTRannounced the intention to seek formation of a WTO dispute settlement panel to examine thewheat trading practices of the Government of Canada and the CWB. Once a WTO disputesettlement panel is established, it must adhere to a disciplined time frame that will producea final panel decision within one year without appeal or 15 months with appeal. Role of Congress Given the importance of wheat in the U.S. agricultural economy, Congress will be closely monitoring developments in the U.S.-Canada wheat dispute and the ITCcountervailing duty and antidumping investigations on durum and hard red spring wheatimports from Canada. Congress will also be closely following WTO dispute settlement in thiscase. For More Information U.S. International Trade Commission. Wheat Trading Practices: Competitive Conditions between U.S. and Canadian Wheat , Publication 3465, report on investigation No. 332-429under Section 332(g) of the Tariff Act of 1930 as amended, December 2001. ftp://ftp.usitc.gov/pub/reports/studies/pub3465.pdf Economic Research Service, USDA. "The Canadian Wheat Board," Canada briefing room. [Http://www.ers.usda.gov/Briefing/Canada/wheatboard.htm] The U.S. dispute settlement case against the Canadian Wheat Board (DS276) is found under the listings of WTO Dispute Cases at: http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm Meat and Poultry Trade Disputes (17) Issue The United States is one of the world's leaders in meat and poultry trade. Meat and poultry products are among the fastest growing components of U.S. agricultural exports. However, at the same time that the industries' reliance on foreign markets is increasing, somecountries have instituted barriers that have disrupted exports, threatened future growth, andheightened trade tensions. Background and Analysis The United States is the world's leading producer, consumer, and importer of beef, and the second leading exporter, now holding 20% or more of the world export share, accordingto USDA. The United States is the third leading pork producer, consumer, importer andexporter, also with an approximately 20% market share. It is also the leading consumer,producer, and exporter of poultry meat, dominating global exports with about 45% of marketshare. Total red and poultry meat exports experienced strong annual gains for 16 yearsthrough 2001, reaching nearly 5 million metric tons (MMT) valued at $7.4 billion, beforedeclining in 2002. Both red meat and poultry meat exports are expected to begin increasingagain in 2003, USDA reports. USDA analysts note that, while trade prospects look brighter, a number of uncertainties could hamper foreign (and domestic) demand, including sluggish economic conditions, andanimal disease and food safety concerns in some markets, for example, beef demand in Japanwas disrupted when that country in September 2001 reported its first cases of bovinespongiform encephalopathy (BSE or "mad cow disease"). Adding to these uncertainties area number of existing or impending foreign-imposed import barriers in key export markets,which U.S. trade officials are working to reduce or eliminate. Following are various tradedisputes of concern to the meat and poultry industries. Russia. U.S. agriculture groups have expressed alarm over Russia's announcement that it will impose import quotas on poultry andtariff-rate quotas on beef and pork, all effective April 1, 2003. U.S. exports of poultry toRussia, by far our largest poultry customer, already had declined by approximately a third in2002 after Russia banned them effective March 10, 2002, ostensibly out of concerns aboutproduct safety. U.S. interests charged that Russia was seeking to protect its domesticproducers and also to retaliate against newly imposed U.S. tariffs on imported steel. Afterextensive negotiations, U.S. and Russian officials reached an agreement whereby Russianveterinarians would re-inspect and certify U.S. exporting plants by June 1, 2003. However,that process bogged down after the Russians failed many U.S. plants and no recent inspectionshave been scheduled, USDA reported. Russia's new import quota for poultry is expected tobe 1.64 billion pounds annually, of which the United States would receive 1.22 billionpounds. In 2001, the United States exported a record 2.3 billion pounds of broiler productsto Russia, USDA added. Although the United States does not sell much pork or beef toRussia, new tariff-rate quotas on these products would effectively block any future U.S.growth there, industry officials contend. In a February 14, 2003, letter, two dozen U.S.agricultural organizations called on the Administration to self-initiate a Section 301investigation, which could lead eventually to trade retaliation. Mexico. U.S. pork and poultry exports to Mexico are both jeopardized by developments in the wake of the scheduled January 1,2003, end to import duties for those and other agricultural products under the North AmericanFree Trade Agreement (NAFTA). In late January, the Administration announced anagreement on poultry that establishes a 6-month safeguard tariff-rate quota of 50,000 MT onU.S. chicken leg quarters with an over-quota tariff of 99%. The Administration is continuingto negotiate for a longer-term agreement to head off an ongoing Mexican safeguardinvestigation that could result in tariffs of up to 240% ( Inside U.S. Trade , January 24, 2003;various USDA attache reports). Mexico, the United States' second largest pork market, alsolaunched on January 7, 2003, an anti-dumping investigation of U.S. pork imports. Preliminary findings, expected as early as July 2003, could result in high duties and depressU.S. exports there. An anti-dumping case also is under way for beef, and a safeguardinvestigation could begin on beef cattle and breeding stock imports as well, Inside U.S. Trade has reported. European Union. Among a number oflongstanding trade disputes with the European Union is the EU's ban, in effect since 1989,on the import of U.S. beef produced with hormones. In 1997, the WTO ruled in favor of theUnited States that the EU cannot ban, without scientific justification, beef produced withhormones. The WTO authorized U.S. retaliation of $117 million in prohibitively high U.S.duties on a variety of EU agricultural imports. The EU offered to compensate the UnitedStates by enlarging the 20,000 ton quota for non-hormone treated beef in lieu of lifting theban. The United States has maintained that compensation, unless contingent on removing theban, is unacceptable. Japan. The United States and other countries (Australia, New Zealand, and Canada) that export beef to Japan anticipate thatJapanese tariffs on frozen and chilled beef imports will be increased sometime in 2003 to 50%from their current 38.5%. Under so-called "snapback" tariff provisions of the WTO traderules, Japan can impose the higher tariffs if imports increase by 117%. Japan is expected touse, as the base period for calculating this increase, the time when Japanese consumption wasunusually low due to the BSE outbreaks (see above). The higher tariffs could remain in effectuntil March 31, 2004, according to USDA officials. Role of Congress Generally, Congress conducts vigorous oversight over the Administration's conduct of trade policy. On the Russian meat and poultry issue, for example, many Members ofCongress have signed onto letters to the President urging him to be more aggressive inresolving the problem. For example, Section 407 of the Trade and Development Act of 2000( P.L. 106-200 ) directs the U.S. Trade Representative (USTR) periodically to revise the list ofproducts subject to trade retaliation, on the premise that rotating products subject to higherduties will expose a broader swath of an offending country's economy to penalties, therebycreating more pressure for compliance. This so-called "carousel" provision was enactedpartly out of frustration over the EU beef hormone and other disputes, but the USTR so farhas not employed the provision. Observers attributed USTR's restraint in using the carouselto U.S. concerns about possible EU retaliation against the United States in the U.S.-EUForeign Sales Corporation dispute in which a WTO panel found the United States hadviolated WTO rules with its tax subsidies to off-shore U.S. business entities. An EUchallenge to the carousel provision in WTO dispute settlement was not pursued. Lawmakers also have withheld, or threatened to withhold, support for other Administration trade initiatives. The Administration has been seeking congressional supportfor granting permanent "normal trade relations" (PNTR) status to Russia, which it failed toobtain in 2002 largely due to the poultry dispute. Under the Jackson-Vanik amendment to theTrade Act of 1974 P.L. 93-618 , section 410, NTR status for Russia must be renewed on ayear-to-year basis, but the Administration wants to make it permanent so that the UnitedStates can take full advantage of any benefits gained if and when Russia joins the WTO. Sweetener Disputes with Mexico (18) Issue Mutual recognition that NAFTA sugar provisions have not worked, prompted U.S. and Mexican negotiators to intensify efforts in mid-2002 to resolve two longstanding sweetenertrade disputes. Talks remain stalled on two key issues-market access for Mexican sugar inthe U.S. market and market access and sales of U.S. high fructose corn syrup in Mexico. Background and Analysis The United States imports sugar to cover the balance of its needs that the domestic sugar sector cannot produce - about 12% of consumption. The level of imports affects the domesticsupply, and in turn, U.S. sugar prices and the functioning of the domestic sugar program. U.S.imports of sugar from Mexico are governed by NAFTA provisions, which Mexico, seekingadditional access, began to dispute starting in 1997. Mexico's sugar industry, concerned thatimports of a competing sweetener - high-fructose corn syrup (HFCS) - from the United Stateswere increasingly displacing sales of Mexican sugar in its own market, succeeded inpersuading its government in 1998 to impose high anti-dumping duties on imports ofU.S.-produced HFCS. In response, the United States challenged these duties, takingadvantage of trade dispute mechanisms under both NAFTA and WTO. Negotiations on Mexico's sugar access did not begin in earnest until mid-2000, just before Mexico became eligible under NAFTA's "sugar side letter" to ship much more sugarduty free to the U.S. market than allowed to enter in earlier years. These negotiations faltered,as U.S. and Mexican negotiators disagreed over just how much sugar Mexico actually couldship north. Their disagreement centered on which version of NAFTA governed this issue. U.S. negotiators based their position on the sugar side letter struck in last minute talksbetween the U.S. Trade Representative and his Mexican counterpart in November 1993, justbefore the House voted to approve NAFTA. Mexican negotiators based their stance on thesugar provisions found in the NAFTA agreement concluded in August 1992 and signed byeach country's president that December. Relatedly, the NAFTA and WTO dispute panelsissued successive decisions questioning the process Mexico followed to impose its HFCSduties and called for changes. Mexico did not respond until April 2002, when it announcedit would replace its anti-dumping duties with a quota on HFCS imports equal in quantity tothe U.S. quota for Mexican sugar. Legislation passed by Mexico's Congress on January 1, 2002, and still in effect, imposed a tax on soft drinks containing corn syrup but not sugar. This law has eliminated much of themarket for U.S. HFCS imports to Mexico and jeopardized the viability of two U.S. companieslocated in Mexico that manufacture HFCS from U.S. corn. The U.S. corn and corn refiningsectors viewed this action as a step back in negotiating a resolution to the HFCS dispute andhave pressed Administration officials to persuade Mexican authorities to remove this tax. Subsequently, negotiators from both sides agreed to lay aside whether or not the sugar sideletter applies, in favor of pursuing negotiations to arrive at a comprehensive, mutuallyacceptable sweetener agreement. In July-September 2002, negotiators exchanged details of a prospective agreement. Though both sides appear to agree on some issues, differences remain on the length of aprospective agreement (temporary or permanent) and how to handle over-quota Mexicansugar exports to the U.S. market. The U.S. sugar industry seeks provisions that would applybeyond 2008 when sugar trade under NAFTA is scheduled to be completely liberalized, andthat would restrain Mexican over-quota shipments. How these are resolved, in turn, willlikely influence the terms reached on future U.S. HFCS sales to Mexico. Some observe thatMexico's interest in reaching an agreement in the short term has diminished, due to the smallquantity of Mexican sugar available for export this year and the political dynamics associatedwith upcoming mid-term congressional elections in July. Also, with the Mexican Congresshaving adjourned in December 2002 without dropping the tax on soft drinks sweetened withcorn syrup-viewed by the U.S. side as necessary to reach a comprehensiveagreement-prospects for a quick resolution have faded. Role of Congress Members of Congress that represent the sugar and corn sectors continue to monitor developments in U.S.-Mexican sweetener negotiations. In letters to Administration officials,some have called for more movement in these talks. Most recently, on December 16, 2002,lawmakers called on the Administration to work toward an immediate conclusion to thenegotiations, expressing particular concern about the growing economic fallout of noagreement on the U.S. corn and corn refining sectors. For More Information CRS Issue Brief IB95117, Sugar Policy Issues ("Sweetener Disputes with Mexico"). Appropriations for Agricultural Export and Food Aid Programs (19) Issue Congress is currently considering FY2004 appropriations for USDA's international activities. At issue are funding levels for agricultural export subsidies, export marketdevelopment programs, export credit guarantees, and foreign food aid. Congress and theAdministration have been at odds over the use of Commodity Credit Corporation (CCC)funds to finance food aid programs and over the Administration's decision in 2003 to beginphasing out food aid based on surpluses. WTO agriculture negotiations could result inrestrictions on agricultural export and credit guarantee programs, the preservation of whichthe Trade Act of 2002 lists as an objective for the WTO agriculture negotiations. Anychanges in these programs resulting from a trade agreement would ultimately be subject tocongressional scrutiny under fast-track procedures for considering trade agreements. Background and Analysis The 2002 farm bill ( P.L. 107-171 ) authorizes USDA to operate a number of programs to promote U.S. agricultural exports or to provide foreign food aid. The Foreign AgriculturalService operates USDA's international programs. These programs include: agriculturalexport subsidies, export market development, export credit guarantees, and foreign food aid. Legislative authority for most of these programs now extends to the end of 2007. Exportsubsidies, but not other types of export and food aid programs, are subject to reductioncommitments agreed to in the 1994 Uruguay Round Agreement on Agriculture (URAA). On-going WTO agriculture negotiations are considering new rules and disciplines for exportcredit programs and food aid based on surpluses. U.S. agricultural export subsidies include the Export Enhancement Program (EEP) and the Dairy Export Incentive Program (DEIP). Market promotion programs include the MarketAccess Program (MAP) and the Foreign Market Development or "Cooperator" Program(FMDP). Considered to be non-trade distorting, programs to promote exports are exemptfrom Uruguay Round reduction commitments. The FSRIA authorizes export credit guaranteesby USDA's Commodity Credit Corporation (CCC) of $5.5 billion worth of farm exportsannually, plus guarantees of an additional $1 billion for emerging markets through 2007. The FSRIA also authorizes P.L. 480 Food for Peace programs and Food for Progress through FY2007. P.L. 480 Titles I (Trade and Development Assistance) and II (Emergencyand Private Assistance) are the main vehicles for U.S. foreign food aid. Food for Progress(FFP) provides commodities to developing countries and emerging markets that aredeveloping their private sectors. Another food aid program, Section 416(b), permanentlyauthorized in the Agricultural Act of 1949, provides surplus commodities for donationoverseas. The 2002 farm bill also established a new food aid program, the McGovern-DoleInternational School Feeding and Child Nutrition Program. Some of these programs, notably food aid provided under P.L. 480 and the salaries and expenses of USDA's Foreign Agricultural Service (FAS), require annual appropriations. Other programs (food aid other than P.L. 480, export subsidies, export market development,export credit guarantees) are funded or guaranteed by USDA's Commodity CreditCorporation (CCC) and do not require line item appropriations. Congress is presentlyconsidering proposals in the President's budget transmitted to Congress on February 3, 2003for funding USDA export and food aid programs in FY2004. The President's budgetestimates that agricultural export and food aid programs would have a program value of $6.2billion. Of that amount, approximately $1.4 billion (for P.L. 480 and FAS) would requireauthorization of budget authority in an appropriations act; the rest would be funded by CCCborrowing from the Treasury. The biggest item requiring authorization of budget authority is $1.185 billion requested for P.L. 480 Title II, the same as requested in FY2003. However, the President's budgetrequest for Title II is less than the amount appropriated in FY2003. The farm bill authorized$100 million of CCC funding for the McGovern-Dole school feeding program in FY2003. Beginning in FY2004, however, the program will be funded by appropriations and thePresident requested $50 million for McGovern-Dole in FY2004. The President's budgetenvisions $151 million of CCC funding for FFP. That program level is expected to provide the minimum 400,000 tons of commodities in FFP required by the 2002 farm bill. The President's budget assumes a program level of $28 million in FY2004 for EEP. The farm bill, however, allows EEP spending of $478 million, which is the maximum allowedunder the World Trade Organization/Uruguay Round agreement on subsidy reductioncommitments. EEP is capped at $28 million in FY2003 by P.L. 108-7 , but for FY2004,unless Congress decides otherwise, USDA retains some flexibility to increase the level ofEEP subsidies.. For DEIP, the budget expects a program level of $57 million for FY2004, anincrease above the $36 million estimated for FY2003. The budget request assumes that theCCC will guarantees commercial financing of $4.2 billion of U.S. agricultural exports inFY2004. Consistent with the farm bill reauthorization of MAP, the budget provides for MAPfunding of $125 million in FY2004. The budget assumes the farm bill authorized level of$34.5 million for FMDP in FY2004. Role of Congress Following House and Senate Appropriations Committee deliberations, spending measures will be brought to the floor of each chamber. In addition to hearings andcongressional action on appropriations for USDA's international activities, severalcommittees have indicated that they will be carrying out oversight of the Administrations'simplementation of the export and food aid programs authorized in the 2002 farm bill. SomeUSDA agricultural export and food aid programs-especially USDA's export credit guaranteeprogram-could be affected by agreements reached in WTO agriculture negotiations. Many in Congress are closely following the WTO agricultural negotiations and theconsideration being given to proposals to tighten multilateral restrictions on U.S. export creditprograms which guarantee, on average, private financing of around $3 billion annually ofU.S. agricultural exports. Under provisions established by the Trade Act of 2002 ( P.L.107-210 ), Congress and the Administration will be consulting on these negotiations and theirimplications for legislatively authorized programs. For More Information CRS Issue Brief IB980-06, Agricultural Export and Food Aid Programs . CRS Report RL31301 , Appropriations for FY2003: U.S. Department of Agriculture and Related Agencies (see section on "Agricultural Trade and Food Aid"). CRS Report RS21425, The Administration's FY2004 Budget Request for the U.S. Department of Agriculture (USDA) (see section on "Agricultural Trade and Food Aid"). CRS Report RS20285, Agricultural Export Subsidies, Export Credits, and the World Trade Organization .

Agricultural exports contribute to the prosperity of the U.S. agricultural economy. Their value is projected at $57 billion for FY2003, and they are expected to grow over the long term. Theseexports are the equivalent of about a quarter of the gross income of U.S. farmers and generate bothfarm and nonfarm employment. U.S. agricultural imports, expected to reach $43 billion in FY2003,are fostered by low average U.S. tariffs, the relative strength of the U.S. dollar, and consumer tastesand preferences for high value food products, the largest component of imports. A large share ofagricultural imports compete against U.S. products, but they also generate economic activity in theU.S. economy. Although many world economic and other factors influence exports, many farm groups believe that U.S. agriculture's future prosperity also depends on such U.S. trade policies as 1) negotiatingimproved market access for U.S. products bilaterally, regionally, and multilaterally; 2) assuringmarket access and consumer acceptance at home and abroad for products of agriculturalbiotechnology; 3) assuring that China adheres to its World Trade Organization (WTO) agriculturalmarket access commitments; and 4) resolving contentious commodity trade disputes. Some farmgroups, mainly producers of import-sensitive commodities, question opening U.S. markets to foreigncompetition. Agricultural trade issues that are being or could be considered during the 108th Congressinclude: Free trade agreements (FTAs) with Chile and Singapore, which Congress will take up accordingto expedited or fast track procedures in the Trade Act of 2002 ( P.L. 107-210 ). The 2002 Trade Actalso requires congressional-executive branch consultation on trade negotiations, which currentlyinclude negotiation of FTAs with 12 other countries or regional groups, negotiations with 34western hemisphere countries for the Free Trade Area of the Americas (FTAA), and multilateraltrade negotiations in the WTO. Biotechnology regulations in other countries, especially in the EU, which will affect U.S. commodity exports. China's implementation of its WTO market opening commitments for agriculture , which has been slow and uncertain, and has failed to meet expectations of U.S. agricultural exporters. Country-of-origin labeling for meats, fresh produce, seafood and peanuts, established by the 2002farm bill, but whose implementation has raised questions about benefits versus compliance costs. Other trade issues of interest to the 108th Congress include commodity trade disputes overcotton, wheat, meat and poultry, and sweeteners; the scope of restrictions that should apply to agricultural sales to Cuba ; and funding for U.S. agricultural export and food aidprograms. This report will be updated.

Introduction A key element of the 1990 Clean Air Act (CAA) amendments ( P.L. 101-549 ; 42 U.S.C. §§7661-7661f) was the comprehensive permit program established in Title V of the act. It was added to the CAA to enhance compliance by detailing for each covered facility all the emission control requirements to which the facility is subject. Previously, an industrial source's pollution control obligations—ranging from emission controls and monitoring to record-keeping and reporting requirements—were scattered throughout numerous, often hard-to-find provisions of state plans or various federal regulations. While approximately 35 states or localities had operating permit programs before 1990, they varied considerably, and few were as comprehensive as the new Title V program. Adding these provisions to the CAA was controversial, and implementation, too, has generated controversies. Congress's intent in creating the operating permits program was to "(1) better enforce the requirements of the law by applying them more clearly to individual sources and allowing better tracking of compliance, and (2) provide an expedited process for implementing new control requirements." Benefits of the air permit program were expected to include clarification of pollution control requirements, simplification of procedures for modifying a source's control obligations, augmenting state resources through permit fees, and enhancing states' ability to administer other significant new CAA responsibilities, such as the air toxics and acid deposition programs. This report describes the statutory background of the Title V program and the status of implementation, in terms of federal approval of state and local permitting authorities' programs and permit issuance. Regulatory actions by the Environmental Protection Agency (EPA) to limit emissions of greenhouse gases that will have implications for Title V permits are reviewed. It also discusses broad policy issues identified by various stakeholders, including program complexity, costs and permit fees, and inconsistencies due to a lack of sufficient federal guidance. Major Features of the Operating Permits Program Prior to the 1990 amendments, the CAA required individual permits only for construction of new or modified industrial sources of air pollutants. Existing sources did not have to obtain permits unless they were subsequently modified and increased their air emissions. Title V, which was modeled after a similar program in the Clean Water Act, expanded the number of sources requiring federal permits by stipulating that all major pollution sources and other designated sources must obtain operating permits, which permitting agencies will use to ensure compliance with the CAA. Operating permits are now an important tool in the overall compliance and enforcement aspects of the CAA, because permits contain the plans and schedules for sources to reach attainment with provisions of the act, plus emission limitations and monitoring requirements. Further, they are enforceable, meaning that EPA, states, or citizens may take action to require a source to achieve compliance with the terms of its permit. EPA estimates that nearly 15,500 industrial sources are subject to Title V. These specifically include major sources, defined in the CAA as stationary facilities that emit or have the potential to emit 100 tons or more per year of any regulated pollutant or combination of pollutants, and sources subject to the act's acid rain provisions. Title V also covers: sources in nonattainment areas that emit as little as 10 tons per year of volatile organic compounds (VOCs), depending on the region's nonattainment status; sources subject to New Source Performance Standards (NSPS); regulated sources of air toxics emissions (any source that emits more than 10 tons per year of an individual hazardous pollutant or more than 25 tons per year of any combination); and sources required to have new source or modification permits under Title I of the act. Permits compile in a single document all of the enforceable emission limitations and standards, plus inspection, monitoring, compliance certification, and reporting requirements for the source, but they are not intended to change or alter the existing, underlying requirements or add any substantive requirements. Permits generally contain these elements: emissions limitations and standards to assure compliance with all applicable requirements; monitoring, record keeping, and reporting; fee payments; and an annual certification by a responsible official of the source. They are issued for five-year periods and must be renewed thereafter. Title V is intended to be primarily a state-run program. It provides two incentives in this regard: (1) permitting agencies are able to use permit fees collected from sources to run their permit programs and (2) EPA will implement a federal operating program if a state fails to do so. In many cases, states delegate to local programs the responsibility for implementing the operating permits programs. For example, 34 local authorities implement the permit program in California, rather than a single state agency. In other locations (for example, Tennessee, Arizona, Washington, and Idaho), local authorities implement the program in parts of a state, and the state regulatory agency has responsibility elsewhere. Permitting agencies are required to collect permit fees sufficient to cover the cost of the permit program, and the fees may be used only for administering the program. The act requires that the fee schedule be set so as to collect from all sources, in the aggregate, not less than $25 per ton of each regulated pollutant to cover all reasonable (direct and indirect) costs of administering the program. Regulated pollutants include VOCs, National Ambient Air Quality Standard pollutants except carbon monoxide, and pollutants regulated under the hazardous air pollutant and NSPS provisions of the act. EPA Regulations EPA issued regulations to implement the permit program requirements in July 1992 (40 C.F.R. Part 70), seven months after the statutory deadline. The Part 70 rules cover the minimum elements of state permit programs. Rules promulgated in July 1996 and amended in 1999 (40 C.F.R. Part 71) cover federal permitting on Indian reservations and in any state that fails to adopt or implement an approvable Title V program. While state and local agencies primarily implement the Title V program, the CAA provides for EPA oversight of permitting programs and gives EPA the right to review permit applications and object to proposed Title V permits. Defining the parameters of this oversight has been a source of tension among EPA, states, and industry. One overarching issue has been the question of developing permits with sufficient flexibility to allow for the fact that industrial sources often change their operations (thus affecting air emissions) in response to marketplace signals, and they want to be able to do so quickly without needing a revised permit for every such change. The public also has an important role in the permitting process, because citizens may submit comments and request a hearing on draft permits. Further, under CAA Section 505(b), any person may petition EPA to object to issuance of a permit, and Section 502(b)(6) requires that there be an opportunity for judicial review in state court of final permit actions. Judicial review may be sought by the applicant, persons who participated in the public comment process, and any other person who could obtain judicial review of such actions under state laws. The Part 70 regulations were challenged by environmentalists, states, and industry, mostly over details concerning permit revisions. In response, in 1994, EPA proposed modifications intended to address some of the biggest issues. Those proposed changes were not widely accepted by states and industry, however, and EPA took additional steps to streamline the permit programs. Since 1994, EPA has worked with states, industry, and environmentalists to reach consensus on key issues and has issued and re-drafted several regulatory proposals but has not finalized major modifications to Part 70. The focus of efforts to revise the rules has been on how to streamline aspects of the regulations concerning permit modifications and revisions. According to EPA officials, the 1992 regulations give states ample flexibility to write permits that allow for minor operational changes by industry and to process permit modifications. Still, efforts to revise those rules have been driven by concerns of many permitting authorities and industrial sources that the current rules do not allow sufficient flexibility. One issue that has been particularly contentious concerns the procedures and amount of public review required for relatively minor modifications at emissions sources. At issue have been the definition and criteria for facility changes that are neither so minor that little or no review will be required, nor clearly so environmentally significant that full EPA review and public comment will be appropriate. EPA continued internal and external discussions on revising the Part 70 rules for some time, but by early 2005, agency officials apparently had ceased these activities. However, in 2009, the Obama Administration finalized a rule announced as one of the Bush Administration's final regulatory actions. Called the Flexible Air Permit rule, it clarifies existing regulations concerning how industry can make changes to facilities without having to obtain a new permit. It is intended to reaffirm opportunities for accessing operational flexibility under current regulations, while ensuring existing levels of environmental protection. During the lengthy consideration of possible Part 70 rule changes, EPA issued guidance in the form of white papers to address some implementation issues that had been raised, such as permit revisions, EPA's role in reviewing permits, administrative complexity, etc. The first was issued in 1995 (concerning streamlining to reduce costs and paperwork), and the second in 1996 (concerning overlapping federal and state requirements). A third white paper, concerning options for operational flexibility, was drafted in mid-2000, but was criticized by environmentalists and some state officials and was not issued (instead, EPA issued the flexible air permit rule in 2009, as discussed above). In addition, EPA has issued some formal guidance on specific implementation issues. Status of the Permit Program and Permit Issuance Under the CAA, all states and territories were to submit operating permit programs by November 15, 1993. Once a state or locality's program was approved by EPA (within one year), major industrial sources had one year to submit permit applications to the state or local authority, and permitting agencies had three years to issue permits. As of June 1997, EPA had approved permit programs for all 114 submissions by states, local agencies, and territories. In part because of regulatory and program approval delays, state and local agencies were slow to begin issuing Title V permits. In early 1998, EPA surveyed states and EPA regions and found that only about 2,100 permits had been issued, compared with an estimated 11,000 that should have been issued. In March 1999, EPA proposed an ambitious goal of resolving the permit backlog by the end of 2000. Permit issuance increased, but it continued to fall far short of the statutory deadlines and EPA's goals. As of March 2001, 57% had been issued. While there were potential consequences for permitting authorities that did not get program approval by EPA (i.e., the possibility of federal takeover, which EPA initiated in a few cases but did not impose), there were no real consequences or penalties for industrial sources that did not receive Title V permits due to state and local agencies' delays. The principal consequence was a delay in attaining the policy objectives intended by Congress when it established the Title V program. A 2002 EPA Inspector General (IG) report criticized EPA and state and local agencies over the program's continuing problems. The IG noted that, as of December 31, 2001, 30% of required permits had not been issued, and only 4 state and 17 local agencies had issued all of their Title V permits. Key factors delaying the issuance of permits included insufficient state resources, complex EPA regulations and limited guidance, and conflicting state priorities, the IG reported. A consequence of those delays was that the benefits that Congress intended the permit program to achieve have not been realized, according to the IG's analysis. According to EPA, as of January 2008—12 years after the first program approvals—99% of all original permits required for Title V sources had been issued. After that initial process, the ongoing tasks of permit reissuance (required after five years) and modification have become the focus of most permitting authorities' attention. According to EPA, nationally, every year about 100 new sources are required to obtain initial permits, and about 3,000 sources are required to obtain renewal permits. Implications of Regulating Greenhouse Gas Emissions for Title V Permitting In 2010 EPA initiated several CAA regulatory actions to limit emissions of greenhouse gases (GHGs) having implications for Title V permits and permitting. The actions followed from the agency's issuance in December 2009 of an "endangerment finding" under Section 202 of the act, which permits (in fact, requires) EPA for the first time to regulate pollutants for their effects as greenhouse gases. Relying on this finding, EPA finalized GHG emission standards for new cars and light trucks on April 1, 2010. The implementation of these standards, in turn, triggered CAA permitting requirements and the imposition of technology-based control requirements for new and modified major stationary sources of GHGs (e.g., power plants and industrial facilities) beginning in January 2011. Affected facilities are subject to the permitting requirements of Title V and the Prevention of Significant Deterioration (PSD) provisions of the law. For PSD, this includes state determinations of what constitutes Best Available Control Technology (BACT) that affected facilities will be required to install to limit GHG emissions. For Title V, this means including GHG control requirements in Title V permits. As noted above, under Title V, major stationary sources are defined as those that emit or have the potential to emit more than 100 tons or more per year of any air pollutant subject to EPA regulation. For greenhouse gases, this is a relatively low threshold: EPA initially estimated that more than 6 million existing stationary sources emit 100 tons or more of GHGs annually and that a 100-ton threshold for GHGs would increase the number of facilities subject to Title V more than 400-fold. Calling such a permitting increase an "absurd result" that would affect "an extraordinarily large number of small sources," in June 2010 the agency promulgated the "Tailoring Rule" to reduce the potential regulatory burden on sources and permitting agencies. In that rule, EPA established a Title V permitting threshold of 100,000 tons per year or more of carbon dioxide-equivalent GHG emissions. Accordingly, EPA estimated that the majority of the 15,000 existing sources already subject to Title V would need to have GHG requirements added when those permits are renewed or revised and that an additional 550 sources would require new Title V permits based solely on their GHG emissions (primarily commercial and large residential facilities). These requirements took effect beginning July 1, 2011. In the Tailoring Rule, EPA estimated that modifying existing Title V permits and issuing a small number of new Title V permits would impose costs on permitting authorities totaling about $8 million per year more than the previous program. Without the Tailoring Rule that modified the 100-ton-per-year threshold applicable to non-GHG pollutants, Title V permitting authorities would face administrative costs of $21 billion per year, or nearly 340 times more than the previous program, EPA estimated. Further, on average, an industrial source would incur costs of about $46,000 to prepare a Title V application and receive the permit, while a commercial or residential source would incur costs of about $23,000, because most have no experience with Title V permitting. EPA's suite of regulatory actions regarding GHG emissions has been highly controversial. They have been challenged in the federal courts, but in 2012 a federal court upheld EPA's GHG regulatory program in its entirety, including the 2010 Tailoring Rule. The Supreme Court granted review of a portion of the lower court's ruling. The Court's June 2014 decision put limits on sources that would be required to obtain Title V and PSD permits. The Court held that the CAA does not allow EPA to require permits solely on the basis of potential GHG emissions and that the agency lacked authority to tailor numerical thresholds to accommodate such an interpretation. However, the Court upheld EPA's authority to require sources that already need Title V and PSD permits for conventional, non-GHG pollutants to comply with BACT requirements for GHGs. Following this ruling, EPA issued a memorandum confirming that it will no longer require Title V or PSD permits for sources if greenhouse gases are the only pollutant that would trigger the requirements. The memo also said that EPA anticipated that it would need to revise federal regulations governing Title V and PSD permitting and approved Title V programs, in light of the Court's decision. The agency announced a rulemaking to do so on August 26, 2016. The rulemaking proposes regulatory revisions to ensure that neither the PSD nor Title V rules require a source to obtain a permit solely because the source emits or has the potential to emit GHGs above the applicable thresholds. EPA's regulatory actions also have been controversial with Members of Congress. Since the 111 th Congress, legislation to delay or halt the agency's GHG initiatives has been debated by legislators. Most of the congressional criticism has focused on impacts of the PSD provisions of EPA's rules—not Title V—because the largest costs resulting from the GHG rules will be for compliance with BACT requirements, not the procedural requirements of Title V. Title V Issues Most stakeholders agree that at least some of the objectives and benefits identified by Congress when it enacted the Title V program in 1990 have been achieved: Incorporating applicable requirements in one document that consolidates duplicative and redundant requirements is beneficial to regulatory agencies, the public, and regulated sources. Establishment of a funding mechanism provides resources to state and local permit programs. Source compliance assurance systems—driven by improved understanding of compliance requirements, obligations on corporate officials to certify compliance and report deviations, and a strengthened penalty/enforcement mechanism—have improved. Public participation has improved at various stages of the permitting process. At the same time, there also has been widespread dissatisfaction with the program as it exists, due to program complexity; confusion and uncertainty about some of its requirements; and criticism of costs to regulated entities, permit agencies, and even the general public. While many believe that the permit program has clarified requirements and fostered consistency and fairness in regulatory treatment of sources, others argue otherwise, saying that permits suffer from excessive length and increased complexity. Benefits are more likely to be observed in states and localities that had no operating permit program prior to Title V and are likely to be questioned more vigorously where such a program previously did exist. Likewise, views are mixed on whether the Title V program has resulted in air quality and health benefits. Arguably, this was not an objective, because Title V is an administrative program and was not intended to have a direct impact on emissions. Permitting agencies, however, say that many major sources have voluntarily restricted their operating conditions or installed pollution controls in order to reduce emissions below the Title V regulatory thresholds (thus becoming what is often referred to as "synthetic minors"; see discussion on page 10), which is a plus for the environment. Critiques of the Title V program are reflected in a 2005 report of the EPA Inspector General and in a 2006 report by a Task Force on Title V Implementation Experience that was convened by EPA's Clean Air Act Advisory Committee. The Task Force, consisting of state and local permitting agency, industry, and environmental advocacy group representatives, developed an extensive list of recommendations for program improvements, which it believed could be implemented under current legislative and regulatory authority. Beginning in 2003, EPA regional offices began conducting periodic audits of state, local, and territorial permitting programs to identify good practices, areas needing improvement, and ways that EPA can improve its oversight. Many but not all of these evaluations are available on EPA websites. The evaluations identify a range of issues, such as timely permit issuance and backlogs, public participation, permit quality and documentation, staffing and training needs, adequacy of permit fee revenues, and communication with EPA and the public. Complexity Prior to establishment of the Title V program, major sources of air pollution were not required to have federally enforceable operating permits. Regulatory requirements for these sources typically derive from multiple provisions of the CAA and were often scattered among multiple documents, thus complicating efforts to determine compliance and to provide effective enforcement of the law. Consolidating existing requirements (some dating from the 1970s) into a single, comprehensive document, while undoubtedly beneficial, also has resulted in permits that are lengthy and detailed, making it difficult to read them without precise knowledge of the individual source's operations, according to some stakeholders. Many issues have arisen, including what level of detail must be incorporated in a Title V permit (versus streamlining or simplifying the permit), how small and insignificant emissions sources should be treated, and how newly issued CAA requirements such as hazardous air pollutant standards will be incorporated. Another issue is the extent to which permitting agencies can adapt or update a source's existing requirements (particularly those that were established many years earlier) so as to reflect its current operating conditions, without resulting in changes that exceed the scope of Title V, since the permit program was intended to consolidate but not substantively alter regulatory requirements. Title V was not intended to affect the stringency of requirements incorporated into a permit, but stakeholders disagree on whether actions such as the addition of new monitoring or new compliance methods affect stringency or are sometimes tantamount to creating new substantive requirements. A related issue concerns whether a Title V permit should include a compliance schedule for facilities that have received notices of violation regarding applicable requirements identified in the permit. EPA regulations provide that if a source is not in compliance with a particular requirement, the source must provide in its permit application a description of how it will come into compliance and a schedule that includes a compliance plan. Environmentalists and EPA have disagreed over whether the permit can include compliance schedules over alleged—rather than settled—violations. Activists argue that permits must include compliance schedules to address allegations of permit violations (essentially making the permit an active mechanism to enforce permitted limits), while EPA, states, and industry contend that that goes beyond the scope of the permit. Federal courts have split on the issue. The Obama Administration reportedly supports inclusion of compliance schedules to correct alleged violations only when challengers can unambiguously demonstrate that the violations are occurring at the facility. From the beginning of the program, a key concern for EPA, states, regulated industries, and environmental advocacy groups has been the issue of operational flexibility in operating permits, the concept of allowing for operational change at a facility, while assuring compliance with applicable requirements and ensuring environmental protection. EPA addressed the issue in the 1992 Part 70 regulations and subsequent guidance (especially a 2000 draft white paper). Also, beginning in 1993, EPA sponsored a flexible permitting pilot program with industrial facilities in 13 states in an effort to evaluate opportunities to design air permits to accommodate operational flexibility. EPA evaluated the economic and administrative benefits of flexible permits and documented several environmental performance benefits (including emissions reductions). Based on its assessment of the pilots, in 2009, EPA finalized a Flexible Air Permit rule that clarified opportunities under existing regulations to allow industry to be market-responsive while ensuring equal or greater environmental protection than that achieved by conventional permits. Title V Permit Review Requests and Petitions As described previously, the CAA requires permitting authorities to submit a proposed Title V permit to EPA for review, and the Administrator has 45 days to object to its issuance. If the Administrator does not object during the 45-day period review period, any person may petition the Administrator within 60 days after expiration of the 45-day period with specific objections. Rules to implement these aspects of the statute were promulgated in the 1992 Part 70 regulations. Since then, however, EPA has concluded that the permit review and petition process is not functioning well because it lacks transparency and consistency, and as a result, in August 2016, the agency proposed rule changes that are intended to streamline the process. In the proposal, EPA noted that "over time, petitions have raised increasingly more complex policy, legal, and technical matters," and that the process has "evolved into a resource-intensive effort" by EPA. Evidence of problems with the process includes the number of petitions that are backlogged and awaiting a decision by the agency. EPA maintains an online database of such petitions, and as of August 2016, the database identified 149 pending petitions. Significantly, despite the CAA requirement that the Administrator is to grant or deny a petition within 60 days after it is filed, 143 of these petitions (96%) have been pending for more than 60 days, and 43 (30% of those pending more than 60 days) have been pending for more than a decade. Concerns about the permit review and petition process were raised as issues in the 2006 Title V Task Force report. Among other things, the August 2016 proposal would spell out mandatory content and format for petitions, would require state and other permitting authorities to respond in writing to major concerns raised during the public comment period on draft Title V permits, and would encourage challengers to file their petitions electronically. Some elements of the proposal have previously been detailed in responses to individual petitions—such as agency interpretation of the statute—and the proposed new regulatory language also would codify those prior administrative orders. By establishing clearer procedural parameters, EPA intends that the changes will benefit permitting authorities, permitted sources, and potential petitioners. With the proposed changes, EPA expects that its ability to meet its statutory obligations to review proposed permits, respond to Title V petitions, and provide more transparency to the petition process will all be improved. Costs and Permit Fees Industry groups generally believe that the regulatory burden and costs of the Title V program outweigh the benefits and far exceed EPA's estimate at the time that the Part 70 rules were adopted of $15,000 average cost per facility annually. In addition to permit applications, facilities incur recurring costs related to staffing, permit changes/corrections, report preparation, legal reviews, and management reviews of compliance. Some stakeholders (environmental advocates, for example) argue that program cost is not a significant issue when viewed in the context of cost as a percentage of a company's operating cost, and that companies often benefit from the additional information gained through the program. Costs are a continuing concern for state and local regulatory authorities with regard to increasing paperwork requirements and the sufficiency of current permit fees. Having adequate resources to administer federal environmental programs is always an issue for states and localities, especially in light of increasing program demands. State environmental agencies' revenue sources vary, but they generally depend on a combination of EPA and state grant funding—both of which have been in decline—Title V permit fees, and other fees, in a few cases. The Title V permit fee requirement was intended to ensure that sufficient resources would be provided for necessary permitting activities. EPA has not conducted a comprehensive audit of permitting agency resources, but available information suggests that a number of states (perhaps many) are not collecting sufficient fees to cover their costs, which contributes to problems in hiring staff and processing permits. In 2007, an environmental advocacy group, the Environmental Integrity Project, released a report concluding that more than half of the states have fee structures that do not meet federal minimum standards. The report focused on 18 states in which fees fell below the federal presumptive minimum, either because the states set lower emission fees or set a ceiling on the amount that could be collected from each polluter that was lower than the federal presumptive minimum on at least the first 4,000 tons of emissions of each pollutant covered by a Title V permit. The report found that, if states were to raise fees to at least the minimum federal amount, they could provide a significant source of funding to support their air quality management programs, but that additional funding (for example, from EPA CAA grants) also is needed. It recommended that EPA undertake a comprehensive evaluation to ensure that low emission fees are not weakening the CAA permit program or its enforcement. A 2011 survey of state air quality officials found that dwindling budgets are pushing some states to consider returning their delegated CAA permitting programs to EPA, unless they can raise permit fees charged to industry or identify other sources of revenue. States have authority to determine the level of fees that they want to set—EPA's "presumptive minimum" fee level is not mandatory—and the state survey found that they vary widely. One factor affecting fee revenues is the large number of sources that have lawfully opted out of the Title V program. EPA originally estimated that about 37,000 facilities nationwide would be subject to Title V. Today, the universe of Title V sources is nearly 15,500, and the others—often termed " synthetic minors"—have installed pollution control equipment or taken other steps to ensure that their emissions are below the Title V threshold of what is a major source. For permitting agencies, the resource issue is twofold. First, most agencies initially calculated fee amounts and revenues based on a larger number of sources, but actual revenues have been less, since more than one-half of sources have lawfully avoided Title V coverage. Second, these sources still represent a regulatory workload, in terms of non-Title V permitting (separate state requirements) and tracking, which is unlikely to be covered fully by other fee revenues or available funding. Getting state legislatures to approve fee increases to address these concerns is politically difficult, in most cases. As sources install pollution control equipment that reduces emissions, another issue arises. The majority of permitting authorities have fee structures that are based on emissions, such as a per-ton fee. Over time, revenues decrease because sources implement tighter emission controls and/or sources close. With decreasing emissions and reduced permit fee revenues, permitting authorities' ability to cover program costs and carry out required program activities is strained. The adequacy of permit fee revenues has been highlighted as a concern in a number of EPA's evaluations of state, local, and territorial permit programs, described above. The EPA's Inspector General 2002 report identified insufficient permit fee resources as a key factor that caused delays in issuing Title V permits. A 2014 EPA IG report focused specifically on revenues to operate the program. The IG found that states' permitting revenues have been declining in recent years and that state operating expenses often exceeded Title V revenues. Among nine of the largest state and local permitting authorities that oversee 45% of the nation's active Title V permits, there was a $69 million shortfall out of $672 million in expenses incurred between 2008 and 2012. Further, the IG criticized EPA for insufficient oversight of state permit fees and attributed the problem to several factors: a lack of a national oversight strategy, outdated (1993) guidance on fee collection, a lack of accounting expertise among EPA staff, and an unwillingness by some regions to pursue formal corrective actions against states. The report found, "The agency's weaknesses in identifying and obtaining corrective actions for Title V revenue sufficiency and accounting practices, coupled with declining resources for some permitting authorities, jeopardizes state and local Title V program implementation." The IG recommended a series of steps to improve the program, all of which EPA accepted, but EPA said that it will not complete most actions until the end of FY2017. Confusing Requirements and Limited EPA Guidance Critiques of the Title V program, including the EPA Inspector General's reports and the Title V Task Force report, identify insufficient EPA guidance as a major implementation issue. The IG's 2005 report, based on a review of permits issued by several states, found that permit clarity varies widely from state to state. Permit requirements are often vaguely stated or identified by reference to other documents, without narrative description or precise citation. EPA regulations require that the permitting authority prepare a statement for each draft permit to set forth the legal and factual basis of the permit, but the IG found that such statements often are inadequate or totally missing. From its review, the IG concluded that many of these problems stem from a lack of EPA guidance on key issues, which results in permitting inconsistencies and contributes to permitting delays that adversely affect sources, agencies, and the public. The IG strongly recommended that EPA issue nationwide guidance on a number of topics (including requirements for the statement of basis in permits, requirements for content of annual compliance certifications by corporate officials, and applicability of sanctions for unresolved program deficiencies) in order to achieve more national cohesion and consistency in Title V permits. EPA has issued very limited formal guidance and rules on Title V in the past several years. In lieu of formal guidance, EPA has relied on responses to citizen petitions and letters to regions and permitting authorities to convey its position on key Title V issues, arguing that this strategy allows for flexibility that reflects differences in source complexity. Some stakeholders are concerned that, rather than resolving program issues through rule-making or nationally applicable interpretive guidance, EPA is using the petition process and other mechanisms not just to apply law to facts, but to make law in the first instance. The change away from issuing national rules or guidance occurred following a federal court decision which vacated a 1998 EPA guidance document on periodic monitoring. In that case, the court ruled that the agency had exceeded its authority by utilizing nonbinding guidance rather than national rule-making to interpret regulatory requirements. The IG noted that permitting authorities may be unwilling to follow or may be unaware of guidance that isn't national in scope. One example of lack of EPA guidance relates to incorporation of monitoring requirements in permits, one of the most contentious issues in Title V implementation. The CAA mandates that permits include monitoring and reporting requirements to assure compliance with permit terms and conditions. In the 1992 Part 70 rules, EPA required that permits include all monitoring and test methods detailed in the applicable underlying requirements (e.g., in NSPS or hazardous air pollutant standards incorporated in the Title V permit). In addition, where an underlying applicable requirement does not require "periodic monitoring," Part 70 requires that periodic monitoring be specified in the Title V permit. The 2005 EPA IG report found that specification of monitoring requirements was one of the most significant areas of inconsistency in permits and that a number of stakeholders and EPA regional officials contend that more EPA guidance on these issues is needed. The Title V monitoring rules, and specifically the application of "periodic monitoring" requirements in permits, have been subject to several EPA interpretations and to litigation challenging those interpretations, in cases asking the federal court to determine the meaning of the periodic monitoring rule and related regulatory language and to determine the consistency of the rules (as interpreted by EPA) with the statutory requirements. In 2008, a federal appeals court vacated a 2006 rule as inconsistent with the Clean Air Act. The 2006 rule had said that (contrary to prior policy) state and local authorities could not require supplemental monitoring in cases where existing monitoring is inadequate to ensure compliance with the Clean Air Act. According to the 2006 Title V Task Force report, stakeholders fundamentally disagree on the statutory and regulatory requirements and particularly on whether permitting authorities may or must (depending on one's perspective) specify new or revised emissions monitoring requirements in permits. EPA officials said that a revised periodic monitoring rule would be developed, but none has been proposed. Congressional Interest The Title V Task Force noted in 2006 that much about Title V remains unsettled and subject to debate in both the legal and policy arenas—an assessment that likely still applies—and it urged that steps be taken to "stem the tide of transaction costs and to bring an increased level of certainty and stability to implementation of this program." Responding to the Task Force report in September 2006, EPA officials identified a number of priorities and next steps. Over the following one to two years, the agency said that it would work with states to identify best practices such as standards for granting a public hearing, providing written responses to public comments, and coordination of Title I and Title V process. Similarly, over the next one to three years, EPA would review existing guidance and issue new guidance as appropriate concerning clarification of the permit revision process and permit reopening, and clarification of certain statements required in draft permits. Finally, EPA would initiate rule-makings to address several concerns, such as clarifying when insignificant activities are exempt from permits, and allowing alternatives to newspapers for public notice requirements. Rulemakings could take three years or more, EPA said. Other priorities included improving online notice and online access to documents on the EPA website. However, it appears that little follow-up activity has occurred. In 2008, EPA officials reportedly told an industry group that the agency was working on a proposed rule and guidance document, in partial response to the Task Force report. The streamlining proposal and guidance were expected to address a number of issues—but only a small percentage of the Task Force's recommendations—including the types of emission units that must be included in a permit, the effectiveness of the public notice process, and the complexity and length of permits. The proposed rule was also expected to remove insignificant emission units from the Title V permit process, allow the use of online public notices instead of newspaper notices, and clarify the use of administrative amendments and minor permit revisions. A proposed rule was expected to be released in early 2009, but this has not occurred. In 2012, EPA officials indicated plans to make certain rule changes and issue guidance on how permit writers should include "statements of basis" in the enforceable terms of permits. The impetus for these plans, officials said, came from the 2005 EPA Inspector General report and President Obama's executive orders on reducing regulatory burdens. No proposal has been issued. Congressional oversight of the Title V program has been limited to hearings by a House Energy and Commerce subcommittee and a Senate Environment and Public Works subcommittee in mid-1995, and a Senate Environment subcommittee field hearing in 2000 that addressed Title V and other CAA issues. So far, Congress has not considered statutory changes that would affect the Title V requirements. Clean Air Act issues have been of considerable interest during the 114 th Congress, especially scrutiny of EPA's regulation of greenhouse gas emissions. Although EPA's actions concerning GHGs involve multiple provisions of the act, this congressional attention has not included Title V.

The 1990 Clean Air Act (CAA) amendments required major industrial sources of air pollutants to obtain operating permits. These permits, authorized in Title V of the act, are intended to enhance environmental compliance by detailing for each covered facility all of the emission control requirements to which it is subject. Title V also was intended to generate permit fees that would be used by state and local permitting authorities for administering the program. Implementation of these requirements affects more than 15,000 industrial sources of air emissions, as well as state and local air pollution control agencies. Adding these provisions to the act was controversial, and implementation, too, has generated controversies. The Environmental Protection Agency (EPA) issued regulations to implement Title V in 1992. Aspects of those rules (particularly concerning procedures to modify permits) have been contentious since then. EPA has considered a number of regulatory revisions but has not finalized any modifications. However, EPA has issued white papers and a number of formal and informal guidance documents that, together with the 1992 rules, comprise the agency's current interpretation of statutory and regulatory requirements. Because of regulatory and program approval delays, state and local agencies were slow to begin issuing Title V permits, falling far short of statutory deadlines and EPA's goals. According to an EPA Inspector General report, key factors that delayed issuance of permits included insufficient state resources, complex EPA rules and limited guidance, and conflicting state priorities. Now, however, most initial permits have been issued, and permit reissuance (required after five years) and modification have replaced issuance of initial permits as the major ongoing task of permitting agencies. Attention to the Title V program increased in 2010 when EPA initiated several controversial regulatory actions to regulate emissions of greenhouse gases (GHGs) under existing CAA authority with implications for Title V permits. For Title V, these actions mean including GHG control requirements in Title V permits issued for non-GHG. To minimize the costs and administrative burden of its GHG regulations, EPA issued a "Tailoring Rule" to impose requirements only on the largest sources of GHG emissions. In June 2014, the Supreme Court found that EPA exceeded its statutory authority in issuing the Tailoring Rule but upheld the agency's authority to require sources that already need permits for conventional pollutant emissions to comply with CAA requirements for GHGs. Most stakeholders agree that at least some of the benefits of Title V identified by Congress in the 1990 CAA amendments have been achieved, such as incorporation of applicable air pollution control requirements in a single document that is accessible to regulators, the public, and industrial sources. At the same time, there also has been widespread dissatisfaction with the program's complexity, costs, and confusing requirements. Many believe that a lack of EPA guidance and oversight has contributed greatly to implementation problems. Congressional examination of Title V has been limited to a few oversight hearings, but none recently. Clean Air Act issues have been of considerable interest during the 114th Congress, especially scrutiny of EPA's regulation of greenhouse gas emissions. Although EPA's actions concerning GHGs involve multiple provisions of the act, this congressional attention has not included Title V.

Introduction The Legal Services Corporation (LSC) is a private, nonprofit, federally funded corporation that helps provide legal assistance to low-income people in civil (i.e., non-criminal) matters. The primary responsibility of the LSC is to manage and oversee the congressionally appropriated federal funds that it distributes in the form of grants to local legal services providers, which in turn give legal assistance to low-income clients in all 50 states, the District of Columbia, the U.S. territories of American Samoa, Guam, and the Virgin Islands, the Commonwealth of Puerto Rico, and Micronesia (including the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, and Palau). The LSC does not provide legal services directly. Rather, it funds local legal services providers/programs. Legal services providers/programs may include nonprofit organizations that have as a purpose the provision of legal assistance to eligible clients, private attorneys, groups of private attorneys or law firms, state or local governments, and certain sub-state regional planning and coordination agencies. During 2008, the LSC funded 137 legal services programs in 918 offices. Although the authorization of appropriations for the LSC expired at the end of FY1980, the LSC has operated for the past 29 years by virtue of annual appropriations laws. The LSC was funded at $390 million for FY2009 ( P.L. 111-8 ) and is currently funded at $420 million for FY2010 ( P.L. 111-117 ). Since its inception, the legal services program has been controversial, and Congress has imposed restrictions on activities of LSC-funded legal services programs. Debate existed from the start among policymakers as to whether the LSC's role should be similar to that of its predecessor, namely, using lawsuits and other means to resolve broad underlying difficulties of the poor, or whether the focus should be more narrowly defined to addressing small, specific situations. Although there is widespread agreement that individuals who cannot afford an attorney should have their "day in court," many observers contend that federal dollars should not be used to promote broad social causes. Debate Over Restrictions Proponents of reducing the number of restrictions on the LSC argue that the restrictions deny those represented by LSC-funded attorneys access to basic legal tools, such as claiming court-ordered attorneys' fee awards and participating in class actions that are available to all other litigants. They contend that their adversaries grossly exaggerate their activist activities, they claim that they spend the vast majority of their time providing assistance to poor individuals who are trying to resolve family issues such as divorce and separation, custody and visitation, and domestic abuse, or housing issues such as eviction. Some LSC advocates also counter that class action suits are an efficient and effective way to represent clients who face a common problem and to resolve the legal problems of large numbers of persons in similar situations. Opponents of reducing the number of restrictions on the LSC argue that without the restrictions LSC attorneys in far too many instances would seek the flamboyant social cause-oriented class action cases, rather than cases that address the urgent, routine, day-to-day legal needs of low-income individuals. They maintain that LSC attorneys, prior to the restrictions, were abusing their statutory directive by pursuing a liberal agenda. Some fear that hundreds of legal services attorneys would unleash a barrage of lawsuits in the nation's federal and state courts to advance a liberal political agenda if the restrictions were not in place. The authorizing statute ( P.L. 93-355 ) of the LSC contains restrictions against lobbying, political activities, class actions except under certain conditions, and cases involving abortion, school desegregation, and draft registration or desertion from the military. Additional restrictions have been included in annual appropriations laws over the years. However, it was the 1996 appropriations law that stipulated that the restrictions were to apply to all LSC activities, not just those funded by LSC appropriations. This meant that all of the resources of a LSC-funded legal services programs, whether they came from the LSC appropriation, other federal funds, state or local appropriations, state Interest on Lawyers' Trust Account (IOLTA) programs, contracts, private donations, foundation grants or other funding sources, were subject to the same restrictions as LSC funds. Some attorneys claimed that this provision in effect enabled Congress to restrict the work of attorneys working for the poor far beyond the scope of the federal appropriation. Others referred to the restriction as the "program integrity" restriction, and claimed that the limit on the use of non-LSC funds is crucial. They asserted that because most, if not all, LSC grantees (i.e., legal services programs) receive money from private or other government sources, without the "program integrity" rule, the other restrictions would be rendered virtually meaningless because grantees could simply claim that they are using non-LSC money. Although more theoretical than practical, it is important to mention the proviso that LSC-funded legal services programs can provide some of the restricted activities if they do so through a legally and physically separate entity. Such an undertaking is viewed by most legal services programs as too expensive to contemplate. Some commentators contend that the restrictions prevent LSC attorneys from helping many low-income persons in urgent need of assistance. The current recession, along with a variety of problems such as consumer fraud, domestic violence, and flawed housing practices, have resulted in some policymakers supporting increased funding and fewer restrictions on the LSC. During a recent hearing on the LSC, Representative Alan Mollohan, chairman of the House Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies (CJS), made the following statement: The ongoing recession is driving more and more Americans below the poverty thresholds that establish eligibility for legal aid services. This growing population of eligible clients is confronted with legal needs that are increasing in both number and complexity. Many clients face the prospect of foreclosure or foreclosure-related eviction. With job losses increasing, there are more clients needing assistance gaining access to food stamp benefits, unemployment compensation or Medicaid services. There is also substantial evidence that economic distress increases family distress, including divorce and domestic violence. All of these factors are driving up demand for legal aid services at precisely the same time that the supply of those services is dwindling. Legal aid providers across the country have been forced to make significant budget cuts due to state government deficits and diminishing charitable and private support. The House-passed CJS Appropriations bill ( H.R. 2847 ) would increase funding for the LSC to $440 million in FY2010 (an increase of $50 million over current year funding) and would keep the current restrictions on LSC activities, except for the one relating to attorneys' fees. According to the House report on H.R. 2847 : A general provision in Title V of the bill revises the administrative provision in order to permit grantees to pursue the recovery of attorneys' fees when recovery is permitted or required under Federal or State law. The Committee believes that this action will level the playing field between legal aid attorneys and their counterparts in the private sector and provide a potentially crucial source of additional revenue to legal aid providers in a year in which state and private funding sources are decreasing. The Senate-passed CJS Appropriations bill ( H.R. 2847 ) would increase funding for the LSC to $400 million in FY2010 (an increase of $10 million over current year funding). The Senate-passed version of the bill would also continue existing limitations on the use of federal funds, except that it would eliminate the restrictions on the use of non-federal funds except in litigation involving abortion and cases involving prisoners. The bill will go to conference to resolve the differences between the House and Senate versions of the bill. P.L. 111-117 , the consolidated appropriations for 2010 (enacted December 16, 2009), included a provision that appropriates $420 million for the LSC for FY2010. P.L. 111-117 also continues existing limitations on the use of LSC funds (and non-LSC funds) except for the restriction on the ability of LSC-funded programs to claim and collect attorneys' fees. By contrast, the proposed Civil Access to Justice Act of 2009, S. 718 , introduced by Senator Harkin (et al.) on March 26, 2009 (and the House companion bill H.R. 3764 , introduced by Representative Robert "Bobby" Scott (et al.) on October 8, 2009), would reauthorize the LSC for six years, increase funding to $750 million per year (for each of the fiscal years FY2010 through FY2015), remove most of the restrictions on activities performed by legal services programs that receive LSC funds, and revise the governance of the LSC. In his introduction of the bill, Senator Harkin said: Unfortunately, as the economy continues to wane, those needing legal assistance increase. Yet, the Federal commitment to legal services and LSC is not as effective as it needs to be. LSC has not been authorized since 1981, and since 1995 Congress has slashed funding for legal services for the poor, from $415 million to $350 million in fiscal year 2008, with only a recent increase to $390 million for fiscal year 2009. Further, severe restrictions on LSC funded attorneys impede the ability of legal aid attorneys to provide the most meaningful legal representation to low-income Americans. The result is that access to justice and quality representation has become far from a reality for too many of our citizens. On June 17, 2009, speaking in opposition of funding the LSC, Representative Hensarling stated: " ... it's a program that's been unauthorized since 1980, reported instances of waste, fraud and abuse. And should we actually be taxing taxpayers to force them to subsidize their neighbors to turn around and sue them? I don't think so." He asserted that there are other options for providing legal services to the poor, such as pro bono law firms and lawyers that work on contingent fees. The following section provides information on when the current restrictions were first enacted. (See box on page 1 for a list of the current restrictions.) Legislative History of Restrictions on LSC Activities Generally speaking, Democrats and other advocates of the LSC have consistently argued that the poor should receive the same range of legal assistance through the LSC that is available to those who could afford to hire private attorneys. By contrast, Republicans generally have asserted that LSC attorneys should deal with the day-to-day needs of the poor and should be barred from dealing with controversial political issues. The legislation authorizing the LSC was signed by President Nixon in 1974. During the Ford Administration, the LSC was reauthorized through FY1980. During the 1980s there were several attempts by the Reagan Administration to abolish the LSC. Although the George H.W. Bush Administration did not try to eliminate the LSC or drastically cut its funding, it supported more restrictions on the LSC. During the early years of the Clinton Administration the LSC reached its highest funding level of $400 million; however, funding was reduced significantly in 1996 due to pressure from a majority Republican Congress to reduce LSC funding and impose more restrictions on the types of permissible LSC activities. According to many sources, imposing restrictions on LSC activities was the compromise that enabled the LSC to continue to exist. During the George W. Bush Administration funding for the LSC gradually increased and several more restrictions on LSC activities were imposed. The Obama Administration has proposed that funding for the LSC be increased to $435 million for FY2010, and that LSC restrictions on class action suits and attorneys' fees be eliminated. P.L. 111-117 , the consolidated appropriations for 2010 (enacted December 16, 2009), included a provision that appropriates $420 million for the LSC for FY2010 (which exceeds the previous all-time high level of $400 million). P.L. 111-117 also continues existing limitations on the use of LSC funds (and non-LSC funds) except for the restriction on the ability of LSC-funded programs to claim and collect attorneys' fees. The LSC Act and various annual appropriation laws contain restrictions on activities in which recipients of LSC funds may engage, and on types of cases in which LSC-funded legal services providers/programs may provide legal representation. LSC Authorizing Legislation (P.L. 93-355; Enacted July 25, 1974)24 The LSC was the result of a bipartisan agreement between members of Congress who supported the predecessor OEO legal services program and those who opposed the OEO program. Supporters of the predecessor OEO program maintained that law reform through the use of litigation, lobbying, and community organization was the most effective approach to obtain social justice for poor people. However, opponents maintained that OEO legal services program efforts in cases pertaining to integration, abortion, and union organizing had generated significant controversy. P.L. 93-355 authorized an independent, national nonprofit organization to oversee provision of legal services to the nation's poor (i.e., the LSC), while simultaneously refocusing legal services advocacy toward basic representation of individual clients and away from law reform by prohibiting LSC funds to be used for lobbying, and policy advocacy. Since its inception, Congress has imposed restrictions on the activities of LSC attorneys. The authorizing statute ( P.L. 93-355 ) contains restrictions against lobbying, political activities, class actions (except under certain conditions), and cases involving abortion, school desegregation, and draft registration or desertion from the military. P.L. 96-68 (appropriations bill)—September 24, 1979 A provision that prohibited LSC funds from being used to assist any alien in the United States with regard to immigration, exclusion, deportation, or expulsion matters was first included in P.L. 96-68 . P.L. 97-377 (appropriations bill)—December 21, 1982 The prohibition against using LSC funds to assist aliens was modified so that LSC funds could be used to help certain categories of resident aliens (i.e., immigrants) who were lawfully present in the United States. This modified provision was first included in P.L. 97-377 . P.L. 104-134 (appropriations bill)—April 26, 1996 P.L. 104-134 made numerous changes to the LSC. In 1996, the LSC was still a very contentious topic of debate. The LSC had been unauthorized for many years, which resulted in controversial issues surrounding the LSC being addressed through the inclusion of a number of administrative provisions in annual appropriations acts. In 1995, the House had adopted a budget resolution that assumed that the funding for the LSC would be cut by one-third for FY1996, two-thirds for FY1997, and eliminated thereafter. Many members of Congress concluded that to prevent the elimination of the LSC they would have to accept significant budget cuts to the LSC and more restrictions on LSC activities. The political compromise that was reached preserved the LSC, but reduced its funding, changed the way in which LSC funds were distributed, imposed additional restrictions on the use of LSC funds, and also stipulated that non-LSC funds received by individual legal services programs were subject to the same restrictions as LSC funds. The compromise did not include the reauthorization of the LSC. P.L. 104-134 included provisions that prohibited any funds received by LSC legal services providers/programs to be used for (1) efforts related to redistricting; (2) attempts to influence regulatory, legislative or adjudicative action at the federal, state, or local level; (3) grassroots lobbying; (4) attempts to influence oversight proceedings of the LSC; (5) class action suits; (5) representation of certain categories of aliens; (6) conducting advocacy training on a public policy issue or encouraging political activities, strikes, boycotts or demonstrations; (7) claiming or collecting attorneys' fees; (8) litigation related to abortion; (9) representation of federal, state, or local prisoners; (10) efforts to reform a federal or state welfare system; (11) representation of clients in eviction proceedings brought by a public housing agency if the eviction was based on drug-related activities; and (12) solicitation of clients. P.L. 104-134 also mandated that LSC-funded providers/programs must establish priorities, and staff must agree in writing not to engage in activities outside these priorities. Moreover, P.L. 104-134 prohibited the LSC from receiving nonfederal funds, and legal services providers/programs are prohibited from receiving non-LSC funds, unless the source of funds is told in writing that these funds may not be used for any activities prohibited by the LSC Act or the appropriations law pertaining to the LSC. P.L. 104-208 (appropriations bill)—September 30, 1996 The prohibition against using LSC funds to assist certain categories of aliens was modified to allow both LSC and non-LSC funds to be used to represent aliens who have been victims of domestic violence or child abuse. This modification was first added by P.L. 104-208 . P.L. 105-12 (Assisted Suicide Funding Restriction Act of 1997)—April 30, 1997 A provision that prohibited LSC funds from being used for activities related to assisted suicide, euthanasia, or mercy killing was first added by P.L. 105-12 . P.L. 105-119 (appropriations bill)—November 26, 1997 Among other things, this law incorporated previous restrictions on LSC activities by reference to P.L. 104-134 and also made some modifications to some of the 1996 restrictions. All subsequent annual appropriations bills that include LSC-related provisions incorporate the restrictions on LSC-funded activities by reference to this law ( P.L. 105-119 ) and/or P.L. 104-134 . P.L. 111-117 (appropriations bill)—December 16, 2009 P.L. 111-117 , the consolidated appropriations for 2010, included a provision that appropriates $420 million for the LSC for FY2010. P.L. 111-117 also continues existing limitations on the use of LSC funds (and non-LSC funds) except for the restriction on the ability of LSC-funded programs to claim and collect attorneys' fees. Conclusion Although polls indicate majority support for the existence of, and federal funding for, the non-profit provision of legal assistance to the poor, determining the appropriate funding level of the LSC and agency/program parameters remains an issue. According to 21 state justice commissions, restrictions placed on programs receiving LSC funds adversely affected many low-income persons. The justice commission in New Jersey asserted that the restrictions have a "negative impact," "in actual practice (causing great inefficiencies in the way applicants for service must be processed and referred) and principle (denial of essential and fundamental legal assistance to some who need it)." The Texas commission maintained that the restrictions are "major obstacles ... for achieving 'equal access' for disfavored clients and politically unpopular cases." Some commentators contend that "access to justice" for poor people is inherently unequal when it is subject to restrictions that are not imposed on clients who can afford to pay for their attorneys. Others assert that "access to justice" for the poor is a fallacy because LSC is unable to meet the demands of the current eligible low-income population. They assert that eliminating the restrictions on LSC activities would only widen the gap of unmet need. Many in the legal services community are supporting proposals that would both increase LSC funding and eliminate some of the restrictions on LSC activities. Others opposed to providing any funding for the LSC contend that the LSC has been unauthorized since 1980 for legitimate reasons. They maintain that instead of increasing the national debt by spending $440 million on the LSC, other non-federal resources are more appropriate sources of funding for legal services programs for the poor.

The Legal Services Corporation (LSC) is a private, nonprofit, federally funded corporation that helps provide legal assistance to low-income people in civil (i.e., non-criminal) matters. The primary responsibility of the LSC is to manage and oversee the congressionally appropriated federal funds that it distributes in the form of grants to local legal services providers, which in turn give legal assistance to low-income clients. The LSC appropriation for FY2009 is $390 million. Since its inception, the legal services program has been controversial. Congress, through the LSC Act and various annual appropriation laws, has imposed many restrictions on activities of LSC-funded legal services programs. The Obama Administration and certain Congressional proposals would eliminate some of these restrictions. Under current law, LSC-funded legal services programs may not: (1) engage in partisan litigation related to redistricting; (2) attempt to influence regulatory, legislative, or adjudicative action at the federal, state, or local level; (3) attempt to influence oversight proceedings of the LSC; (4) engage in litigation related to abortion; (5) engage in litigation related to school desegregation; (6) engage in litigation related to draft registration or desertion from the military; (7) initiate or participate in any class action suit; (8) represent certain categories of aliens, except that both LSC and non-LSC funds may be used to represent aliens who have been victims of domestic violence or child abuse; (9) conduct advocacy training on a public policy issue or encourage political activities, strikes, or demonstrations; (10) represent clients in eviction proceedings if the eviction was based on drug-related activities; (11) represent federal, state, or local prisoners; (12) participate in efforts to reform a federal or state welfare system; (13) solicit clients; or (14) engage in activities related to assisted suicide, euthanasia, or mercy killing. The Obama Administration's FY2010 budget proposed that funding for the LSC be increased to $435 million for FY2010 (which would exceed the previous all-time high level of $400 million), and that LSC restrictions on class action suits and attorneys' fees be eliminated. H.R. 2847, the FY2010 appropriations bill from the House Appropriations Subcommittee on Commerce, Justice, Science and Related Agencies (CJS), as passed by the House (on June 18, 2009) would have increased funding for the LSC to $440 million for FY2010 and would have kept the current restrictions on LSC activities, except for the one relating to attorneys' fees. H.R. 2847, as passed by the Senate (on November 5, 2009), would have increased funding for the LSC to $400 million for FY2010 and would have, in effect, allowed non-federal funds that are received by LSC-funded legal services programs to be used to pay for activities that are prohibited by the LSC, except for litigation involving abortion or prisoners. By contrast, the proposed Civil Access to Justice Act of 2009, S. 718, introduced by Senator Harkin (et al.) on March 26, 2009 (and the House companion bill H.R. 3764, introduced by Representative Robert "Bobby" Scott (et al.) on October 8, 2009), would increase LSC funding to $750 million per year and remove most of the restrictions on activities performed by legal services programs that receive LSC funds. P.L. 111-117, the consolidated appropriations for 2010 (enacted December 16, 2009), included a provision that appropriates $420 million for the LSC for FY2010. P.L. 111-117 also continues existing limitations on the use of LSC funds (and non-LSC funds) except for the restriction on the ability of LSC-funded programs to claim and collect attorneys' fees. This report provides background information on the LSC, presents some of the arguments for and against the imposition of the current restrictions on LSC funds, and provides information on when the restrictions were enacted. This report will be updated as warranted.

Introduction The Child Protection Act of 2012 re-enforces federal laws that seek to prevent and punish the sexual exploitation of children. The new law increases the penalty for federal child pornography offenses; outlaws the harassment of aged victims and witnesses; grants federal marshals additional powers to track sex offenders; calls for a reevaluation of the guidelines used to sentence those who intimidate children in order to obstruct prosecution of a sex offense; and bolsters the Justice Department's Internet Crimes Against Children (ICAC) program. Legislative History Many of the components of the Child Protection Act appeared first in earlier legislative proposals. In the House, its predecessors included the Protecting Children From Internet Pornographers Act of 2011 ( H.R. 1981 ), introduced by Representative Lamar Smith for himself and Representative Wasserman Schultz. Companion bills in the Senate included the Protecting Children From Internet Pornographers Act of 2011 ( S. 1308 ), introduced by Senator Hatch for himself and Senators Klobuchar and Rubio, and the Child Protection Act of 2012 ( S. 3456 ), introduced by Senator Blumenthal for himself and Senators Whitehouse and Cornyn. On July 31, 2012, the House Judiciary Committee approved the Child Protection Act ( H.R. 6063 ), which passed under suspension of the rules on August 1, 2012. It passed the Senate by unanimous consent on November 26, 2012, and was signed by the President on December 7, 2012. Penalty for Possession of Child Pornography It is a federal crime to knowingly transport, receive, sell, or possess child pornography, or to attempt or conspire to do so, under various jurisdictional circumstances. The crimes are proscribed in two sections, whose principal difference is that one deals with pornography depicting activities of actual human beings and the other deals with pornography consisting of computer generated images as well. Federal jurisdiction of the possession offenses exists under either section, if the offense occurs on a federal enclave, in a federal facility, in Indian country, or if the pornography has been "mailed or transported in or affecting interstate or foreign commerce by any means, including computer." The transportation, receipt, or sales offenses under either section are punishable by imprisonment for not less than 5 years or more than 20 years. The Child Protection Act increases the maximum penalty for possession, attempted possession, or conspiracy to possess, from imprisonment for not more than 10 years to imprisonment for not more than 20 years, when the pornography depicts or purports to depict a child under 12 years of age or a prepubescent child. The increase is designed as a demand reduction measure and to reiterate that Congress considers possession of child pornography a serious offense that should be punished accordingly. Harassment of Child Victims or Witnesses A person violates 18 U.S.C. 1512 when he kills or attempts to kill another person; uses force or the threat of force against another person, or attempts to do so; uses intimidation or threats against another person or attempts to do so; or intentionally harasses another person and thereby hinders, delays, prevents, or dissuades another from testifying or producing evidence, or attempt to so harass; if he does so with the intent to influence a witness, or prevent a witness from testify or producing evidence, in a federal proceeding. Section 1514 allows the court, at the behest of the prosecution, to issue a temporary restraining order and a subsequent protective order to prevent such a violation of Section 1512 or to prevent ongoing victim or witness harassment that has no legitimate purpose. Failure to comply with either a restraining order or a protective order constitutes contempt of court. There is no statutory definition of the term "no legitimate purpose." At least one district court, however, has denied a government request under Section 1514 to order a defendant to take down a website that identified government witnesses and agents. The Child Protection Act makes several changes in Section 1514. The House Judiciary Committee report explains the need for the modifications as follows: Child pornography and exploitation prosecutions hinge often on the testimony of the child victim. Unfortunately, many children are abused by an acquaintance or even a family member and are often intimidated from telling their stories with threats that they will be punished or get in trouble if they tell.... Current fines and contempt citations are inadequate to protect minor witnesses and victims, especially in child sex abuse cases.... Although Federal law provides criminal penalties for physical violence, threats, and other egregious forms of witness intimidation, more subtle forms of intimidation directed to a child remain unaddressed. This section provides Federal courts with the means to control such intimidation through effective protection orders and the felony penalty would add needed teeth to the law to strengthen the deterrent effect of a restraining order to prevent repeat intimidation. The Child Protection Act thus amends Section 1514 to make a violation or attempted violation of a restraining order or protective order punishable by imprisonment for not more than five years and/or a fine of not more than $250,000 (not more than $500,000 for organizations). The proscription applies to orders issued in conjunction with any federal criminal case or investigation. The Child Protection Act also makes several other adjustments to Section 1514 that apply regardless of the nature of the federal criminal context in which they arise. Thus, where it was once limited to orders for the victims and witnesses in federal "criminal cases," Section 1514 now permits protective orders in both criminal cases and criminal investigations. Where the section once required action by the prosecutor, it now permits the court to act upon its own initiative as well. It remains to be seen whether this permits a court to issue a protective order for the benefit of a defense witness. Where the section once clearly applied to harassment of victims and witnesses, it may now clearly be invoked also to protect a member of the immediate family of a victim or witness. Where harassment once required a series of acts, it may now consist of a single act. Moreover, Section 1514 now affords child victims and witnesses greater security in the form of a protective order procedure that shields them not only from harassment (activities causing "substantial emotional distress for no legitimate purpose"), but from intimidation (activities causing "fear or apprehension" for no legitimate purpose). These new child-specific protective orders are more readily available than their adult counterparts. The court must issue a protective order when it " finds evidence that the conduct at issue [whether it takes the form of harassment or intimidation] is reasonably likely to adversely affect the willingness of the minor witness or victim to testify or otherwise participate in the Federal criminal case or investigation." Protective orders covering adults, in contrast, require the court to find "by a preponderance of the evidence that harassment of an identified victim or witness in a Federal criminal case or investigation exists or that such order is necessary to prevent and restrain an offense under section 1512 of this title ... " Finally, Section 1514 now creates a rebuttable presumption that Internet publication of identifying information relating to a child victim or witness satisfies the "no legitimate purpose" element of harassment or intimidation: [A]court shall presume, subject to rebuttal by the person, that the distribution or publication using the Internet of a photograph of, or restricted personal information regarding, a specific person serves no legitimate purpose, unless that use is authorized by that specific person, is for news reporting purposes, is designed to locate that specific person (who has been reported to law enforcement as a missing person), or is part of a government-authorized effort to locate a fugitive or person of interest in a criminal, antiterrorism, or national security investigation. "Restricted personal information" means the "the Social Security number, the home address, home phone number, mobile phone number, personal email, or home fax number of, and identifiable to," an individual. The case law suggests that the Constitution may cabin the scope of the court's authority under Section 1514 in this context. Administrative Subpoenas for the Marshals Service Federal agencies may often issue administrative subpoenas in the performance of the regulatory duties without prior judicial approval. In a regulatory context, the government ordinarily finds issuing an administrative subpoena more efficient than securing and executing a search warrant. On the other hand, individuals ordinarily find compliance with an administrative subpoena less intrusive than the government's search of their property under a warrant. Consequently, an administrative subpoena in a regulatory context will usually survive judicial scrutiny as long as the subpoena is statutorily authorized, statutory requirements are met, and its demands are not unreasonable. Congress has approved the use of administrative subpoenas in criminal investigations in a few instances—Inspector General inquiries, and drug trafficking, health care fraud, and child abuse cases. The Child Protection Act grants the Marshals Service the power to issue administrative subpoenas in order to track unregistered sex offenders. Federal law requires individuals with a prior conviction for various federal, state, or foreign sex offenses to register with state, tribal, or territorial authorities. The Marshals Service is responsible for tracking and apprehending unregistered sex offenders. It was thought that administrative subpoenas would "allow the Marshals [Service] to access hotel, rental car, or airline records quickly, before the trail goes cold on a fugitive sex offender." Sentencing Guidelines Federal courts must begin the sentencing process by determining the range of sentences recommended under the United States Sentencing Commission's sentencing guidelines. The sentences they impose will be upheld on review only if they are considered reasonable in light of the recommendations of the guidelines among other statutory sentencing factors. The sentencing guidelines arrive at a recommended sentencing range for a particular offense through a score keeping system that takes into account the seriousness of the offense, the circumstances under which it was committed, and the offender's criminal record. Under the system, federal crimes are each assigned to a particular guideline that sets a base offense level for the offense. Offense levels are then added or subtracted based on the circumstances of a given case. The final sentencing level total translates to a sentencing range. The Sentencing Commission not only formulated the original guidelines but it periodically reviews and revises them. In the words of the House Judiciary Committee report the Child Protection Act "instructs the U.S. Sentencing Commission to review, and increase if appropriate, the Sentencing Guidelines contained in Part J of Chapter 2, relating to penalties for witness intimidation in certain crimes against children offenses." Part J contains the sentencing guidelines for contempt of court, obstruction of justice, perjury, and bribery of witness, among others. The obstruction of justice guideline now covers both witness tampering and in some cases lying to a federal officer or employee with respect to a matter within his or her agency's jurisdiction. The guideline increases the applicable sentencing level when the lie relates to a sex offense. The guideline supplies no comparable sentencing level increase when the prosecution of a sex offense is obstructed by witness tampering under 18 U.S.C. 1512 rather than lying under 18 U.S.C. 1001. The Sentencing Commission's review will be focused on the adequacy of sentencing treatment under the guidelines for obstruction of justice offenses committed in conjunction with sex trafficking, sexual abuse, sex offender registration, child pornography, and Mann Act violations, particularly when they involve children. Internet Crimes Against Children (ICAC) Task Force Program The Internet Crimes Against Children (ICAC) Task Force Program is a Justice Department program that assists state and local task forces devoted to investigating and prosecuting Internet sexual offenses against children—pornography, obscenity, and predatory enticement. Congress had authorized appropriations for the program of $60 million per year for each year from FY2009 through FY2013. The Child Protection Act authorizes appropriations in the same amount for each year from FY2014 through FY2018. The Child Protection Act also raises the cap on ICAC task force training from $2 million to $4 million per year; designates the head of the program as the National Coordinator for Child Exploitation Prevention and Interdiction and provides that the position shall be in the Senior Executive Service; eliminates the volume of criminal activity as a possibly exclusive criterion for determining high-priority suspects identified in monthly ICAC data system reports; and directs the Attorney General to report to the House and Senate Judiciary Committees, within 90 days of passage, on the status of the establishment of the National Internet Crimes Against Children Data System. 18 U.S.C. 1514 (text) (amending language in italics) (a)(1) A United States district court, upon application of the attorney for the Government, shall issue a temporary restraining order prohibiting harassment of a victim or witness in a Federal criminal case if the court finds, from specific facts shown by affidavit or by verified complaint, that there are reasonable grounds to believe that harassment of an identified victim or witness in a Federal criminal case exists or that such order is necessary to prevent and restrain an offense under section 1512 of this title, other than an offense consisting of misleading conduct, or under section 1513 of this title. (2)(A) A temporary restraining order may be issued under this section without written or oral notice to the adverse party or such party's attorney in a civil action under this section if the court finds, upon written certification of facts by the attorney for the Government, that such notice should not be required and that there is a reasonable probability that the Government will prevail on the merits. (B) A temporary restraining order issued without notice under this section shall be endorsed with the date and hour of issuance and be filed forthwith in the office of the clerk of the court issuing the order. (C) A temporary restraining order issued under this section shall expire at such time, not to exceed 14 days from issuance, as the court directs; the court, for good cause shown before expiration of such order, may extend the expiration date of the order for up to 14 days or for such longer period agreed to by the adverse party. (D) When a temporary restraining order is issued without notice, the motion for a protective order shall be set down for hearing at the earliest possible time and takes precedence over all matters except older matters of the same character, and when such motion comes on for hearing, if the attorney for the Government does not proceed with the application for a protective order, the court shall dissolve the temporary restraining order. (E) If on two days notice to the attorney for the Government, excluding intermediate weekends and holidays, or on such shorter notice as the court may prescribe, the adverse party appears and moves to dissolve or modify the temporary restraining order, the court shall proceed to hear and determine such motion as expeditiously as the ends of justice require. (F) A temporary restraining order shall set forth the reasons for the issuance of such order, be specific in terms, and describe in reasonable detail (and not by reference to the complaint or other document) the act or acts being restrained. (b)(1) A United States district court, upon motion of the attorney for the Government , or its own motion , shall issue a protective order prohibiting harassment of a victim or witness in a Federal criminal case or investigation if the court, after a hearing, finds by a preponderance of the evidence that harassment of an identified victim or witness in a Federal criminal case or investigation exists or that such order is necessary to prevent and restrain an offense under section 1512 of this title, other than an offense consisting of misleading conduct, or under section 1513 of this title. (2) In the case of a minor witness or victim, the court shall issue a protective order prohibiting harassment or intimidation of the minor victim or witness if the court finds evidence that the conduct at issue is reasonably likely to adversely affect the willingness of the minor witness or victim to testify or otherwise participate in the Federal criminal case or investigation. Any hearing regarding a protective order under this paragraph shall be conducted in accordance with paragraphs (1) and (3), except that the court may issue an ex parte emergency protective order in advance of a hearing if exigent circumstances are present. If such an ex parte order is applied for or issued, the court shall hold a hearing not later than 14 days after the date such order was applied for or is issued. (3) At the hearing referred to in paragraph (1) of this subsection, any adverse party named in the complaint shall have the right to present evidence and cross-examine witnesses. (4) A protective order shall set forth the reasons for the issuance of such order, be specific in terms, describe in reasonable detail the act or acts being restrained. (5) The court shall set the duration of effect of the protective order for such period as the court determines necessary to prevent harassment of the victim or witness but in no case for a period in excess of three years from the date of such order's issuance. The attorney for the Government may, at any time within ninety days before the expiration of such order, apply for a new protective order under this section , except that in the case of a minor victim or witness, the court may order that such protective order expires on the later of 3 years after the date of issuance or the date of the eighteenth birthday of that minor victim or witne s s . (c) Whoever knowingly and intentionally violates or attempts to violate an order issued under this section shall be fined under this title, imprisoned not more than 5 years, or both. (d)(1) As used in this section — (A) the term "course of conduct"' means a series of acts over a period of time, however short, indicating a continuity of purpose ; (B) the term "harassment" means a serious act or course of conduct directed at a specific person that— (i) causes substantial emotional distress in such person; and (ii) serves no legitimate purpose ; (C) the term " immediate family member " has the meaning given that term in section 115 and includes grandchildren; (D) the term " intimidation " means a serious act or course of conduct directed at a specific person that — (i) causes fear or apprehension in such person; and (ii) serves no legitimate purpose; (E) the term " restricted personal information " has the meaning give that term in section 119; (F) the term " serious act " means a single act of threatening, retaliatory, harassing, or violent conduct that is reasonably likely to influence the willingness of a victim or witness to testify or participate in a Federal criminal case or investigation; and (G) the term " specific person " means a victim or witness in a Federal criminal case or investigation, and includes an immediate family member of such a victim or witness. (2) For purposes of subparagraphs (B)(ii) and (D)(ii) of paragraph (1), a court shall presume, subject to rebuttal by the person, that the distribution or publication using the Internet of a photograph of, or restricted personal information regarding, a specific person serves no legitimate purpose, unless that use is authorized by that specific person, is for news reporting purposes, is designed to locate that specific person (who has been reported to law enforcement as a missing person), or is part of a government-authorized effort to locate a fugitive or person of interest in a criminal, antiterrorism, or national security investigation .

On the December 7, 2012, the President signed the Child Protection Act of 2012, P.L. 112-206 (H.R. 6063), into law. The measure had previously passed the House under suspension of the rules and the Senate by unanimous consent. Its provisions are (1) increase the maximum penalty for certain child pornography offenses; (2) outlaw harassment of a child victim or witness while under a protective order; (3) grant the U.S. Marshals Service administrative subpoena authority in sex offender registration cases; (4) direct the U.S. Sentencing Commission to review the adequacy of federal sentencing guidelines that apply to federal sex offenders; and (5) bolster the Internet Crimes Against Children (ICAC) program. Prior law punished the possession of child pornography in a federal enclave, facility, or Indian country or when shipped or transmitted in interstate commerce with imprisonment for not more than 10 years. P.L. 112-206 increases the maximum to 20 years. Prior law permits federal courts to enter an order to protect the victims and witnesses in a federal criminal case from being harassed for "no legitimate purpose." Violation of such an order is punishable as contempt of court. P.L. 112-206 punishes violations by imprisonment for not more than five years. It also creates a rebuttable presumption against the existence of a legitimate purpose, if the defendant publishes or distributes the picture or other identifying information of the victim or witness, other than for press or law enforcement purposes. Constitutional boundaries may cabin the breadth of the proscription. Prior law allows administrative agencies to demand testimony or the production of documents necessary for regulatory purposes, without having to secure a warrant or court subpoena. In a few limited instances—such as health care fraud, child pornography, and U.S. Secret Service protection—federal law enforcement officials enjoy similar authority. P.L. 112-206 grants the U.S. Marshals Service the authority to use administrative subpoenas to unregistered sex offenders. Prior law requires federal courts to begin the sentencing process by calculating the penalties recommended by the U.S. Sentencing Commission's sentencing guidelines. P.L. 112-206 directs the commission to review the adequacy of the guidelines applicable for obstruction of justice when committed in conjunction with sexual abuse, sex offender registration, child pornography, sex trafficking, and Mann Act offenses. Prior law instructs the Attorney General to create and implement a national strategy for child exploitation and interdiction. P.L. 112-206 bolsters that effort by (1) increasing from $2 million to $4 million the annual cap on private training of ICAC task force members; (2) authorizing appropriations of $60 million for ICAC task forces for each fiscal year through FY2018; (3) insisting that the ICAC national coordinator be a member of the Senior Executive Service; (4) eliminating the possibility that the identification of high-priority suspects might be based solely on the volume of suspected criminal activity; and (5) instructing the Attorney General to report to the Judiciary Committees, within three months, on the establishment of the ICAC data system.

Introduction During its development, the U.S. Navy's Unmanned Carrier Launched Airborne Surveillance and Strike (UCLASS) aircraft and its predecessors have been proposed to fill a number of roles and operate in a variety of air defense environments. The effort to choose among those roles and determine final requirements for the system has led to controversy and delay in executing the program. Members of Congress have proposed actions to resolve the requirements issue and allow the program to move ahead. Prepared in response to a specific Congressional request, this report details the history of UCLASS requirements development through the program's evolution to its current stage. It is based on available open-domain information, which may not agree in all particulars with Department of Defense (DOD) acquisition documents not available in the public domain. Summary of Changes in UCLASS Requirements Table 1 summarizes changes in UCLASS and predecessor program requirements over time. N-UCAV In 1999, the Navy and the Defense Advanced Research Projects Agency (DARPA) began research into an unmanned combat air vehicle (UCAV). At the same time, the Air Force and DARPA jointly undertook a separate UCAV project. The Navy's UCAV (referred to variously as N-UCAV and UCAV-N) was designed to fit a relatively small niche. The Navy planned to continue using manned aircraft to suppress enemy air defenses (SEAD) and perform electronic attack. N-UCAV was thus intended "for reconnaissance missions, penetrating protected airspace to identify targets for the attack waves" consisting of manned aircraft. Although the program focused mostly on system studies, Northrop Grumman independently built a single X-47A air vehicle, which was tested under the N-UCAV program. First flight took place in February 2003. J-UCAS On December 31, 2002, the Office of the Secretary of Defense (OSD) issued a program decision memorandum adjusting future funding for both Navy and Air Force UCAV development and mandating the services merge their efforts into a joint program. The Defense Department recognized the potential for significant synergy by combining the programs, and in 2003 "directed that the programs be consolidated into a joint demonstration program supporting both Navy and Air Force needs." The resulting Joint Unmanned Combat Air Systems (J-UCAS) program was a DARPA-Air Force-Navy effort to demonstrate the technical feasibility, military utility, and operational value of a networked system of high-performance, weaponized unmanned air vehicles. Missions included SEAD, electronic attack, precision strike, penetrating surveillance/reconnaissance, and persistent global attack. "The operational focus of this system is on those combat situations and environments that involve deep, denied enemy territory and the requirement for a survivable, persisting combat presence ... operating and surviving in denied airspace." N-UCAS Three years later, the 2006 Quadrennial Defense Review called for the J-UCAS to be terminated. Instead, the Air Force was to begin developing a new bomber, while the Navy was mandated to develop an unmanned longer-range carrier-based aircraft capable of being air-refueled to provide greater standoff capability, to expand payload and launch options, and to increase naval reach and persistence. That follow-on effort became the Navy Unmanned Combat Air System (N-UCAS). Given the baseline of being able to operate from aircraft carriers, N-UCAS's other requirements looked much like J-UCAS, with the desired ability to provide "persistent, penetrating surveillance, and penetrating strike capability in high threat areas" "or suppress enemy air defenses." UCAS-D In 2006, as part of the N-UCAS program, the Navy initiated the Unmanned Combat Air System Demonstration (UCAS-D) program, intended to demonstrate the technical feasibility of operating unmanned air combat systems from an aircraft carrier. In 2013, the Navy successfully launched and landed a UCAS-D on an aircraft carrier. However, as UCAS-D was a subset of N-UCAS, it did not have a separate set of requirements. In total, the Navy invested more than $1.4 billion in UCAS-D. In 2011, as UCAS-D efforts were ongoing, the Navy received approval from DOD to begin planning for the UCLASS acquisition program. UCLASS RFI N-UCAS had been a development program to determine how to make an unmanned vehicle take on many of the aspects of a manned fighter. UCLASS, the Unmanned Carrier-Launched Airborne Surveillance and Strike program, was the Navy's way of turning what it had learned from N-UCAS into an operational platform "to address a capability gap in sea - based surveillance and to enhance the Navy's ability to operate in highly contested environments defended by measures such as integrated air defenses or anti - ship missiles." On June 9, 2011, the Joint Requirements Oversight Council (JROC) issued JROCM 087-11, a memorandum approving the UCLASS Initial Capabilities Document. That document stated UCLASS was to be "a persistent, survivable carrier-based Intelligence, Surveillance, and Reconnaissance and precision strike asset." JROC Revises UCLASS Requirements In preparing for the FY2014 budget submission, the JROC revisited the UCLASS requirement. On December 19, 2012, the JROC published memoranda 086-12 and 196-12, which significantly altered "the requirements for UCLASS, heavily favoring permissive airspace intelligence, surveillance and reconnaissance (ISR) capabilities." The change in requirements appeared to be budget-driven. "The reduction in strike capability of the Navy's next generation carrier-based unmanned aerial vehicle was born of fiscal realities, said Dyke Weatherington, the Pentagon's director of unmanned warfare and intelligence, surveillance, and reconnaissance (ISR)." The Navy stated: In support of affordability and adaptability directives, JROCMs 086-12 and 196-12 redefined the scope of JROCM 087-11 and affirmed the urgency for a platform that supports missions ranging from permissive counter-terrorism operations, to missions in low-end contested environments, to providing enabling capabilities for high-end denied operations, as well as supporting organic Naval missions. The Office of the Secretary of Defense stated: In a December 2012 memorandum, the JROC emphasized affordability as the number one priority for the program. The CDD (Capability Development Document) established an affordability KPP (Key Performance Parameter) in which the recurring fly-away cost of the air vehicles to conduct one 600 nautical mile orbit shall not exceed $150 million. Available funding to complete system development is also limited, pressuring industry to provide mature systems and emphasize cost during development. UCLASS Draft RFP On April 17, 2014, the Navy issued a draft request for proposals (RFP) for the UCLASS system. The RFP reportedly held to the requirements that, in the Government Accountability Office (GAO)'s words, "emphasized affordability, timely fielding, and endurance, while deemphasizing the need to operate in highly contested environments." The UCLASS draft RFP is classified. However, "according to (Chief of Naval Research RADM Mathias) Winter, the broad overarching goals of the UCLASS program are to provide two intelligence, surveillance and reconnaissance orbits at 'tactically significant ranges' 24 hours a day, seven days a week over uncontested airspace." The UCLASS would also have a light strike capability to eliminate targets of opportunity. A press report stated: "The plan here is to provide an early operational capability that will be verified and validated for a light strike permissive environment," (RADM Mathias) Winter said. "What we will ensure is that the design of the system does not preclude what we call capability growth to be able to operate in contested environments." UCLASS is still expected to grow into the missions required before the 2012 JROC memo. According to the Secretary of the Navy, "(t)he end state is an autonomous aircraft capable of precision strike in a contested environment, and it is expected to grow and expand its missions so that it is capable of extended range intelligence, surveillance and reconnaissance, electronic warfare, tanking, and maritime domain awareness." The timeline for procurement of UCLASS is unclear, and the GAO has noted that in part due to changes in requirements, UCLASS has experienced ongoing delays: Since our last review in September 2013, the system's intended mission and required capabilities have come into question, delaying the Navy's UCLASS schedule. DOD has decided to conduct a review of its airborne surveillance systems and the future of the carrier air wing, and has as a result adjusted the program's schedule. The Navy's fiscal year 2016 budget documents reflect these changes, with award of the air system contract now expected to occur in fiscal year 2017, a delay of around 3 years. In addition the Navy now expects to achieve early operational capability—a UCLASS system on at least one aircraft carrier—no earlier than fiscal year 2022, a delay of around 2 years... The schedule in the Navy's budget documents show that a Milestone A review—the decision to begin technology maturation and risk reduction efforts—is expected to occur in fiscal year 2017, a delay of around 3 years since our last review. As the UCLASS program continues to stretch out across multiple budget years, possibly including further JROC reviews, Quadrennial Defense Reviews, and other changes in DOD priorities, it is possible that requirements will evolve further.

During its development, the U.S. Navy's Unmanned Carrier Launched Airborne Surveillance and Strike (UCLASS) aircraft and its predecessors have been proposed to fill a number of roles and operate in a variety of air defense environments. Over time, those requirements have evolved to encompass a less demanding set of capabilities than first envisioned. This report details the history of UCLASS requirements development through the program's evolution to its current stage.

Background Oil exploration and production in Iraq began in the 1920s under the terms of a wide-ranging concession granted to a consortium of international oil companies known as the Turkish Petroleum Company and later as the Iraq Petroleum Company. The nationalization of Iraq's oil resources and production was complete by 1975. From 1975 to 2003, Iraq's oil production and export facilities were entirely state operated. However, from the early 1980s until the toppling of Saddam Hussein's government in 2003, the country's hydrocarbon infrastructure suffered from the negative effects of war, international sanctions, a lack of investment and technology, and, in some cases, mismanagement and corruption. Iraq's highest-ever production level of 3.5 million barrels per day (mbd) was reached in 1990 immediately prior to the Iraqi invasion of Kuwait. Damage during the 1991 Gulf War and subsequent international sanctions limited overall production and exports until 2003 and beyond. According to the Oil and Gas Journal , Iraq has 115 billion barrels of proven oil reserves, the world's third-largest after Saudi Arabia and Iran. Other estimates of Iraq's potential oil reserves vary, and the U.S. Department of Energy's Energy Information Administration (EIA) notes that current estimates "have not been revised since 2001 and are largely based on 2-D [two-dimensional] seismic data from nearly three decades ago." Given the relative abundance of oil resources in Iraq and the relative ease with which Iraqi oil is extracted, many observers expect that new exploration using advanced technology will reveal further reserves, although estimates of potential additional reserves vary considerably. Many oil industry professionals consider Iraq to have the world's largest, potentially most productive reserves that are not yet fully developed. Iraq's current proven reserves are concentrated (65% or more) in southern Iraq, particularly in the southernmost governorate of Al Basrah. Large proven oil resources also are located in the northern governorate of Al Tamim near the disputed city of Kirkuk. (See Figure 1 , below.) Iraq's current average oil production rate fluctuates around the March 2003 level of 2.5 mbd. However, the current export level of 1.97 mbd remains below the March 2003 level and the 2010 budget target of 2.10 mbd (see Table 1 , below). At present, crude oil is the source of over 90% of Iraq's domestic energy consumption, and, according to the International Monetary Fund (IMF), oil exports generate approximately 85% of Iraq's government revenue. Declines in global oil prices from their 2008 high and reduced oil production led Iraqi leaders to amend their 2009 and 2010 revenue and budget assumptions from projected surpluses to projected consecutive $15 billion deficits. The IMF expects Iraq's budget "to record significant, albeit declining deficits" in 2010 and 2011, "before returning to a surplus position in 2012." Official U.S. assessments stress that continued fluctuations in oil prices and production may jeopardize Iraq's fiscal stability and the sustainability of its reconstruction and development plans, with uncertain follow-on effects on the economy and security. Compared to other top oil producers, Iraq's current total output makes a significant contribution to global oil supplies. According to the U.S. Energy Information Administration (EIA), as of October 2009, Iraq's total production of 2.4 mbd accounted for nearly 3% of global supply and made Iraq the world's 11 th -largest oil producer (see Table 2 , below). Current Iraqi plans call for the expansion of oil production to 4 mbd by 2013 and then upward to 6 mbd by 2017. In December 2009, Iraq's Minister of Oil Hussein Shahristani stated that "any increase will not be seen before 2011." International firms are not expected to begin to make investments and carry out substantial infrastructure work under the terms of recently agreed technical service contracts until after the Iraqi elections scheduled for March 2010. Recent Developments U.S. officials and many observers greeted Iraq's 2009 technical service contract bidding rounds (see below) as a signal that the Iraqi political leadership is committed to capitalizing on Iraq's resource potential and generating revenue to meet the country's significant development needs. The International Monetary Fund, World Bank, and others have argued that the fiscal shortfalls Iraq is facing as a result of stable oil production levels and moderate global oil prices will jeopardize the government's ability to provide needed services and could undermine security gains. Nevertheless, the political, security, and technical challenges described above leave most experts skeptical that Iraq will be able to meet its ambitious goals within the time frame currently outlined by the Maliki government. New International Agreements In support of ambitious oil production expansion goals, Iraqi officials are conducting an international bidding and contracting process for oil field services and have renegotiated some Saddam-era oil production agreements. Iraq's government held two technical service contract bidding rounds in June and December 2009. Following the first tender in June, international firms sought per barrel fees far above what Iraq was willing to pay, and several potentially valuable service contracts for major fields were not awarded. Subsequent negotiations between Iraq and prospective foreign partners yielded more compatible fee offers from the international oil companies (IOCs), and several first round field contracts were initialed in late 2009. The second bidding round in December 2009 resulted in more closely aligned Iraqi offers and foreign bids, with many IOCs submitting highly competitive bids and proposing higher production volume pledges than Iraqi officials expected. Since December 2009, contract negotiations have proceeded rapidly. However, according to the U.S. Special Inspector General for Iraq Reconstruction (SIGIR), "to succeed, the winning bidders must overcome Iraq's aging infrastructure, rampant corruption, and fragile security." Under the terms of the new technical service contracts signed by the Ministry of Oil since mid-2009, IOCs will work in joint venture partnerships with Iraq's state-owned oil firms to manage and improve the production of specific oil fields, including many of Iraq's largest. Iraq will compensate IOCs based on an agreed per barrel fee subject to contract conditions, such as the attainment and maintenance of targeted production levels for defined lengths of time. Once contracts are initialed by the Ministry of Oil, they are reviewed by Iraq's cabinet, the Council of Ministers. While the bidding processes have been conducted in a transparent, public manner, final contract details are being released to the public on an ad hoc basis as terms are agreed and approved by Iraqi officials. In all cases, terms may be subject to renegotiation, and clauses reportedly have been included allowing for adjustments required by potential future OPEC quota considerations. Table 3 below provides an overview of recent Iraqi oil service contracts offered and awarded in the June and December 2009 bidding rounds. Iraq also has decided to invest in some fields itself, in the absence of specific foreign interest. KRG Contracts In late 2007, the Kurdistan Regional Government (KRG) finalized its own regional oil and gas investment law and signed new production sharing contracts (PSCs) with several international companies, including U.S.-based Hunt Oil. Under the terms of the KRG's model PSC, foreign firms manage oil production in given fields, recovering their costs from the sale of specific percentages of the oil produced. The KRG opposes proposals to require federal approval of its existing or future contracts, but notes that it is committed to revenue sharing as defined in the constitution (see below) and draft revenue-sharing legislation that has been considered to date. In May 2009, the national Ministry of Oil agreed to allow the KRG to export a limited quantity of oil using the national oil pipeline infrastructure from two fields, Tawke and Taq Taq, for which PSCs were signed prior to February 2007. However, a dispute over the compensation of the foreign firms involved in production at those fields has halted exports from KRG-controlled fields and has yet to be resolved (see below). Kurdish officials reportedly hope to expand oil production in the KRG region to 1 mbd by 2014. Small-scale U.S. government efforts continue to encourage development of legal and regulatory frameworks for the oil sector and to offer assistance to improve Iraqi budget execution. However, major U.S. programs to assist in the rehabilitation and security of Iraqi oil infrastructure are reaching completion. According to the most recent report of the SIGIR (issued January 30, 2010), "as of December 31, 2009, the United States had allocated $2.06 billion, obligated $1.93 billion, and expended $1.91 billion … to rehabilitate the oil and gas sector in Iraq." In addition, as of December 2005, the United States had administered over $2.8 billion in Iraqi funds from the DFI for oil infrastructure projects. The SIGIR has reported that Iraq's operational funds for its Oil Ministry increased over 800% from 2008 to 2009 reaching the level of $950 million. Oil sector investment funding for 2009 remained roughly static at $2.2 billion and is scheduled to grow to $2.6 billion in 2010. Observers have noted that significant investments in port, road, rail, water, and power infrastructure also are necessary in order for Iraq to achieve its ambitious oil production expansion targets. Key Issues The main points of contention among Iraqi politicians and citizen groups with regard to energy policy include the proper roles and authorities of federal and regional bodies, the terms and extent of potential foreign participation in oil and gas production and development, and potential formulas and mechanisms for equitably sharing oil and gas revenue. In addition, some Iraqi labor groups and elected officials have challenged the transparency and inclusiveness of legislative drafting and contract negotiation processes thus far. Concurrent negotiations regarding constitutional amendments have had direct implications for the hydrocarbon legislation debate, particularly efforts to clarify the specific authorities granted to federal and regional governments to regulate oil and gas development and export activities under Articles 111 and 112 of the Iraqi constitution. Overall, Iraqi, U.S., and other international observers have expressed concern that the violence and political tension that have prevailed in Iraq in recent years have not been conducive to careful consideration of detailed hydrocarbon sector legislation or new national oil and natural gas contracts. The November 4, 2009, U.S. Defense Department report on security and stability in Iraq stated that "fundamental differences remain over federal and regional authorities in contracting and management of the oil and gas sector." In the run-up to Iraq's March 2010 national elections, candidates' positions on oil- and natural gas-related policy questions received scrutiny from voters, although most candidates did not appear overly inclined to defend uncompromising positions on energy policy as a means of garnering popular support. Political, Legal, and Constitutional Questions The Iraqi constitution's ambiguity about the roles and powers of federal, regional, and governorate authorities has fueled division between the national government, the Kurdistan Regional Government (KRG), and other political actors. Articles 111 and 112 of the Iraqi constitution state that Iraq's natural resources are the property of " all the people of Iraq in all regions and governorates ," and that "the federal government, with the producing governorates and regional governments , shall undertake the management of oil and gas extracted from present fields (italics added)." These provisions were included as a means of ensuring consensus among Iraqis and the adoption of the constitution in 2005. In practice, differing interpretations of the constitution since that time drive an ongoing political impasse over oil issues that has prevented the adoption of comprehensive national oil legislation to date. Iraqi Kurds, acting through the KRG, initially demanded the right to sign oil development deals without national government interference, while the national government has proceeded with a technical service contract bidding process that some critics argue is unconstitutional. Baghdad officials also have had to address popular nationalist concerns about the participation of foreign firms in Iraq's energy sector and have sought to do so by using a technical service contract model, by requiring joint venture participation for Iraq's state-owned oil firms, and by offering conservative payment terms to international partners. Iraq's Federation of Oil Unions and its Southern Oil Company have publicly opposed the government's bidding process, and many Iraqi Arabs question the legality of oil contracts signed by the KRG. Resolving KRG-Baghdad Differences Disagreements between officials in the national government and the KRG continue to flare concerning the legality and terms of each government's oil contracts with international investors. Although the national government has agreed to the export of some oil produced under KRG contracts with foreign firms, Baghdad maintains that the KRG is responsible for paying its foreign partners and that KRG contracts signed after February 2007 are considered "illegal" until reviewed and approved by the Ministry of Oil. KRG officials in turn argue that the Baghdad government is responsible for paying the foreign partners because the exports use national pipeline infrastructure and the oil ultimately belongs to the Iraqi people. In October 2009, KRG officials halted oil production for export in KRG territory pending a resolution of the payment dispute. In January 2010, Iraqi Prime Minister Nouri al Maliki indicated a willingness to resolve the dispute, and KRG officials offered to restart oil exports from KRG controlled fields if the national government reserved a portion of the proceeds of the sale to compensate the KRG's foreign partners. In February, Oil Minister Shahristani further suggested that the government could consider compensating the firms for their physical work on contracted fields but would not engage in the payment of profits due based on KRG-signed contracts. It remains unclear whether the new interest among Iraqi leaders in resolving the dispute will be enough to reach an agreement. Hydrocarbon Sector Legislation A package of hydrocarbon sector and revenue-sharing legislation originally proposed in 2007 remains stalled amid ongoing disputes about broader political questions. The legislation would define terms and procedures for the management and development of the country's significant oil and natural gas resources, while reforming state entities charged with overseeing and carrying out energy sector operations. U.S. officials and lawmakers have viewed such legislation as an important benchmark that would indicate the Iraqi government's commitment to promoting political reconciliation and providing a sound basis for economic development. Compromises reached in early 2007 allowed a legislative package to move forward toward formal consideration by Iraq's parliament, but continuing disagreements about the relative powers of regional and national government authorities precluded further progress in adopting new laws. The legislative package preliminarily agreed to in 2007 included a draft hydrocarbon framework law that outlined a regulatory and policy development framework for future oil and gas exploration and production in Iraq. Three companion laws completed the package and would have established terms and mechanisms for revenue sharing, for the creation of a National Oil Company, and the reorganization of the Ministry of Oil. U.S. officials and Iraqi leaders now expect that the new Council of Representatives will consider hydrocarbon sector legislation after national elections in March 2010. At present, it remains unclear whether Iraqi officials intend to consider standing proposed legislation or whether they will seek to renegotiate key elements of the original compromise that allowed draft legislation to move forward in 2007. For more detailed analysis of the legislation proposed in 2007, see the Appendix . Transparency, Fiscal Resources, and Revenue Sharing Transparency In August 2009, the U.N. Secretary General reported to the Security Council that "much remains to be done before a fully operational control and measurement system over oil production, distribution and export sales can be comprehensively implemented," and added that, with regard to the installation of oil metering equipment to measure output and throughput, "indications from the Ministry of Oil point to implementation by 2011 at the earliest." Several observers have questioned Iraq's ability to efficiently and transparently manage its oil resources without adequate technical systems in place to account for the volume of oil produced, transported, and exported. On March 1, 2010, the IMF Executive Board stated that "completion of the oil metering system would help facilitate the full reconciliation of oil flows with financial flows between the state-owned oil companies and the budget." In February 2010, Iraq began implementing the Extractive Industries Transparency Initiative (EITI) as an EITI candidate country. Iraq's State Oil Marketing Organization (SOMO) remains responsible for the sale and export of Iraqi crude oil. Under the terms of United Nations Security Council resolution (UNSCR) 1483 (and renewed through subsequent Security Council resolutions), revenue from Iraq's oil exports is deposited into an Iraq-controlled account held at the Federal Reserve Bank of New York (FRBNY). Five percent of the funds are reserved for a United Nations Compensation Fund for reparations to the victims of the 1990 Iraqi invasion and occupation of Kuwait. The remaining 95% is deposited into a Development Fund for Iraq (DFI) account at the FRBNY and is then transferred to an Iraqi Ministry of Finance account at the Central Bank of Iraq for further distribution to Iraqi government ministries. At Iraq's request, UNSCR 1905 (adopted December 21, 2009) extended the mandate for the DFI and the International Advisory and Monitoring Board (IAMB) until December 2010. The IAMB provides periodic reports on Iraq's oil export revenue, Iraq's use of its oil revenues, and its oil production practices. In July 2009, the IAMB stated that its completed 2008 audit, "continues to highlight key issues of concern regarding weaknesses in controls over oil extraction and use of the resources." In October 2006, the Iraqi cabinet approved the creation of an oversight body known as the Committee of Financial Experts (COFE) to monitor oil revenue collection and administration. The president of the COFE inaugurated its activities in April 2007, and it currently is working alongside the IAMB on audit procedures. In April 2009, the IAMB stated that Iraq's Committee of Financial Experts "is ready and capable to succeed the IAMB and conduct competent and independent oversight of the DFI." A similar finding was reported to the UN Security Council in August 2009. Immunity provisions contained in standing UN Security Council resolutions prevent Iraqi funds deposited in the DFI from being subject to property attachment motions in lieu of legal judgments rendered against the former Iraqi regime. President Bush issued a continuation of the U.S. legal protections for the DFI and other Iraqi assets under Executive Order 13303 through May 20, 2009, and President Obama extended the protections through May 2010. Article 26 of the U.S.-Iraq security agreement commits the United States to continue to assist Iraq with its request to the UN to extend related protections for energy proceeds and the DFI. Fiscal Resources The International Monetary Fund (IMF) warned in a January 2008 report that Iraq's public finances have been "fragile" in recent years and added that, in light of considerable operations and reconstruction needs, the Iraqi government has "little room for fiscal slippage" until oil output increases. The 2008 IMF report explained how high oil prices had compensated for missed oil production expansion targets that had undermined revenue generation through late 2007. Increases in oil prices through August 2008 and expanded oil exports generated substantially higher than expected oil revenues for Iraq through most of 2008. However, drops in global oil prices after September 2008 drastically undercut Iraqi oil revenues, and this trend has forced the Iraqi government to scale back its 2009 and—in spite of recent price increases—its 2010 budget plans. The projected budget deficit for 2009 was $15 to $17 billion, and was financed in part through the use of reserve funds accumulated from prior budget surpluses. In a March 2010 follow up report, the IMF reiterated that "Iraq's longer term economic outlook is strong as oil prices and production are projected to increase markedly in the coming years." However, the IMF estimated that Iraqi budget deficits in 2010 and 2011 would create a $5 billion financing gap after domestic resources have been tapped that will need to be met with international financial support. In January 2010, the Iraqi Council of Ministers approved a 2010 budget of $73.5 billion, based on an export level of 2.1 million barrels per day at an expected average oil price of $62 per barrel. An expected $15 billion 2010 budget deficit will be covered in part by funds raised through a planned Iraqi government bond issue and in part though recently negotiated external support agreements such as the IMF Stand-by Arrangement and World Bank loans. Table 4 below presents various potential revenue scenarios and illustrates that while significant oil revenue may be available to Iraq over the medium term, its availability remains a function of both Iraq's production and export capacity and prevailing global market prices. Revenue Sharing The central role of the oil sector in Iraq's economy, the uneven geographic distribution of Iraq's oil resources, and the legacy of communal favoritism practiced under Saddam Hussein have created lasting concerns among Iraqis about the future equitable distribution of oil revenues. These concerns deepened in the atmosphere of violence and sectarian tension that gripped Iraq from mid-2003 though mid-2008. It continues to shape the dispute between the KRG and the federal government. The principles and mechanisms by and through which Iraq's oil revenues are to be collected and distributed remain contested. Most outside observers agree that an equitable, mutually accepted revenue distribution formula will be critically important to Iraq's future economic health and political stability. Article 112 of Iraq's constitution requires the Iraqi government to distribute revenues: in a fair manner in proportion to the population distribution in all parts of the country, specifying an allotment for a specified period for the damaged regions which were unjustly deprived of them by the former regime, and the regions that were damaged afterwards in a way that ensures balanced development in different areas of the country, and this shall be regulated by a law. The principal issues remain formulas for ensuring equitable distribution of revenues to Iraq's population and the mechanisms through which revenue will be collected and distributed. Debate over distribution formulas reflects efforts to agree on quantitative terms for ensuring equitable per capita distribution and providing for "damaged" and "unjustly deprived" regions in line with Article 112 of the constitution. Debate on distribution mechanisms focuses on whether or not regions or governorates should retain the right to make decisions about revenue from oil and gas produced in their territory and whether federal revenue distribution should be automatic and fixed or whether the federal government should retain discretion over the allocation of funding to regions and governorates. At present, a baseline arrangement that sends 17% of revenues to the KRG has been reflected in recent budgets. The 2010 budget also includes a provision that will deliver $1 to producing governorates for each barrel of oil and refined fuel they produce, leading some observers to warn that redistribution of financial resources from the central government could reduce the amount of funding available for needed infrastructure investments and create new opportunities for local corruption. Since 2008, Iraq's annual budget legislation has required that a census be held to determine ratios for future revenue distribution. Broader political tensions and government capacity constraints have precluded the holding of a national census thus far. Revenue-sharing mechanisms based on per capita population formulas may ensure formerly disadvantaged regions receive adequate shares of oil and gas proceeds, but could create new resentment in less populous governorates, including areas inhabited by Iraq's minority Sunni Arab population. Similarly, revenue distribution mechanisms that reward producing governorates may create resentment in non-producing areas. Meeting Logistical and Technical Requirements By all accounts, Iraq will have to meet significant logistical and technical requirements in order to expand its oil production to planned levels. In January 2010, the SIGIR judged that "anticipated production increases cannot be accommodated by the existing pipeline and export infrastructure." Experts have identified three main areas where investments are needed: drilling rigs and pumping equipment, water supplies for oil field reinjection, and oil pipelines, storage facilities, and export terminals. The International Energy Agency's (IEA) December 2009 Oil Market Report identified logistical constraints on export capacity as "a formidable issue that urgently needs to be addressed." According to the IEA, "Experts estimate that current capacity constraints will limit exports to under 3.0 mbd until major infrastructure work can be completed in the southern region, with 2013-14 the earliest expansion work would be completed." Oil Minister Hussain al Shahristani estimated in April 2009 that Iraq will need to attract $50 billion in investment to expand oil production capacity from the current level of 2.4 mbd to 6 mbd. Energy experts expect Iraq to rely on an extensive contracting program with local, regional, and international entities to manage these investments. Both the U.S. and Iraqi governments are taking steps to improve public financial management and the coordination of U.S. assistance programs, partly in response to 2008 assessments from the SIGIR and others that argued that U.S. investments in capacity building could be "at risk" unless more integrated financial capacity development programming was implemented for Iraqi ministries. Iraq has issued new decrees and reformed administrative bodies to grant greater contracting authority to ministries and provinces. The U.S. Embassy in Baghdad and the commanders of U.S. Forces-Iraq (USF-I) also have reorganized the management of existing U.S. and coalition budget assistance programs to improve coordination. In late June 2008, an interagency Public Finance Management Assistance Group (PFMAG) began work in an advisory capacity with a number of Iraqi ministries. Maintaining Security Both the SIGIR and the U.S. Department of Defense report that the security of Iraq's oil infrastructure has improved markedly since 2007 because of the introduction of an infrastructure protection system that includes several Pipeline Exclusion Zones (PEZs). U.S.-funded components of the PEZ program were completed in 2009. As new oil infrastructure and pipelines are constructed to support Iraq's planned expansion of production, new investments in security infrastructure and security personnel will be necessary. The extent of needed investment will be determined in relation to the size and scope of the actual expansion and the broader security situation prevailing in Iraq. Renegotiating Iraq's OPEC Quota Prior to the 1990-1991 Gulf War, Iraq was a leading member of OPEC with a production quota that mirrored that of its neighbor, Iran. While Iraq remains active in OPEC, it has not operated under the group's quota system since 1991, and many observers expect that the eventual renegotiation of Iraq's OPEC production quota will be a contentious process. In light of Iraq's ambitious production expansion plans, this issue has attracted more analysis and commentary in recent months. The introduction of significant Iraqi oil supplies onto the international market absent corresponding cuts in production from other OPEC or non-OPEC producers could exert downward pressure on global oil prices, especially if global economic growth remains sluggish and oil demand remains relatively flat. In December 2009, Minister Shahristani stated that he does not "expect any discussion until we reach a significant increase in production," adding his view that "there is a need to consider criteria such as the need for construction and development when studying quotas." According to Shahristani, Iraq intends to continue "coordinating its effort to be sure that Iraq and all other countries can maximize the revenues from their oil sales." OPEC Secretary General Abdullah al Badri stated in December 2009, "when the time comes, we will sit and discuss this issue and we will be sure to accommodate Iraq." Oil market experts have underscored the importance and potential difficulty of reaching such an accommodation. If global economic growth resumes at its pre-financial crisis rate, new demand for energy resources could ease the Iraq-OPEC transition. Should global economic activity remain relatively flat or demand for oil resources contract, OPEC members may face more challenging decisions about how to accommodate Iraq's planned production increases. Outlook and Future Prospects U.S. officials and many observers greeted Iraq's 2009 technical service contract bidding rounds as a signal that the Iraqi political leadership is committed to capitalizing on Iraq's resource potential and generating revenue to meet the country's significant development needs. The International Monetary Fund, World Bank, and others have argued that the fiscal shortfalls Iraq is facing as a result of constant oil production levels and moderate global oil prices will jeopardize the government's ability to provide needed services and could undermine security gains. Nevertheless, the political, security, and technical challenges described above leave most experts skeptical that Iraq will be able to meet its ambitious goals within the time frame currently outlined by the Maliki government. In December 2009, the International Energy Agency (IEA) revised its medium-term oil production outlook for Iraq upward to 3.1 mbd by 2014. The IEA warned that this revised outlook is "extremely vulnerable to future revision" in light of "the many political and security risks that continue to challenge the government and industry." According to the IEA report, Iraq's "production targets are arguably very ambitious and are near impossible to reach in the announced time frame given political, logistical, and technical hurdles." In the near term, experts and industry professionals are closely focused on the outcome of the March 2010 national elections, the makeup of the new Council of Representatives, and the formation of a new cabinet. While many expect that the new cabinet will continue along the oil sector management path outlined by the current government, some stakeholders harbor concerns that the terms for international investment in Iraq's oil and gas sector could be significantly revised under a new administration or under pressure from members of the new parliament. The new government also will need to address long-standing political and constitutional questions that have remained unresolved in light of the pending election. U.S. Policy and Issues for Congress The Obama Administration and many Members of the 111 th Congress identify the promotion of political reconciliation and long-term economic development as key U.S. policy goals in Iraq. The current military strategy employed by U.S. forces in Iraq seeks to support Iraqi forces as they maintain a secure environment in which elected leaders can resolve core political differences. In Iraq, the ongoing debate over energy policy and legislation reflects Iraqis' unresolved political differences over the powers reserved for federal and regional authorities, proper means for ensuring equitable distribution of hydrocarbon revenues, and long-standing, shared concerns about preserving Iraq's unity and sovereignty. In light of the U.S. military commitment and persistent Iraqi political differences, Members of Congress and U.S. policymakers face a number of challenging questions: As the U.S. role in providing security in Iraq diminishes, how will the United States influence the pace and content of Iraqi energy policy debates? How should U.S. diplomats engage with Iraqis regarding the management of Iraq's sovereign economic resources? Should the United States encourage Iraqis to complete constitutional reforms that will resolve core political differences before promoting the adoption and implementation of hydrocarbon sector legislation? How can the United States effectively encourage Iraqis to adopt equitable revenue-sharing mechanisms? Should the U.S. government promote or facilitate U.S. and international investment in Iraq's oil and gas sector and, if so, in what form, on which terms, and on what scale? If constitutional disputes over federal and regional authority remain unresolved, the durability of compromises reached with regard to hydrocarbon legislation, revenue sharing, and new oil and gas contracts may be undermined. International investment and technology appear necessary in light of the current Iraqi government's ambitious plans for the expansion of Iraq's oil and gas production. However, the terms and conditions of international participation are likely to remain highly controversial, with powerful Iraqi interest groups taking opposing positions. The public positions that Members of Congress and Administration officials take on each of these questions may influence Iraqi attitudes toward the remaining U.S. presence in Iraq, toward Iraq's proposed legislation and investment arrangements, and toward each other. Congressional Benchmark and Other Legislation In recent years, Congress has sought to ensure that appropriated funds are not used to control Iraq's oil resources and has sought to influence the development and course of U.S. policy in Iraq by requiring the Administration to report on key oil and oil revenue related benchmarks. Legislation in the 111th Congress Section 1221 of P.L. 111-84 , the National Defense Authorization Act for Fiscal Year 2010, states that, "no funds appropriated pursuant to an authorization of appropriations in this Act may be obligated or expended ... To exercise United States control of the oil resources of Iraq." Section 9008 of the FY2010 Defense Appropriations Act ( P.L. 111-118 ) contain similar prohibitions. Section 314 of P.L. 111-32 , the Supplemental Appropriations Act, 2009 (June 24, 2009) states that "none of the funds appropriated or otherwise made available by this or any other Act shall be obligated or expended by the United States Government ... to exercise United States control over any oil resource of Iraq." Senator John Ensign continues to advocate for the creation of an "Iraq Oil Trust" to ensure that all Iraqis share the proceeds of Iraq's oil exports equitably. S. 351 , the Support for Iraq Oil Trust Act of 2009, would require the U.S. Department of State to provide the government of Iraq with a plan outlining options for the creation and implementation of different types of oil trusts. The bill would withhold 10% of U.S. Economic Support Fund assistance to Iraq until the Administration certified the delivery of such a plan. The bill mirrors the version introduced in the 110 th Congress, S. 3470 , the Support for Iraq Oil Trust Act of 2008, of which then-Senator and now Secretary of State Hillary Clinton was a co-sponsor. Legislation in the 110th Congress Section 1314 of the FY2007 Supplemental Appropriations Act ( P.L. 110-28 ) specifically identified the enactment and implementation of legislation "to ensure the equitable distribution of hydrocarbon resources of the people of Iraq without regard to the sect or ethnicity of recipients" and "to ensure that the energy resources of Iraq benefit Sunni Arabs, Shia Arabs, Kurds, and other Iraqi citizens in an equitable manner" as benchmarks on which the President was required to report to Congress in July and September 2007. Section 3301 of the act states that no funds appropriated by the act or any other act may be used "to exercise United States control over any oil resource of Iraq." On July 12, 2007, the Administration released an interim report on the Iraq benchmarks stating that progress toward meeting the revenue-sharing benchmark "is unsatisfactory," and noting that the Administration remains "actively engaged" in encouraging Iraqi leaders "to expeditiously approve the draft [revenue sharing] law in the Council of Ministers and move it to the Council of Representatives." According to the report, "the effect of limited progress toward this benchmark has been to reduce the perceived confidence in, and effectiveness of, the Iraqi Government." The September 2007 report stated that Iraq's government "has not made satisfactory progress toward enacting and implementing legislation to ensure the equitable distribution of hydrocarbon revenue." The report also stressed that "it is difficult to predict what further progress might occur" when Iraq's parliament reconvenes and considers proposed legislation. Section 8113 of P.L. 110-116 , the Department of Defense Appropriations Act, 2008 (November 13, 2007) states that "none of the funds appropriated or otherwise made available by this or any other Act shall be obligated or expended by the United States Government ... to exercise United States control over any oil resource of Iraq." Section 1222 of P.L. 110-181 , the National Defense Authorization Act for Fiscal Year 2008 (January 28, 2008) states that "no funds appropriated pursuant to an authorization of appropriations in this Act may be obligated or expended ... to exercise United States control of the oil resources of Iraq." Section 1211 of S. 3001 , the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (September 27, 2008) and Section 8106 of P.L. 110-329 , the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, contained similar prohibitive language. President Bush issued signing statements stating that the executive branch would "construe such provisions in a manner consistent with the constitutional authority of the President" because, in his view, the provisions "could inhibit the President's ability to carry out his constitutional obligations." Appendix. Draft Hydrocarbon Legislation Hydrocarbon Framework Law Beginning in mid-2006, a three-member Oil and Energy Committee working under the auspices of the Iraqi cabinet prepared draft hydrocarbon framework legislation to regulate Iraq's oil and gas sector. A political negotiating committee subsequently edited their draft. Following approval by the negotiating committee, Iraq's Council of Ministers (cabinet) approved a draft version of the hydrocarbon framework law in February 2007. Subsequent negotiations among Iraqi leaders sought to clarify the responsibilities of federal and regional authorities as well as contracting procedures for oil fields. On July 3, 2007, Iraqi Prime Minister Nouri al Maliki announced that the Council of Ministers had approved a final version of the framework law and had forwarded the bill to the Council of Representatives for consideration. The Council of Ministers' Shoura Council reportedly amended provisions of the bill to ensure their consistency with provisions of the Iraqi constitution. However, Kurdish officials protested the changes, arguing that they are substantive, rather than semantic, and have tentatively withdrawn their support for the legislation. The boycott of cabinet and parliamentary proceedings by various Iraqi entities at the time of the cabinet's approval of the law added to the controversy surrounding the proposed legislation. As of November 2009, statements from Iraqi government officials and members of the Council of Representatives suggest that parliamentary consideration of the legislation continues to be delayed by disagreements between key political figures and likely will be delayed until the election of a new parliament in national elections scheduled for early 2010. The Council of Ministers reportedly is considering new draft legislation, but no timetable has been announced for its consideration. Skepticism about the performance of Oil Minister Shahristani appears to be significant within the Council of Representatives, as is opposition to the conduct of the investment bidding round conducted in July 2009 and to contracts signed by the Kurdistan Regional Government. As such the applicability of the compromises reached prior to the announcement of draft legislation may be in doubt. Note: The following analysis applies to draft legislation released in 2007 and may require substantial revision if new draft legislation emerges from the Council of Ministers in the coming weeks and months or under a new government elected in 2010. Federal Oil and Gas Council The central element of the draft hydrocarbon framework legislation is the creation of a Federal Oil and Gas Council (FOGC) to determine all national oil and gas sector policies and plans, including those governing exploration, development, and transportation. The FOGC would become the most powerful body in Iraq's oil sector, with the power to review all contracts, and would operate according to a two-thirds majority decision-making system. The seats on the FOGC are reserved for specific cabinet members, representatives of constitutionally recognized regional governments, hydrocarbon experts, and "producing governorates." A "Panel of Independent Experts," open to Iraqi and foreign membership, would work with the FOGC in a non-binding, advisory capacity. The possibility that foreign energy experts or industry representatives could be chosen to participate on this panel has alarmed some Iraqis and foreign observers. Although the draft law stipulates that the formation of the FOGC "shall take into consideration a fair representation of the basic components of the Iraqi society," some observers have warned that the makeup of the FOGC specified in the draft law could potentially contribute to sectarian or regional tensions. Given the potential for the majority Shiite Arab community to directly or indirectly control the makeup of Iraq's cabinet in Iraq's democratic system and the ineligibility of Sunni Arab governorates to qualify for FOGC seats based on the other specified terms, some Sunni Arabs fear their interests may not be adequately represented in the powerful council. Other Iraqis may be encouraged to seek constitutionally recognized regional status in order to ensure their representation in the council. Contract Type(s) The draft hydrocarbon framework law establishes several criteria that future "exploration and production contracts" must meet. The criteria are designed to preserve Iraqi control and maximize the country's economic return. The draft law does not mandate the use of so-called "production-sharing agreements" as the sole model contract for future oil development in Iraq. The law states that contract holders may be given exclusive rights to exploration, development, production, and marketing of Iraqi oil for specified periods, subject to approval of the contract and a field development plan by Iraqi authorities. The law also outlines general terms and conditions for evaluating contracts and development plans designed to preserve the Iraqi government's sovereign control of oil production, economic returns to Iraq, and "appropriate returns" to potential investors. The FOGC's Panel of Independent Experts would use these criteria to evaluate contracts signed by the Kurdistan Regional Government since 2003, and the Ministry of Oil, and the FOGC would use the criteria to evaluate contracts signed by the former regime with international oil companies (Article 40). The contract provisions of the law have attracted significant attention because they would allow foreign participation and therefore represent, in principle, a reversal of the nationalization of Iraq's oil sector. The specific details of model contracts developed by Iraqis and the terms of specific individual contracts negotiated between Iraq and potential foreign partners would determine the type of foreign participation and the specific long-term revenue benefits to Iraq or foreign companies. The draft hydrocarbon framework law does not mandate a specific form of contract or predetermine specific contract terms or details. The FOGC would develop model contracts for use in Iraqi oil and gas fields and evaluate agreements with foreign participants according to the stated criteria and the model contracts. According to Revenue Watch Middle East director Yahia Said, "the aim of this law from beginning was to promote foreign investment in Iraq's oil sector. Yet while the law opens the door for foreign companies, there are careful, deliberate mechanisms in place to maintain control in the hands of national government." Petroleum Revenues and Sharing Arrangements The draft hydrocarbon framework law states that Iraq's oil wealth belongs to all of its citizens, as reflected in the Iraqi constitution. However, the draft legislation does not contain specific guidelines or mechanisms for revenue sharing. The draft would create two funds for oil revenues: the first, an "Oil Revenue Fund," and the second, a "Future Fund" to hold an unspecified percentage of oil revenue for long-term development goals. Both funds would be regulated and administered according to terms specified in separate federal revenue legislation. Regional Authority and Oil Field Management Annexes Constitutionally recognized regional authorities would automatically qualify for seats on the FOGC under the terms of the draft oil sector legislation. The draft law originally was structured to grant regional authorities licensing powers with regard to oil fields specified in four annexes, subject to the terms of the draft law and in conjunction with the plans and procedures of the FOGC. Official versions of the draft annexes were not published. However, Kurdish representatives made several public statements following an April 2007 conference in Dubai expressing their opposition to the draft annexes and threatening to withdraw support for the legislative package in the Council of Representatives. The annexes reportedly were dropped from the draft legislation prior to its approval by the cabinet. Under the new arrangement—allegedly designed to meet demands of Kurdish negotiators—the management of specific oil fields would be decided by the members of the FOGC. Draft Revenue-sharing Law Article 112 of the Iraqi constitution sets qualitative criteria for the distribution of oil and gas revenues and requires the Iraqi parliament to pass a law regulating revenue distribution. In February 2007, some officials in Baghdad and Washington indicated that a broad agreement to share oil revenues among regions based on population had been reached. However, Iraqi leaders continued to negotiate the terms of the draft revenue-sharing law through June 2007. In line with the constitutional requirement, a separate draft revenue-sharing law has been prepared as a component of the hydrocarbon legislative package currently under consideration. According to a draft of the revenue-sharing law published by the Kurdistan Regional Government on June 20, 2007, the federal government would be empowered to collect all oil and gas revenue, with the stipulation that all funds be deposited into external and internal accounts based on their source. The federal government would have priority to allocate the funds in the accounts to support national priorities such as defense and foreign affairs, "provided that this does not impact the balance and needs of the governments of the Regions and the Governorates which are not organized in a region." The remainder of the accounts would be distributed to regions and governorates automatically, on a monthly basis, based on agreed population-density-based percentages until a census can be completed. The Kurdistan Regional Government would receive a 17% share of the remaining funds deposited in two accounts at the Central Bank of Iraq branch in Irbil. No specific provision is made in the draft for addressing requirements to meet the needs of "damaged regions" as required by Article 112 of the constitution. The draft revenue law also would create a "Commission of Monitoring the Federal Financial Resources" composed of central government officials, experts, and representatives of each region and governorate. The Commission would monitor deposits and allocations from the central revenue fund, in addition to facilitating international audits and producing monthly, quarterly, and annual transparency reports. Article 7 of the draft revenue law reiterates the call for the establishment of a "Future Fund" for surplus revenue, but states that the operation of such a fund should be defined in a separate piece of legislation following further negotiation among federal, regional, and governorate representatives. Ministry of Oil and Iraq National Oil Company Laws The final two components of the hydrocarbon legislative package are proposed laws that will reorganize Iraq's Ministry of Oil and establish an Iraqi National Oil Company (INOC). Under the hydrocarbon framework law, the responsibilities and authorities of the Ministry of Oil and the INOC would be altered significantly, and the draft Ministry and INOC laws are necessary to ensure proper oversight, accountability, and separation of powers between the two entities. As of November 2009, a draft INOC law had been approved by the Council of Ministers, but was not considered by the Council of Representatives before the 2010 national election.

Development in Iraq's oil and natural gas sector is proceeding, amid ongoing debates. Iraqis differ strongly on a number of key issues, including the proper role and powers of federal and regional authorities in regulating oil and gas development; the terms and extent of potential foreign participation in the oil and gas sectors; and proposed formulas and mechanisms for equitably sharing oil and gas revenue. Concurrent, related discussions about the administrative status of the city of Kirkuk and proposed amendments to articles of Iraq's constitution that outline federal and regional oil and gas rights also are highly contentious. Both the Bush Administration and the 110th Congress considered the passage of oil and gas sector framework and revenue-sharing legislation as important benchmarks that would indicate the Iraqi government's commitment to promoting political reconciliation and providing a solid foundation for long-term economic development in Iraq. Obama Administration officials and some Members of the 111th Congress have expressed similar views. In the absence of new comprehensive legislation to manage the energy sector and distribute energy export revenues, interim revenue-sharing mechanisms have been implemented, while both the national government and the Kurdistan Regional Government have signed oil and natural gas contracts with foreign firms. The central importance of oil and gas revenue for the Iraqi economy is widely recognized by Iraqis, and most groups accept the need to create new legal and policy guidelines for the development of the country's oil and natural gas resources. However, Iraq's current Council of Representatives (parliament) did not take action to consider proposed energy sector reform legislation because of broader political disputes. Observers and U.S. officials remain focused on the outcome of the March 2010 Iraqi national election as an indicator of future trends. In January 2010, the Council of Representatives adopted Iraq's 2010 budget, which includes a deficit of more than $19 billion because of increased spending and stagnant oil production and export levels in Iraq. The budget also includes a controversial revenue distribution mechanism that will reward specific energy resource producing governorates. Iraq has secured a $3.6 billion stand-by arrangement with the International Monetary Fund (IMF) and a total of $500 million in loans from the World Bank to cover a portion of the expected 2010 deficit, as U.S. officials continue to warn that reduced revenues and spending may jeopardize Iraqi investments in infrastructure and security forces needed to fully stabilize the country. The military strategy employed by U.S. forces in Iraq has sought to create a secure environment in which Iraqis can resolve core political differences as a means of ensuring national stability and security. However, it remains to be seen whether proposed oil and gas legislation and ongoing interim efforts to develop Iraq's energy resources will promote reconciliation or contribute to deeper political tension. U.S. policymakers and Members of Congress thus face difficult choices with regard to engaging Iraqis on various policy proposals, related constitutional reforms, and oil and natural gas development contracts, while encouraging Iraqi counterparts to ensure that the content of proposed laws, amendments, and contracts reflects acceptable political compromises. This report reviews policy proposals and interim contracts, analyzes the positions of various Iraqi political actors, and discusses potential implications for U.S. foreign policy goals in Iraq. See also CRS Report RL31339, Iraq: Post-Saddam Governance and Security, by [author name scrubbed].

Introduction The North American Free Trade Agreement (NAFTA), in effect since January 1994, plays a key role in the bilateral economic relationship between Mexico and the United States. The two countries are closely tied in bilateral trade and investment, and in areas of mutual interest such as migration, security, environmental, and health issues. NAFTA's effect on Mexico and the state of the Mexican economy have implications for the overall relationship between the United States and Mexico and for U.S. economic and political interests. On May 19, 2010, Mexican President Felipe Calderón met with President Barack Obama during an official state visit of the Mexican president to the United States. The two leaders discussed a wide range of bilateral, hemispheric, and global issues that affect the two countries and reaffirmed their shared values regarding the safety, social and economic well-being, and security of citizens in both countries. The two presidents expressed a commitment to increase cooperation in enhancing economic competitiveness and noted progress in the building of a Twenty-First Century border, which includes three new border crossings that are opening in 2010, initiation of three additional binational bridge projects, and significant modernization projects at existing border facilities. The 111 th Congress will likely maintain an active interest in Mexico on issues related to counternarcotics, economic conditions, migration, trade, and border issues. Comprehensive immigration reform was debated early in the 110 th Congress and immigration reform efforts could be considered once again in the 111 th Congress. This report provides an overview of Mexico's motivations for entering NAFTA, the Mexican economy, the economic effects and views of NAFTA in Mexico, and possible policy options for Members of Congress. It also provides information on NAFTA's effect on Mexico's agricultural sector, one of the more controversial issues regarding the effects of NAFTA in Mexico. This report will be updated as events warrant. Mexico's Motivations for Entering NAFTA3 In 1990, the President of Mexico at the time, Carlos Salinas de Gortari, approached then U.S. President George H.W. Bush with the idea of forming a free trade agreement (FTA). President Salinas de Gortari's motivations in pursuing an FTA with the United States were to increase economic growth by attracting foreign direct investment (FDI); boosting exports; creating industrial jobs; and giving the Mexican economy a growth stimulus. The Mexican economy had experienced many difficulties throughout most of the 1980s with a significant deepening of poverty. Mexico's intention in entering NAFTA was to increase export diversification by attracting FDI, which would help create jobs, increase wage rates, and reduce poverty. At the time NAFTA went into effect, many studies predicted that the agreement would cause an overall positive impact on the Mexican economy. From the 1930s through part of the 1980s, Mexico maintained a strong protectionist trade policy in an effort to be independent of any foreign power and as a means to industrialization. Mexico established a policy of import substitution in the 1930s, consisting of a broad, general protection of the entire industrial sector. Mexico placed high restrictions on foreign investment and controlled the exchange rate to encourage domestic industrial growth. Mexico also nationalized the oil industry during this time. These protectionist economic policies remained in effect until the country began to experience a series of economic challenges caused by a number of factors. The 1980s in Mexico were marked by inflation and a declining standard of living. The 1982 debt crisis in which the Mexican government was unable to meet its foreign debt obligations was a primary cause of the economic challenges the country faced in the early to mid-1980's. Much of the government's efforts in addressing the challenges were placed on privatizing state industries and moving toward trade liberalization. In the late 1980s and early into the 1990s, the Mexican government implemented a series of measures to restructure the economy that included steps toward unilateral trade liberalization. Mexican began to reverse its protectionist stance in the mid-1980s when the government was forced to declare that it was unable to repay its debts and to default on its loans. Then President Miguel de la Madrid took steps to open and liberalize the Mexican economy and initiated procedures to replace import substitution policies with policies aimed at attracting foreign investment, lowering trade barriers and making the country competitive in non-oil exports. In 1986, Mexico acceded to the General Agreement on Tariffs and Trade (GATT), assuring further trade liberalization measures and closer ties with the United States. In November 1987, the United States and Mexico entered into a bilateral understanding on trade and investment called the Framework of Principles and Procedures for Consultation Regarding Trade and Investment Relations. Prior to this agreement, there had been no legal framework to govern commercial relations between the two countries. There were two parts to the agreement, one served as a mechanism to address trade issues, and the other established an agenda for the removal or reduction of trade barriers. Seven topics were listed in the agenda for possible future discussions: textiles, agriculture, steel, investment, technology transfer and intellectual property, electronics, and information on the service sector. Under this framework understanding, two sectoral agreements were reached which liberalized trade in steel, textiles, and alcoholic beverages. In addition, working groups started meeting on agriculture, industry, services, tariffs, and intellectual property rights. In October 1989, the two countries entered into a second trade and investment understanding called The Understanding Regarding Trade and Investment Facilitation Talks . This agreement built on the work of the 1987 agreement, establishing a negotiating process for expanding trade and investment opportunities. These two agreements significantly improved trade relations between Mexico and the United States and other improvements in trade relations followed. Marking the advances in trade relations between the two countries, Mexico proposed negotiations for a free trade agreement with the United States. In June 1990, then President Carlos Salinas de Gortari of Mexico and then President George H.W. Bush issued a joint statement in support of negotiating a free trade agreement. Economic Conditions in Mexico Before and After NAFTA The Mexican economy is strongly tied to economic conditions in the United States, making it very sensitive to economic developments in the United States. Mexico is highly reliant on exports and most of Mexico's exports go to the United States. In 2008, Mexico's exports as a percent of GDP equaled 31%, up from 10% twenty years ago, and over 80% of Mexico's exports went to the United States. The state of the Mexican economy is important to the United States because of the close trade and investment ties between the two countries, and because of other social and political issues that could be affected by economic conditions, particularly poverty and how it relates to migration issues. Not all changes in economic growth or trade and investment patterns in Mexico since 1994 can be attributed to NAFTA. The economy has also been affected by other factors such as Mexico's previous market-opening measures in Mexico, financial crises, exchange rates, oil prices, and business cycles. Trade-related job gains and losses since NAFTA probably accelerated trends that were ongoing prior to NAFTA and are not totally attributable to the trade agreement. Isolating the economic effects of NAFTA from other economic or political factors is difficult. Mexico has experienced at least two major events outside of NAFTA that had significant economic consequences. Unilateral trade liberalization measures prior to NAFTA and the currency crisis of 1995 both affected economic growth, per capita GDP, and real wages in Mexico. In the mid-1990s, Mexico experienced a financial crisis caused by a number of complex financial, economic, and political factors. The early 1990s in Mexico were marked by a large increase in foreign investment as investor confidence in the Mexican economy grew due to the prospect of NAFTA. However, signs that Mexico's economy was not as fundamentally strong as it appeared began to surface after the assassination of Mexican presidential candidate Luis Donaldo Colosio in March 1994. The shock of the assassination resulted in a subsequent outflow of foreign exchange reserves and growing concerns about a currency devaluation. In response to these concerns, the Mexican government issued short-term dollar-indexed notes to finance the growing current account deficit. The Mexican government expected investor confidence to be restored after the August 1994 presidential election. Foreign investment flows, however, did not recover to the level of expectation. In the months following the election, the current account deficit widened as imports surged due to an overvalued peso. The government began to experience a short-term liquidity crisis. By December 1994, the continued decrease in the inflows of foreign direct investment and foreign exchange reserves put pressure on the government to abandon its previous fixed exchange rate policy and adopt a floating exchange rate regime. As a result, Mexico's currency plunged by around 50% within six months, sending the country into a deep recession. In the aftermath of the 1994 devaluation, the Mexican government took several steps to restructure the economy and lessen the impact of the currency crisis among the more disadvantaged sectors of the economy. The United States and the International Monetary Fund (IMF) assisted the Mexican government by putting together an emergency financial support package of up to $50 billion. Mexico adopted tight monetary and fiscal policies to reduce inflation and absorb some of the costs of the banking sector crisis. The austerity plan also included an increase in the value-added tax, budget cuts, and increases in electricity and gasoline prices. The peso steadily depreciated through the end of the 1990s, which led to greater exports and helped the country's exporting industries. However, the peso devaluation also resulted in a decline in real income, hurting mostly the poorest segments of the population, but also the newly emerging middle class. Yet, NAFTA and the change in the Mexican economy to an export-based economy may have helped to soften the impact of the currency devaluation. GDP Growth Between 1960 and 1980, the Mexican economy grew at an average annual rate of over 6.5%, resulting in significant improvements in per capita GDP and living standards during that time period. In the years that followed, however, average real GDP growth dropped due to the 1982 debt crisis, which resulted in productivity growth falling to negative numbers. The government's economic reforms in the latter part of the 1980s helped stimulate economic growth and GDP growth averaged 3.8% between 1990 and 1994 (see Figure 1 ). After the 1995 financial crisis, GDP growth declined by 6.2%, and then increased in the following three years by 5%-6% annually. Real GDP growth dropped from 6.2% in 2000 to -0.2% in 2001. After 2001, economic conditions in the United States improved, which helped economic growth in the Mexican economy. Real GDP growth in 2004 was 4.0%, up from 0.8% in 2003 and 2002. In 2006, GDP grew by 4.9% but decreased to 3.3% in 2007. Real GDP grew by only 1.5% in 2008. The 2009 global financial crisis had a strong adverse effect on the Mexican economy, and the GDP growth rate contracted by 6.6%. Estimates for 2010 show a possible growth rate of 4.2%. Poverty Poverty is one of the more serious and pressing economic problems facing Mexico. Addressing poverty issues and creating jobs have been a priority for the Calderon Administration. Former President Fox also considered poverty as one of Mexico's principal challenges and made it a top priority during his administration. The Mexican government had made progress in its poverty reduction efforts, but poverty continues to be a basic challenge for the country's development. Poverty is often associated with social exclusion, especially of indigenous groups of people who comprise 20% of those who live in extreme poverty. The 1995 currency crisis was a major setback to Mexico's efforts in alleviating poverty levels, and though there was some improvement after the crisis, the poverty levels did not decline to their pre-crisis levels until 2002 (see Figure 2 ). The percentage of people living in extreme poverty, fell from 24% of the population in 2000, to 17% in 2004, and 14% in 2006 as shown in Figure 2 . In 2008, however, the extreme poverty rate went up again to 18%. Those living in moderate poverty fell from 54% of the population in 2000 to 50% in 2002 and 43% in 2006, though the percentage of those living in moderate poverty also increased in 2008 to 47%. Mexico's continuing problem of poverty is especially widespread in rural areas and remains at the Latin American average. The government has made significant efforts to combat poverty, but it remains widespread and is closely linked to high levels of inequality in terms of unequal access to healthcare, education, and available work opportunities. In rural areas the percentage of those living in moderate poverty 61% in 2008, while that of those living in extreme poverty was 32%. The rates for urban areas were 40% and 11%, respectively. Mexico's main program to reduce poverty is the Oportunidades program. The program seeks to not only alleviate the immediate effects of poverty through cash and in-kind transfers, but also by improving nutrition and health standards among poor families and increasing educational attainment. This program provides cash transfers to families in poverty who demonstrate that they regularly attend medical appointments and can certify that children are attending school. Monthly benefits are a minimum of $15 with a cap of about $150. The majority of households receiving Oportunidades benefits are in Mexico's six poorest states: Chiapas, Mexico State, Puebla, Veracruz, Oaxaca, and Guerrero. Oportunidades covers five million households, almost a quarter of all Mexican families. Effects of NAFTA on Mexico NAFTA is a free trade agreement that eliminated trade and investment barriers among NAFTA trading partners. Upon implementation, almost 70% of U.S. imports from Mexico and 50% of U.S. exports to Mexico received duty-free treatment. The remainder of duties were eliminated over a period of 15 years after the agreement was in effect. The agreement also contained provisions for market access to U.S. firms in most services sectors; protection of U.S. foreign direct investment in Mexico; and intellectual property rights protection for U.S. companies. At the time that NAFTA went into effect, a number of economic studies predicted that the trade agreement would have a positive overall effect on the Mexican economy, narrowing the U.S.-Mexico gap in prices of goods and services and the differential in real wages. Economic Effects A number of studies have found that NAFTA has brought economic and social benefits to the Mexican economy as a whole, but the benefits have not been evenly distributed throughout the country. Most studies after NAFTA have found that the effects on the Mexican economy tended to be modest at most. While there have been periods of positive growth and negative growth after the agreement was implemented, much of the increases in trade began in the late 1980s when the country began trade liberalization measures. Though its net economic effects may have been positive, NAFTA itself has not been enough to lower income disparities within Mexico, or between Mexico and the United States or Canada. A 2005 World Bank study assessing some of the economic impacts from NAFTA on Mexico concluded that NAFTA helped Mexico get closer to the levels of development in the United States and Canada. The study states that NAFTA helped Mexican manufacturers to adopt to U.S. technological innovations more quickly and likely had positive impacts on the number and quality of jobs. Another finding was that since NAFTA went into effect, the overall macroeconomic volatility, or wide variations in the GDP growth rate, has declined in Mexico. Business cycles in Mexico, the United States, and Canada have had higher levels of synchronicity since NAFTA, and NAFTA has reinforced the high sensitivity of Mexican economic sectors to economic developments in the United States. Several economists have noted that it is likely that NAFTA contributed to Mexico's economic recovery directly and indirectly after the 1995 currency crisis. Mexico responded to the crisis by implementing a strong economic adjustment program but also by fully adhering to its NAFTA obligations to liberalize trade with the United States and Canada. NAFTA may have supported the resolve of the Mexican government to continue with the course of market-based economic reforms, resulting in increasing investor confidence in Mexico. The World Bank study estimates that FDI in Mexico would have been approximately 40% lower without NAFTA. One of the main arguments in favor of NAFTA at the time it was being proposed by policymakers was that the agreement would improve economic conditions in Mexico and narrow the income gap between Mexico and the United States. Studies that have addressed the issue of economic convergence have noted that economic convergence in North America might not materialize under free trade as long as "fundamental differences" in initial conditions persist over time. Most studies have found that there are a number of domestic factors that explain the lack of convergence and that a free trade agreement alone is not sufficient to narrow the disparities in economic conditions between the two countries. In general, most studies suggest that for Mexico to narrow these income disparities, the government needs to invest more in education; innovation and infrastructure, as well as improve the quality of national institutions. This is not a unique situation to Mexico since other countries in Latin America are experiencing similar issues. According to one study, income convergence between a Latin American country and the United States is limited by the wide differences in the quality of domestic institutions, in the innovation dynamics of domestic firms, and in the skills of the labor force. Another study notes that the ability of Mexico to improve economic conditions depends on its capacity to improve its national institutions, adding that Mexican institutions did not improve significantly more than those of other Latin American countries during the post-NAFTA period. A number of domestic factors could explain why Mexico is not converging to U.S. levels in terms of per capita income, income per worker, or average wages. A recent study concluded that the U.S.-Mexico income gap has not narrowed due to a number of reasons, some of which are related to poorly implemented economic reforms and a lack of important reforms that are needed in other areas. First, Mexico has done poorly in implementing the economic reforms of the late 1980s and early 1990s, which has actually reduced economic growth instead of the having the intended goal of promoting growth. The study states that the government did not have the proper institutional and regulatory framework to properly implement privatization and trade liberalization efforts, which exacerbated the effects of the 1995 economic crisis and only resulted in private monopolies taking over public ones. Second, Mexico failed to take into consideration implementation of other important economic reforms. Since the mid-1990s, according to the study, the government has failed to make other much needed reforms such as fiscal policy or labor law reform, partially because of the political sensitivity of these issues but also because of the special interest groups that have been successful in blocking these reforms. Third, the authors conclude that Mexico is lacking a "domestic engine" to spur internal demand, which is increasing the country's vulnerability to economic conditions in the United States. Finally, according to the study, the government's restrictions on macroeconomic policies limit the ability of Mexican policymakers to respond to external shocks in a countercyclical manner. Mexican Wages and Per Capita GDP Any changes in Mexican wages since NAFTA implementation cannot be solely attributable to trade integration. Wages are reflective of a number of economic variables including GDP, productivity, exchange rates, and international trade. Mexican wages have generally followed the cycles of the Mexican economy for many years. Wages increased from the early 1980s until the mid-1990s, when the currency crisis hit when real wages fell by 15.5% (see Table 1 ). Wages increased after 1996 until 2000 when the percent increase was 10.8% and then stagnated for several years. Wages fell by 3.2% in 2008 and by 5.0% in 2009. Mexico's trade liberalization measures may have affected the ratio between skilled and non-skilled workers in Mexico. In 1988, the real average wage of skilled workers in Mexico's manufacturing industry was 2.25 times larger than that of non-skilled workers. This ratio increased until 1996, when it was about 2.9, but then remained stable until 2000. The World Bank study found that NAFTA brought economic and social benefits to the Mexican economy, but that the agreement in itself was not sufficient to ensure a narrowing of the wage gap between Mexico and the United States. The study states that NAFTA had a positive effect on wages and employment in some Mexican states, but that the wage differential within the country increased as a result of trade liberalization. According to a report published in the Journal of Development Economics that examines wage inequality in Mexico before and after NAFTA, studies on NAFTA have not always agreed on the effect of trade on wages or the reasons for the increasing wage differential between skilled and unskilled Mexican workers. Some studies conclude that the reason for the rise in wages for more highly skilled workers is the technological change brought about by trade. Others link the rise in wage differentials to trade and the changes in prices of skill-intensive goods that result from trade liberalization. As prices for skill-intensive goods decline after trade liberalization, the demand for skilled workers rises and wages rise. The authors of the report conclude that the sharp increase in wage inequality in Mexico was caused by technological change. They argue that trade liberalization alone had almost no effect on the wage gap, but that the technological change that came about after NAFTA caused the wage gap to widen. U.S.-Mexico Trade Mexico's trade with the United States has grown considerably since 1994. Mexico had a trade deficit of $1.3 billion with the United States in 1994, the year of NAFTA implementation (see Table 2 ). In subsequent years, the trade balance shifted to a surplus as exports to the United States increased. While imports from the United States also increased after NAFTA, the rate of growth was not as high. In 2008, Mexico had a trade surplus of $84.8 billion with the United States. U.S. imports from Mexico totaled $216.3 billion in 2008 while exports to Mexico totaled $131.5 billion. In 2009, however, U.S.-Mexico trade declined due to the economic slowdown resulting from the global financial crisis. U.S. imports from Mexico decreased 19% and U.S. exports to Mexico decreased 20% in 2009. The top 2009 U.S. imports from Mexico were oil and gas; motor vehicles; audio and video equipment; and communications equipment. The exports to Mexico were motor vehicle parts; petroleum and coal products; basic chemicals, resin and related products; and oilseeds and grains. Much of the increase in U.S.-Mexico trade since 1994 could be attributable to NAFTA, but, as stated previously, exchange rates and economic conditions have also been a factor. The devaluation of the Mexican peso against the U.S. dollar in 1995 limited the purchasing power of the Mexican people and also made products from Mexico less expensive for the U.S. market. U.S. imports from Mexico increased from $49.5 billion in 1994 to $74.2 billion in 1996, while U.S. exports to Mexico also increased but at a slower rate. As economic conditions in Mexico improved in the late 1990s, trade with the United States rose steadily until 2001 when the downturn in the U.S. economy caused trade to slow down. In the years after 2001, Mexico's economy continued to follow U.S. economic trends and trade increased in the following years, though at a slower rate. Regional Effects of NAFTA While the overall effects of NAFTA on the Mexican economy might have been positive, the effects have been unequal across regions and sectors. Wages and employment tend to be higher in states experiencing higher levels of foreign direct investment and trade. The effects of trade liberalization have varied widely among regions, and while trade liberalization may narrow income disparities over the long run with other countries, it may indirectly lead to larger disparities in income levels within a country. Studies have found that initial conditions in Mexico determined which Mexican states experienced stronger economic growth as a result of NAFTA. States with less developed infrastructure (transportation and communications) did not receive the benefits from NAFTA as other states. Telecommunications infrastructure and human capital were especially important in determining the economic performance of individuals states. The states with more telephone service and a higher skilled labor force experienced more positive impacts. Northern and central states grew faster throughout the 1990s, modestly reducing the income differentials with those of the Mexico City area. Poorer southern states grew slower during the same time period due to low levels of education, infrastructure, and quality of local institutions, making them less prepared to gain from trade liberalization. Mexico's Agricultural Sector and NAFTA One of the more controversial aspects of NAFTA has been its effect on the agricultural sector in Mexico and the perception that NAFTA has caused a higher amount of worker displacement in the agricultural sector than in other sectors of the economy. While some of the changes in the agricultural sector are a direct result of NAFTA, as Mexico faced increasing import competition from the United States, many of the changes are also attributable to Mexico's unilateral agricultural reform measures. Mexico began to reform its agricultural sector in the 1980s; most domestic agricultural and trade policy reform measures included privatization and resulted in increased competition. Mexico's unilateral reform measures included eliminating state enterprises related to agriculture and removing staple price supports and subsidies. With the reform of Mexico's Agrarian Law, lands that had been distributed to ejidos or community rural groups following the 1910 revolution gained the right to privatize. Another major reform was the abolishment of CONASUPO , Mexico's primary agency for government intervention in agriculture. The agency bought staples from farmers at guaranteed prices and processed the products or sold them at low prices to processors and consumers. By 1999, the company was abolished. Many of Mexico's domestic reforms in agriculture coincided with NAFTA negotiations, beginning in 1991, and continued beyond the implementation of NAFTA in 1994. The unilateral reforms in the agricultural sector make it difficult to separate those effects from the effects of NAFTA. Mexican Productivity, Exports and Prices With Mexico's entry into NAFTA, the expectation was that relative prices for certain Mexican crops would decrease while prices for other crops would likely remain the same. This was based on the economic expectation that, by removing Mexico's price and trade interventions in basic crops such as grains and oilseeds, prices for the same goods in Mexico and the United States would equalize. Prices for crops that were exported such as fruits and vegetables were expected to stay the same because these had not been subject to major government intervention before or since NAFTA. NAFTA and Mexico's internal reforms were expected to lead to the "law of one price" for all agricultural goods produced in North America. This meant that prices for basic crops such as grains and oilseeds produced in Mexico, which previously had fixed prices by the government, would decline as these goods faced competition from U.S. goods. NAFTA and agriculture reform measures were also expected to increase efficiency in Mexico's agricultural production as farmers adjusted to competition from lower cost imports. Production in agricultural sectors that had prior price and trade interventions was expected to decrease as lower-priced imports from the United States entered the market, while production in export-oriented sectors, mainly fruits and vegetables, was expected to increase. As a result of these shifts, employment was expected to increase in some areas, but, according to one study, the increase was not expected to be large enough to absorb all the workers who would be displaced by reduced production in other sectors. After NAFTA, Mexican prices of basic crops such as maize dropped and, subsequently, Mexican imports of those crops increased. Mexican agricultural production, however, did not decrease after NAFTA. The Mexican government's unilateral liberalization of corn and NAFTA were both factors in declining prices of corn in Mexico. In 1993, the price of corn in Mexico was $4.84 per bushel; the price fell to $3.65 per bushel in 1997 and has remained at about the same level ever since. Mexican corn production, however, increased despite the decline in prices (see Figure 3 ). Total production of maize increased from an annual average of 12.5 million metric tons during the 1983-1990 period to an annual average of 17.7 million metric tons, representing an increase of 41%, during the post-NAFTA period of 1994-2001. Mexican corn production yields were a fraction of U.S. corn production yields in 2003, but in spite of the low yields, Mexican corn production increased after NAFTA. Between 1990 and 2003, Mexican corn production increased 44%, a faster rate of growth than U.S. corn production which increased by 27% during the same time period. Most of the effects from NAFTA likely took place within the first ten years of implementation. From 1993 to 2003, Mexican exports to the United States in agricultural products increased from $2.7 billion in 1993 to $6.3 billion in 2003, while Mexican exports to Canada increased from $136 million to $409 million over the same time period. Mexican imports from the United States also increased during this time period, from $3.6 billion in 1993 to $7.9 billion in 2003. Mexican exports to the United States sharply increased in the following categories: sugar and related products (595%), beverages excluding fruit juices (584%), and grains and feeds (328%). U.S. foreign direct investment in the Mexican food processing industry more than doubled from $2.3 billion in 1993 to $5.7 billion in 2000. Employment Changes in agricultural employment in Mexico since NAFTA implementation cannot be attributed entirely to trade liberalization, not only because of Mexico's unilateral reform measures which coincided with NAFTA, but also because these changes may result from the industrialization process. Some economists argue that as countries become more industrialized, agriculture plays a smaller role in the economy and employs a smaller share of the workforce. One study covering 76 countries shows that a 1% increase in per capita GDP is associated with a reduction in agriculture value-added as a share of GDP by about 0.6 percentage points. In South Korea, for example, the agricultural share of GDP declined from about 25% in 1970 to 5% in 2000 due to rapid industrialization. A report by the Institute for International Economics (IIE) on the achievements and challenges of NAFTA discusses the effect of NAFTA on the agricultural sector. The report uses international comparisons that suggest that the Mexican agricultural labor force as a proportion of total labor was very high at the time of NAFTA and that many farmers were likely to lose their jobs as the country became more efficient in agricultural production. The study cites an estimate that, once all Mexican tariffs were eliminated, total farm employment in Mexico would decline by an estimated 800,000 workers. Agricultural production in Mexico has been increasingly centered on large-scale farms, factory-type livestock lots, and capital-intensive food processing, which puts pressure on small-scale farms and household farmers in Mexico. Another study states that the number of Mexicans employed in rural agriculture declined from 8.1 million to 6.8 million and that the value added by Mexican agriculture dropped from about $32 billion in 1993 to about $25 billion in 2003. Rural-Urban Migration Several studies found that the composition of Mexico's agricultural supply did not change significantly after NAFTA, although there were shifts in production as the agricultural sector adjusted to trade liberalization. One study found that some commercial farmers shifted production from staple crops to crops for export purposes and that yields of basic crops increased after NAFTA, but only for those crops grown under irrigated conditions. The study states that Mexico's productivity of irrigated lands increased after NAFTA, but non-export, non-irrigated agriculture did not increase. The study also cited a disparity in agricultural productivity between the northern and southern states due to the poor transportation and irrigation networks in the central and southern states of Mexico, making transportation costs very expensive. Another reason is access to credit. Those with small farms in the rural areas have difficulties finding access to credit. Without government guarantees, Mexican commercial banks often hesitate to provide loans because of the historically high default rate on agricultural loans. To help address this problem, the Mexican government created Financiera Rural in 2002, which helps provide access to microcredits for farmers to buy machinery, equipment, and technology. The effect of NAFTA on rural-urban migration within Mexico or on migration from Mexico to the United States is difficult to quantify because of the various factors affecting migration. Mexican migration after NAFTA was affected by a combination of higher efficiency in Mexican agricultural productivity, sectoral adjustments to trade as some sectors experienced higher growth than others, urban growth in Mexico, and demands for unskilled labor in the United States. A study by the Carnegie Endowment for International Peace discusses the experience of Mexico since the enactment of NAFTA. The study's analysis focuses on people, the communities they live in, and the choices they make in response to their social and economic environment. The study states that NAFTA accelerated the transition of Mexico to a liberalized economy but did not create the necessary conditions for the public and private sectors to respond to the economic, social, and environmental effects of increased trade with its NAFTA partners. One of the study's conclusion is that NAFTA's agricultural policies did not benefit subsistence farmers, while providing larger commercial farmers with substantial support. On the issue of Mexico's demographic patterns, one study found that NAFTA has had a minor role in Mexico's rural-urban migration. The study argues that the observed trend of migration from rural areas of Mexico to urban centers is directly the result of agricultural liberalization. However, the study also notes that these migration patterns have been in place since 1960. Therefore, it is not clear how much of a role NAFTA has had in Mexico's rural-urban migration. While some observers believe that the trend of migration from rural areas of Mexico to urban centers is directly a result of NAFTA, many economists argue that rural-urban migration trends are common in the industrialization process of most countries. For this reason, some argue that the high concentration of poverty in rural areas makes it very important for Mexican policymakers to understand the nature of Mexico's farming structure when proposing development policies. Mexican Programs for Farmers Anticipating the possible effects of NAFTA on farmers, the Mexican government established the Program of Direct Support for the Countryside, Programa de Apoyos Directos Para el Campo ( PROCAMPO), in 1993. PROCAMPO provided income support to farmers over a 15-year transitional period through hectare-based direct payments to producers. However, budget austerity caused by Mexico's 1995 peso crisis resulted in budget cuts for the program. Another Mexican program, Alianza para el Campo, or Alianza, was created in 1995 to improve agricultural productivity with modern equipment and technology. A third program, Produce Capitaliza , provides infrastructure and extension-type assistance and support to livestock producers for upgrading pastures. While these three programs have provided support for Mexican farmers, there continues to be a huge disparity in subsidy levels between the United States and Mexico. Some analysts have suggested that if the United States continued to subsidize corn production in the United States, Mexico should be permitted to impose some form of safeguard measures to protect farmers. Views of NAFTA in Mexico Views of NAFTA within Mexico are mixed. Media reports tend to highlight the anti-NAFTA sentiment in the Mexican agricultural sector, but according to an extensive non-partisan opinion survey conducted by two independent groups in Mexico, the majority of the Mexican population views NAFTA favorably. A public opinion survey conducted in 2006 showed that the majority of the Mexican population favors trade liberalization with the United States and Canada. The survey, conducted by the Centro de Investigación y Docencia Económicas (CIDE) and the Consejo Mexicano de Asuntos Internacionales (Mexican Council on Foreign Relations, COMEXI) , also showed that Mexicans have a very positive view of globalization, though there is some division on whether NAFTA should be renegotiated and whether Mexico should continue forming new trade agreements with other countries. The survey examined the views of the general public and another group of individuals, labeled as "leaders" in the study, which comprises 259 representatives from five sectors (government, politics, business, media and academic, and non-government organizations) with an interest in international affairs or professional ties with other countries. Both groups ranked export promotion among Mexico's two most important foreign-policy objectives and hold a largely favorable opinion of international trade. The poll showed that both the general public and the "leaders" considered international trade to be beneficial for the country's economy, job creation, Mexican businesses, poverty reduction, and their own living conditions. Ninety-six percent of the "leaders" and 79% of the general public favored increasing international trade (see Figure 4 ). The most vocal opponents of NAFTA in Mexico have criticized the agreement because of its negative effect on Mexico's agricultural sector. Labor and farmers' coalitions joined forces in early 2008 to protest the final tariff eliminations under NAFTA on corn. Tens of thousands marched on the streets of Mexico City in February 2008 to protest the agreement. Many of these were farmers or peasants with farm plots of less than 12 acres and criticized the Mexican government for not doing enough to help them adjust to increased competition from the United States. They stated that most of the government aid to help farmers has gone to large agricultural businesses in northern states. Groups representing the small farmers argue that, in the long run, small farmers in Mexico will not be able to compete with the "Americans' heavily subsidized and mechanized farms." Policy Issues Mexico's economic relationship with the United States is of mutual importance to both Mexico and the United States. Economic studies on the effects on Mexico and Mexican views of NAFTA could provide a valuable perspective when evaluating the possibility of reopening parts of the agreement or alternative policy options. Some observers have suggested that one of the lessons from NAFTA for developing countries is that they negotiate trade agreements in a way that would be more beneficial to them. This could take place by including provisions such as financial assistance from trading partners or new minimum wage requirements. Possible areas of consideration for U.S. and Mexican policymakers may include furthering economic integration between Mexico and the United States; enhancing or strengthening institutions created under NAFTA side agreements; or taking other measures to help resolve the issues related to income disparity between Mexico and the United States. Some proponents of economic integration in North America have maintained that the emergence of China and India in the global marketplace may be putting North America at a competitive disadvantage with other countries and that NAFTA should go beyond a free trade agreement. Some observers have proposed that the U.S. government consider the possibility of forming a customs union or common market. However, critics of this level of economic integration believe that NAFTA has already gone too far and that it has harmed the U.S. and Mexican economies and undermined democratic control of domestic policy-making. If the United States were to potentially consider the further economic integration in North America, it would require cooperation by the governments of Mexico and Canada, and approval by the U.S. Congress. Expanding NAFTA to a customs union or common market is not likely to happen within the foreseeable future. A possible option to address Mexico's income disparities with the United States is to consider expanding the mandate of the North American Development Bank (NADBank). NADBank and its sister institution, the Border Environment Cooperation Commission (BECC), were created under a bilateral side agreement to NAFTA called the Border Environmental Cooperation Agreement. The objective of NADBank and BECC is to help U.S.-Mexico border communities plan and finance environmental infrastructure projects. Some Members of Congress and elected officials from Mexico have informally discussed the possibility of expanding the mission of the NADBank to go beyond environmental and border issues. One possibility would be to expand NADBank projects to include transportation and other types of infrastructure projects. Another option would be to expand eligible projects to the entire region of Mexico instead of just the border area. Some policymakers have suggested the possibility of creating an infrastructure fund that would be managed by NADBank to provide investment in infrastructure, communications, or education. U.S. policymakers may also consider increased cooperation with Mexico in its efforts to address the continuing problem of poverty and the difficulties being faced by farmers in the southern Mexican states. The Mexican government has taken a number of measures to lessen the impact of NAFTA on farmers and to address on-going poverty issues but the results of these programs has been mixed. Although the programs are not NAFTA-related, they do benefit segments of the population and regions of Mexico that have benefitted little from trade liberalization. Another policy option that has been mentioned is withdrawal from NAFTA. Legislation was introduced in the 111 th Congress for the United States to withdraw from NAFTA ( H.R. 4759 ). The bill would require the president to give written notice to Mexico and Canada of the U.S. withdrawal, which would occur six months after the bill's enactment. The bill had 27 co-sponsors and was referred to the House Ways and Means Committee. Supporters of the bill believe that NAFTA did not live up to its promises and that it has resulted in large job losses in the United States and Mexico. Opponents of the bill believe that NAFTA has had 'incredible' successes in all three countries of North America and that withdrawing from NAFTA would cause job losses in the United States to increase and that U.S. exports to Mexico would be sharply impacted. They point to the losses in exports that have occurred already from Mexico's retaliatory tariffs due to the trucking dispute and those exports represent only a small percentage of total U.S. exports to Mexico. Appendix. Map of Mexico

The North American Free Trade Agreement (NAFTA), in effect since January 1994, plays a very strong role in the bilateral economic relationship between Mexico and the United States. The two countries are also closely tied in areas not directly related to trade and investment such as security, environmental, migration, and health issues. The effects of NAFTA on Mexico and the Mexican economic situation have impacts on U.S. economic and political interests. A number of policymakers have raised the issue of revisiting NAFTA and renegotiating parts of the agreement. Some important factors in evaluating NAFTA include the effects of the agreement on Mexico and how these relate to U.S.-Mexico economic relations. In the 111th Congress, major issues of concern are related to U.S.-Mexico trade issues, economic conditions in Mexico, the effect of NAFTA on the United States and Mexico, and Mexican migrant workers in the United States. In 1990, Mexico approached the United States with the idea of forming a free trade agreement (FTA). Mexico's main motivation in pursuing an FTA with the United States was to stabilize the Mexican economy and promote economic development by attracting foreign direct investment, increasing exports, and creating jobs. The Mexican economy had experienced many difficulties throughout most of the 1980s with a significant deepening of poverty. The expectation among supporters at the time was that NAFTA would improve investor confidence in Mexico, increase export diversification, create higher-skilled jobs, increase wage rates, and reduce poverty. It was expected that, over time, NAFTA would narrow the income differentials between Mexico and the United States and Canada. The effects of NAFTA on the Mexican economy are difficult to isolate from other factors that affect the economy, such as economic cycles in the United States (Mexico's largest trading partner) and currency fluctuations. In addition, Mexico's unilateral trade liberalization measures of the 1980s and the currency crisis of 1995 both affected economic growth, per capita gross domestic product (GDP), and real wages. While NAFTA may have brought economic and social benefits to the Mexican economy as a whole, the benefits have not been evenly distributed throughout the country. The agricultural sector experienced a higher amount of worker displacement after NAFTA, in part because of increased competition from the United States but also because of Mexican domestic agricultural reforms. In terms of regional effects, initial conditions in Mexico appear to have determined which Mexican states experienced stronger economic growth as a result of NAFTA. Some economists argue that while trade liberalization may narrow income disparities over the long run with other countries, it may indirectly lead to larger disparities in income levels within a country. Over the last decade, the economic relationship between the United States and Mexico has strengthened significantly and the two countries continue to cooperate on issues of mutual concern. President Barack Obama met with Mexican President Calderón in May 2010 during the Mexican president's official state visit to the United States. The two leaders reaffirmed their commitment to increasing cooperation in a wide range of issues, including enhancing mutual economic growth. A key component for their global competitiveness initiative is to create a border the for the Twenty-First Century that will expand and modernize border facilities for a secure and more efficient border.